Level up your sourcing game with this strategy

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Welcome to another edition of BUY x BUILD, where I write about buying and building cash flow businesses.

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When it comes to sourcing SMB deals, I’m sure most of you are already browsing all the online marketplaces such as BizBuySell, LoopNet, and Axial. Some of you might be experimenting with proprietary outreach as well.

In this post, I’ll hone in on a strategy that I’ve now seen a few searchers use to gain a competitive edge in their markets. Shawn Allard used this very strategy to acquire an ice cream brand in Phoenix.

The strategy – gain early access to deals before they hit the market.

It’s relatively simple to execute. Here’s how I’ve seen others do it:

1. Broker outreach. Start by contacting brokers on the public listings you like. Starting a relationship this way often works better than cold calling. Once you get info, schedule a call to discuss the deal with the broker. Once you’ve gone through enough listings, you’ll get a good feel for who the best brokers are and who to spend more time with.

2. Sell yourself. On the call, your goal should be to express sincere interest in the deal, ask good questions, and establish yourself as a credible buyer / discuss your criteria in more detail. If you plan to submit a LOI, do so quickly. If you plan to pass, do that quickly as well.

3. Regular contact. From there, make it a point to follow up regularly. This could be in response to other listings from the same brokers or checking in regularly to see if they’ve listed anything that fits your criteria. As you get into the habit of doing this, you’ll naturally develop a rolodex of 5-10 brokers that you are regularly interacting with.

4. Make the ask. Once you’ve interacted a few times and developed a relationship, you can let them know that you’d be willing to preview deals if they’re trying to gauge market interest / buyer demand before listing, or potentially considering not listing on the marketplaces at all. This positions it as a favor to them vs. a favor to you. One searcher I know is in the process of previewing two deals currently because the brokers are hoping to avoid BizBuySell.

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This isn’t a novel approach by any means. Larger, established corporate and private equity buyers use this approach with investment bankers all the time because those deals aren’t listed publicly. It seems to be unique in the SMB world though since public listings are the norm. That’s why this strategy can help you gain an edge in the market.

Note that the above steps are not an exact prescription but rather a general framework. For instance, you might hit it off with a certain broker on the first call and feel comfortable making the ask right away. Other times, you might need to nurture the relationship and speak a few times before doing so. Feel out the situation and make a judgement call.

Do you use other sourcing strategies that are effective? Reply and let me know.

Looking to…?

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