When Should Sellers Proceed with Caution?

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 790 words

Proceed with caution whenever a buyer wants your time, your numbers or exclusivity before showing you who decides, how the purchase will be paid for and why your company fits their plan. Most deals that die late were showing signs early. The owner simply wanted the buyer to be real, so the signs were read generously.

Selling a company with $3 million to $100 million in revenue usually takes months, and every week spent with the wrong buyer is a week the right one is not getting your attention. Knowing the warning signs lets you slow down, ask for proof, or walk away before real damage is done.

Warning signs in the first conversations

Early on, the question is whether the person talking to you can actually say yes. Watch for these patterns:

• The decision-maker never appears. A corporate buyer sends a junior analyst to every call while the president or CEO is always unavailable. Serious acquirers put their principals in the room before a letter of intent (LOI, the mostly non-binding offer that sets price and main terms).
• Momentum fades without explanation. Replies slow, meetings get moved, questions stop. Interest that fades rarely comes back stronger.
• No clear reason to buy. The buyer cannot explain why your company fits what they own or want to build.
• Fishing for detail. A buyer who owns a competitor asks about customers, pricing and key staff before signing a confidentiality agreement.

Individual buyers: experience and money

Individual buyers close many lower middle market deals, and plenty of them become excellent owners. The risk is the buyer who has never run a company and has never worked in your industry. That person can be sincere and still freeze when due diligence (the buyer's detailed check of your books, contracts and operations) turns up the ordinary surprises every company has.

Ask three things early: what they have run before, how they will finance the purchase, and who is advising them. A buyer planning an SBA 7(a) loan, a common route for smaller acquisitions, should already be talking to a lender. A buyer with an attorney and a CPA lined up is usually further along than one who says they will find them later.

Late-stage signs that a deal is in trouble

Caution does not end once an LOI is signed. The most expensive failures happen in the weeks before closing, after you have stopped talking to other buyers. In our ten-step process that stretch runs from the signed LOI through due diligence and legal documents. Watch for these:

• The buyer will not share financial statements or proof of funds, even though you are showing them everything.
• New conditions appear that were never in the LOI, often tied to a lower price.
• Diligence requests keep growing with no target date for closing.
• The buyer's lender, investors or partners have never met you and are not named.

What is normal, not a red flag

Caution should not turn into suspicion of every buyer. Some behavior that feels intrusive is simply how careful buyers work. Detailed questions about your largest customers, requests to meet key managers late in the process, a quality-of-earnings review by an outside accounting firm, and a lender who takes a few weeks to approve are all ordinary. So is a buyer who pushes back on your add-backs.

The difference is direction. A serious buyer's questions narrow toward closing, with a schedule attached. A weak buyer's questions widen, reopen settled points and never produce a date.

How to test a buyer without insulting one

Good buyers expect to be screened, because they screen sellers too. The standard sequence is a blind profile first, then a signed confidentiality agreement (NDA), then a financial profile showing the buyer can fund the purchase, and only then the company's name and detailed numbers. Our article on how potential buyers are screened walks through each step, and our guide to evaluating buyer financing before accepting an offer covers what proof to ask for.

Having a sell-side advisor run this sequence takes the awkwardness out of it. An owner asking for proof of funds can feel rude; an advisor asking is routine. When a deal wobbles, a third party can also restart talks that the two principals would find hard to reopen on their own.

Where MDR & Associates fits

Every buyer who approaches a company we represent registers, signs an NDA and completes a financial profile before seeing any detail. We work with several buyers at once so no single buyer controls your timeline, and a principal of the firm is in every negotiation. If you are already talking to a buyer and something feels off, a short confidential conversation is the fastest way to find out whether it is.

Where this fitsSell your business in Texas →

Questions owners ask next

Should I stop talking to other buyers once I sign an LOI?

Usually yes, because most LOIs include an exclusivity period during which you agree not to negotiate with anyone else. Keep that period as short as the buyer's diligence reasonably needs, tie it to milestones, and know which buyers you would return to if the deal fails.

Is it reasonable to ask a buyer for proof of funds?

Yes. Before you share customer names or detailed financials, a buyer should show it can pay, through bank or investor letters, a lender pre-qualification or a personal financial statement. Serious buyers are used to the request. Refusing to answer it at all is one of the clearest signs a deal may not close.

What if the interested buyer is a competitor?

Competitors can be strong buyers because they often value your company highly, but they also gain the most from your information. Share in stages: summary numbers first, customer names and pricing last, ideally only after an LOI and under a strict NDA that limits who inside their company sees what.