One reason why a business for sale cannot be matched with a buyer is a problem that is never discussed. And it has nothing to do with an offering that is over-priced or operates in a declining market. The problem that sabotages some potential transactions is GBS (greedy broker syndrome). It is the unwillingness of a listing broker to accept or even tell a seller about offers that would be presented by another brokerage. It also is practiced by some intermediaries who discourage buyer clients from trying to purchase any business not listed with the selling broker's company.
This unwillingness to cooperate with colleagues who happen to work for other brokerages is not tolerated in most real estate markets. Yet it has become too common a practice in California's business for sale marketplace for many years.
Business brokers who refuse to cooperate with other brokers claim they are motivated by their desire to protect their clients. The argument is that the sale of a business is very specialized, requiring a great deal of knowledge and experience. The non-cooperating listing broker may contend that:
1. The very fact a particular business is for sale must be kept secret so that word doesn't get out to the company's employees, customers, vendors or competitors. The listing broker may insist that only he or she can be trusted with that information, and only that listing broker’s company follows a responsible procedure for disclosing a limited amount of information about the offered business, and only to qualified buyers. This argument is made to explain why a listing broker won't allow clients represented by other professionals to investigate the broker's listings. It's easily dealt with if the listing broker is present at all meetings between the buyer and the seller.
2. Only professional sales representatives working for the listing brokerage are able to provide information about the business in a way that does not lead prospects to think they will have the same results if they buy the company. The fear is that if the sale is not conducted carefully, a buyer may think the business comes with a guarantee of continued successful performance. If that success level is not reached under the new ownership, the seller and seller's representative might be sued for misrepresentation.
3. Creation of the buy/sell agreement must be handled by one of the agents or brokers affiliated with the listing brokerage. If a contract is prepared by someone else, there are likely to be errors leading to misunderstandings and problems that cause the deal to fail. And if a sale does go through, with the representative from another company involved, there are likely to be problems in the agreement that lead to a lawsuit initiated by an unhappy buyer.
4. Meanwhile, some uncooperative intermediaries representing a buyer often steer the client away from any offering posted by another brokerage. The buyer representative will suggest that other¯ business opportunities might have hidden problems that are not readily apparent during due diligence problems serious enough to ruin the business once the buyer takes over. The "professional"¯ will argue that only opportunities vetted by his or her brokerage are certain to be suitable for purchase.
All of these assertions are usually invalid. No brokerage has a monopoly on capable and experienced sales intermediaries. Besides, there are a number of ways of preventing the problems stated in the warnings voiced by listing and selling brokers as their reason for not cooperating with other brokerages.
It takes little time and effort to check into the credentials of someone who has contacted you about introducing a client to your listing. If necessary, meet with the sales person and, in most cases, determine he or she is just as competent as the people in your company. If an inexperienced agent seeks to introduce a buyer or a business opportunity to the client of someone who doesn't cooperate, it might make sense for the more skilled professional to manage the introduction and any negotiations and contracts that might follow. The new professional's compensation, in the event a deal is achieved, would be a generous finders' fee and the opportunity to gain some knowledge of the business by watching the other broker put together a transaction and manage it to completion.
Because clients have a stake in whether or not the people representing them will work with their colleagues from other brokerages, it's up to buyers and sellers to make sure their representatives practice cooperation. Clients need to insist that their needs are addressed ahead of the preferences of their representatives. And clients need not be intimidated by the scare tactics used to explain a broker's unwillingness to "play nice with others."
Another perspective on this topic can be found at: Business Broker Co-op Issues & Advice
About The Author: Peter Siegel, MBA is the Founder And Administrator of BizBen.com (established over 25 years!) and is a Business Purchase Financing expert (SBA and Non-SBA financing). He consults daily with California business buyers, owner/sellers, business brokers, and agents regarding buying and selling California small businesses. Call him today regarding advice on finding, buying, selling, financing a business purchase/getting pre-qualified (ask about the BizBen ProBuy and ProSell Programs for business buyers and owner/sellers, and brokers). He'll also give you referrals to the best resources on buying and selling businesses, brokers, etc and a FREE copy of his eBooks "How To Find And Buy A California Business Successfully" or "Valuing And Selling A California Business Successfully" with any personal consultation/service. Peter Can be reached direct at 866-270-6278 (if you get voicemail please leave some good times to reach you and a detailed message - thanks).
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Brad Steinberg, Broker - Laundromat Specialists
PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.
|Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses
Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.
|Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers
I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements.
|Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Diane Boudreau-Tschetter: Escrow And Bulk Sale Services
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Joe Sandbank, Esq. - Legal Services
I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
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