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
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Janet Carrera: Escrow & Bulk Sale Service - 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.
|William F. Ziprick, Attorney: Legal Services For Buyers And Sellers
Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.
|Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA
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.
|Helen Yoo, New Century Escrow - Escrow Services In Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Shalonda Chappel: Escrow & Bulk Sale Services - Southern California
Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.
|Elizabeth McGovern: Escrow Services - San Francisco 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.
|Brad Steinberg, Business Broker: Laundromat Specialist
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.
|Related Articles, Events, Blog Posts, Discussions, Videos, Interviews|
|How Do I Navigate Through The Negotiation Process When Buying A Business?
Negotiating the terms of a business deal is a delicate process, where one wrong move can cost you the business that you wanted to purchase. Peter Siegel, MBA (BizBen ProBuy Program) discusses the ins and outs of negotiations, and how to work well with the seller to get a deal done.
|Who Really Represents The Business Buyer In A Deal? Does Dual Agency Work?
Who really represents the buyer? The selling broker or agent through dual agency? Many brokers and agents weigh in on this Discussion on BizBen. Bottom line is all business buyers need to know who really represents them and has their best interest at heart when seeking and negotiating on deals.
|Should I Buy A Business That is Losing Money? Feedback From Top Advisors
Are businesses worth taking a look at when they are losing money? Multiple Advisors & Business Brokers weigh in on this topic and say yes! (but be careful) on a BizBen Discussion. Some great feedback on this topic will make potential business buyers (and money losing sellers) want to read this info!
|5 Myths About Selling A California Business: Best Tips For Sellers & Brokers
Peter Siegel, MBA (at 925-785-3118) - BizBen Director discusses myths associated with the process of selling a business and some of them can actually cause deals to fall through. Don't let your sale be comprised, be aware of these common misconceptions related to the process of selling a business.
|Top 100 List: This Week's Top Motivated Business Buyers & Their Requests!
If you're trying to sell a business - check out this week's top 100 business buyers - one of these buyers may be looking to buy your type and location of business! This list is updated weekly - make sure you check it frequently! Are you searching to buy - get on this list and reach seller direct!
|Unreported Income: Should Sellers Disclose Unreported Cash To Buyers?
Should owners who offer a business for sale reveal to prospective buyers any income that is not recorded in the books? This is a controversial topic with arguments both for and against. Most business sales intermediaries believe if you don't pay tax on it, you can't claim it. Some sellers disagree.
|Selling My Small Business: What Items Should I Have Ready To Be Successful?
When selling a small to mid-sized business, owners should have their paperwork and financial information ready to go! They should also have a short business plan of past history, current operations, and potential for the future. In this BizBen Discussion several advisors and intermediaries weigh in.
|Is There Such A Thing As Paying Too Little When Buying A Small Business?
We all understand the idea of paying too much for a small business. But is there such a thing as not paying enough? That seems like an odd notion, but I'm familiar with situations in which a buyer acquired a small business for a figure substantially under what probably was market value.