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 business for sale marketplace for many years. In fact it is estimated that over 70% of all business brokers and agents don't fully (or partially) cooperate with their business for sale listings with other intermediaries.
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 business brokerage or agency 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 (brokers and agents).
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 (owner/sellers) need to insist that their needs are addressed ahead of the preferences of their representatives (brokers and agents, intermediaries). And clients (owner/sellers) need not be intimidated by the scare tactics used to explain a broker's unwillingness to "play nice with others."
Cheryl's a restaurant business broker, over 25 years in the bar and restaurant industry coupled with a J.D. Cheryl works tirelessly to create successful strategies and effective negotiations for those who wish to purchase a new or sell an existing bar, restaurant, cafe, or night club. 415-309-2722
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I am an experienced entrepreneur, attorney, & business professor. I & my EvergreenGold® team offer business owners sound advice & expertise to build business value & achieve profitable sales. Call me today for a business evaluation & SWOT analysis for your business anywhere in the USA.
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