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Why Do Business Owner, Sellers Circumvent Brokers They Hire?

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Comments & Replies: 2     Views: 2528     Posted By: Timothy Cunha JD  Timothy Cunha JD: Business Broker, SF Bay Area



Topics: Selling A Business     Tags: business brokers, selling a business



I am regularly perplexed by business owners who retain a business broker to represent their business to the market and manage the sales process, but then the owner circumvents the broker at every turn. When the broker has clearly told the seller (and has it spelled out in the marketing agreement) that ALL inquiries and ALL potential buyers should be immediately turned over to the broker to handle professionally, sometimes the seller does exactly the opposite - and severely compromises the sale process.

Recently I had a business for sale for well over $1,000,000. The owner was contacted by a potential out-of-state buyer and decided that he knew how t handle the transaction better than the broker and proceeded to micro-manage the negotiations. Not only did he insist on being in direct contact with the buyer, he kept me totally in the dark as to the buyer's identity. I had to prepare draft contracts and other documents "blind." Furthermore, the seller not only wouldn't let me in touch with his attorney, he also refused to even let me know who the attorney was. Despite all this, we finally got to contract (for over $1,000,000), at which time I learned the buyer's identity - but, still the seller refused to let me contact them directly. As anyone with experience in business sales knows, there is at least as much work after the contract is signed as there is before. Sparing the details, the deal fell through completely and the seller had, in the meantime, shut down the business. What he could have sold for 7-figures was now worth maybe half if not less.

Subsequently, after the deal was over, I was able to talk with the buyer. After only a few minutes, we were able to determine a structure that would have preserved the sale and made my client - the seller - a lot of money. The buyer's comment: “Why didn’t you work with me from the beginning?”

My answer: "My client, the seller, wouldn't let me".


It is very important that the broker have control over the transaction, because in case of future litigation after the transaction has closed, believe me, the broker will be dragged into it, and questioned as to what their actions were during the transaction. If the seller is working with other buyers and communicating with them, and not communicating with their broker, then that can absolutely make the working relationship much more difficult than it needs to be. Some sellers may see brokers as all the same, and so they should be in constant contact with them, and explain their value at the listing presentation. It's also worth noting that some sellers may have sellers remorse, and even though they've listed their business for sale, underneath, they are anxious about what they will do after selling the business and in a way try to self sabotage the sale without even realizing it.


  Helpful Resources To Assist In Selling And Buying California Businesses
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.

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.

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.

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.

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.

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.

Helen Yoo: Escrow & Bulk Sale Services - 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.

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.


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