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Why Do Business Owner, Sellers Circumvent Brokers They Hire?



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.

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.

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