Introduction
In the world of buying or selling a business, business brokers often play a crucial role. They act as intermediaries, connecting sellers and buyers, facilitating negotiations, and helping to close deals. While many business brokers are reliable and professional, it's essential to shed light on the less favourable aspects of their services. In this blog post, we will explore the dark side of business brokers, highlighting the worst things you should look out for when deciding on a broker to representing you and your business.
Lack of Transparency
One of the most significant concerns with some business brokers is their lack of transparency. They may withhold critical information about a business, such as financials, contracts, or pending legal issues, to expedite a sale. This lack of transparency can lead to disastrous consequences for both buyers and sellers, potentially resulting in costly legal battles or a bad investment. If you spot a lack of transparency at the earlier stages, consider finding another broker sooner rather than later, ideally before you sign an exclusivity agreement.
Unfair Fees
Business brokers typically charge a commission based on the final sale price of a business, as well as an initial advertising fee. While this commission can vary, it is vital to ensure you are receiving value for money when agreeing the fees. Similarly to the above, make sure you agree this before you sign the agreement. Ideally your business broker should be motivated enough to sell your business but not overpaid that they will substantially hurt your hard-earned profit. Many large business brokers, operate on a business model based on receiving as many onboarding fees as possible. To demonstrate how we are different, our onboarding fees are competitively low and are there to purely fund the marketing of your business.
Conflict of Interest
Business brokers are meant to act as neutral parties, representing the best interests of both buyers and sellers. However, conflicts of interest can arise when brokers have exclusive agreements with certain buyers or sellers, limiting their options and potentially compromising the fairness of the transaction. Buyers and sellers must remain vigilant to ensure their broker is truly working in their best interest and not prioritising their own gain. Our brokers always represent the seller and doing everything possible to get the seller the best possible outcome, whilst working with the buyer to ensure the process is handled smoothly.
Inadequate Due Diligence
When selling a business, due diligence should be the number one priority from all parties, however, unfortunately, some business brokers may cut corners or fail to perform adequate due diligence. This can result in unforeseen liabilities or risks for the buyer, who may discover hidden financial issues, legal disputes, or operational challenges after the transaction. Sellers, too, may suffer from a lack of due diligence, as potential buyers might withdraw their offers if they uncover undisclosed problems.
Lack of Industry Expertise
While there are reputable and experienced business brokers in the industry, there are also those who lack the necessary industry knowledge. Incompetent brokers may lack the understanding of specific markets, industries, or legal requirements, making it difficult for them to accurately value a business or identify potential risks. This lack of expertise can lead to misguided advice, incorrect valuations, and unsuccessful deals. It is common for a business broker to be open to selling any business of any size, in any business. Think Acquisition have a set criteria to ensure our clients are best served, with our industry experience.
Poor or Slow Communication
If you are working with a broker, it is essential that you find out if their communication is fast and accurate at all times. Alongside this it is best recommended to research their systems and technology to ensure your business has the best possible chance of selling. The business brokering industry is outdated, and lengthy, unnecessary processes delay transactions, causing more deals than needed to fail to complete. There are no excuses for a professional business broker to delay transactions due to outdated, poorly performing software's & processes, whilst living in 2023.
How are we different?
As buyers ourselves, we understand the process and have worked tirelessly to ensure no stone is left unturned, putting our customer service as a priority. We understand that business brokers can be viewed in a negative light, and we are doing everything possible to disrupt the industry and offer a stand out service. Above all else, our focus is to sell your business!
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