Has anyone had experience with business brokers who blatantly lie?

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July 15, 2024

by a searcher in Chicago, IL, USA

Has anyone had experience with business brokers who blatantly lie? I've had several experiences with brokers who have lied during negotiations. They say something like "the seller accepts your terms, and we are signing the LOI today" and then the very next day or a few days later they send an email saying "we signed an LOI with another buyer, thanks for your time".

This has happened on several occasions and I'm in disbelief how brokers can just lie and act like it's a normal way to do business. No remorse, no shred of honesty and It actually works against them to not inform a buyer that there are other interested parties.

I think the industry is full of these cowboys and it's sad and frustrating to go through this time and time again.

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Reply by a searcher
from University of North Texas in San Antonio, TX, USA
I've experienced similar situations, and it’s incredibly frustrating. The behavior you described is unfortunately more common than it should be. I've found that some brokers prioritize quick deals over maintaining integrity, which can lead to the kind of dishonesty you're talking about. As a buyer and investor, it's crucial to be respectful but also clear about what you are looking for, how you conduct business, and what you expect. Every time I begin substantive discussions, I make it clear upfront that I only engage in practices that are legal, ethical, and moral. If I see anything contrary to that, I don't hesitate to block the person or entity. I'm not rude about it, but I am insistent on maintaining high standards and business practices. It's essential to approach each deal with a healthy degree of skepticism and to ensure all agreements are documented formally and promptly. When negotiating, I always keep the lines of communication open and ask for regular updates on the status of the deal to avoid any surprises. Also, consider rethinking your approach and building a team around you that supports your vision and upholds the same high standards. Having a supportive team can help call out any discrepancies and strengthen your position. That said, there are reputable brokers out there who value honesty and long-term relationships. It might take some time to find the right ones, but they do exist. When you do come across one, it's worth building a strong relationship with them. Hang in there and don't let these negative experiences deter you. Good luck with your future negotiations!
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Reply by a searcher
from The University of Chicago in Chicago, IL, United States
I would look at this way. Brokers are in the game to make a sale and earn commissions, sellers to get max multiples today and buyers are here to buy lower today and sell higher tomorrow. It's all about what's in it for them/me.

As buyers, which most of this community is, once you understand the incentives of both brokers and sellers you will know which 'facts' to take it for face value. Ex: Many times, sellers, who have been running the business, often underplay their day-to-day responsibilities, their comp and some 'personal expenses' and add back $XXX to the margin to boost payout. Are they lying? I don't think so because that's what they believe in. Similarly, brokers tend to boost future earnings potential cause once the sale is done, they don't have to care about running the business. Are they lying maybe, are they bad? maybe not. I would look at brokers as facilitators to reach your end goal and you, in most cases, have to work with them. I find it much better to control our own actions (buy the business or walk away) than trying to say the broker / seller lied.

Above comment was much broader in nature, but I think within the first few interactions with a broker you could identify someone who has not done this before (ex: a broker selling gas stations listing a dental practice of a friend), you can anticipate more grey areas / 'lies' because they just do not know the business. But a broker who specializes in one vertical has his/her reputation and relationships to keep, understands the business / comps and I find that you can rely on their statements.
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