Unprofessional behavior from business brokers

November 09, 2024

by a searcher from National Defense University in Raleigh, NC, USA

(this is not satirical, but is a tongue in cheek reply to ^Jeff Snell‌’s post here: https://www.searchfunder.com/article/viewarticle/48244)

This may come across as a bit of a rant but as a qualified business buyer, over the past year or so there’s been a significant increase in unprofessional behavior from business brokers. This in and of itself is frustrating, but there’s one other thing I’ve noticed and it needs to stop.

That is brokers failing to provide accurate and complete information about the businesses they’re selling. This results in buyer fatigue for two reasons: 1) We’re forced to chase down basic details that should have been readily available, and 2) to be blunt, it’s a colossal waste of time.

To mitigate this, I’ve started setting clear expectations upfront about the information I need before proceeding. That helped, but…

I just ended a call with a broker who couldn’t provide up-to-date financial statements for a business they listed (or wouldn’t before I submitted an LOI or APA). When pressed, they admitted they hadn’t even reviewed the latest numbers themselves. Whenever I encounter a broker who doesn’t know the essential details of their own listing, they’re essentially dead to me. If they can’t answer fundamental questions, I have to question their competence and commitment.

Business buyers do not work for brokers. We invest dozens of hours per potential deal reviewing and analyzing relevant information. Dozens more conducting due diligence. Unprepared and inattentive brokers waste an incredible amount of our time by not doing their part.

Don’t expect the buyer to compensate for your lack of effort.

Do your homework.

Reply by a searcher
from The Juilliard School in Danbury, CT, USA

Thanks for the tag Luke! Unfortunately most brokers suck and that's never going to change. Seriously though, business brokerages are a high commission based sales oriented business and there is way more demand then supply. As a result, the brokers will most likely have the seller's best interest in mind and will never care as much about the buyer unless they already have a strong pre-existing relationship with them (proven and qualified by track record) or they have cash, proof of funds, and can close quickly. At the end of the day, it really just comes down to proof of money, surety of close, and time to money for them to collect their commission on each deal. Keep in mind, it's a high ticket sale and these brokers are not only doing everything they can to present a businesses in a positive and sellable way, but more often than not, they are also buying the best businesses directly themselves and sometimes even approaching unsophisticated buyers discretely with "incredible life changing opportunities" that in reality are unsellable businesses. They do this when they have a strong relationship with the seller and want to help them or are able to work out a side deal. Unfortunately the harsh reality of this field is that the game will always be rigged against the buyer when demand exceeds supply. The best way to protect yourself is to learn everything you can, invest in strong due diligence resources, and source off market deals as much as possible.

Reply by an intermediary
from The University of Chicago in Chicago, IL, USA

I just saw this post. I strongly disagree with this post. I have been a broker for 35 years. 1) Over the years, number of brokers have not increased. The number of available businesses has not increased either. However, number of buyers have increased dramatically. Some brokers have adjusted their practice accordingly. Per economics, when demand increases, prices go up. Searcher class seems to be proving this wrong. 2) Aaron's post says "I just ended a call with a broker who couldn’t provide up-to-date "financial" statements for a business they listed" I do the same with the buyer i.e. end the call with the buyer who "demands" YTD "financials" early in the process. For small businesses with add-backs and inconsistent monthly accounting practices, YTD "financials" do not help much. At the same time, buyer is fully entitled to know how the business is doing before spending too much time. The PE groups, and I deal with them in almost all deals, ask the same question differently. They ask, "How is the business doing this year?". This is a softer and open-ended question compared to "send me financials". PE groups ask only after they have studied the business, have asked questions on past financials and have explained why they are interested. My answers is "Business is doing x% =/- this year" and elaborate further if there are material changes.

+10 more replies.

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