Welcome back to Becoming a Better Business Broker in 30 Days!
This concise series title describes exactly what we hope you get out it - becoming a broker that can close more deals with less work.
Before diving into today make sure to check out our last article, Buy-Side Brokering 101.
Today, Halloween is coming a bit early, as we cover a spooky topic, Business Brokerage Clients To Avoid.
Identifying these clients early in your brokerage life can save you time, stress, and potentially unprofitable engagements.
The Least Wanted List 😂
1. The Over-Valuer
Our first culprit is the Over-Valuer. This is because the client insists their business is worth significantly more than the market dictates. Despite your best efforts and 'playing Devil's advocate' they remain fixed on their inflated valuation, making it impossible to sell their business.
How to handle: This is a tough one because it's like telling someone their baby is ugly 😬. We've previously found success in encouraging these Sellers to try and sell their business independently on BizBuySell - as they will likely get an influx (or zero) of buyer inquiries which will give them the feedback that their business is over-valued. Sometimes, these clients will come back to you with their tails between their legs to have you try and help them sell.
2. The Indecisive Seller
Next, we encounter the Indecisive Seller. They're on the fence about selling, constantly changing their mind about whether or not they want to proceed. This indecision can drag out the sales process and deter potential buyers who are ready to move forward.
How to handle: take a significant upfront engagement fee (credit against your commission) at the beginning of the process. Having an indecisive Seller commit to a $5,000 upfront fee is a great litmus test for how serious they are about selling their business.
3. The Non-Discloser
The Non-Discloser is a tricky one. They withhold crucial information about their business, intentionally or due to negligence. This lack of transparency can lead to surprises during due diligence, often killing a deal.
How to handle: this (should) be an easy decision. If you see early red flags that the owner is hiding negative information from you - run away. The liability of taking on this client (and the likelihood that the deal will die in diligence anyway) is far too high.
4. The Micromanager
Then, there's the Micromanager. They want to be involved in every tiny detail of the process, often questioning your methods and decisions. You'll have "any updates?" emails every few days and will get increasingly frustrated each day an offer isn't submitted. While it's essential for Sellers to be engaged, too much interference can hinder your ability to work effectively.
How to handle: You need to educate these Sellers during the prospecting process - pre-listing. Teach them about the average time it takes to sell a business. Another good strategy is asking them how often they would like a progress update (monthly, weekly, etc.) and sticking to that cadence of communication.
5. The Unrealistic Expectations Client
Similar to the Over-Valuer, the Unrealistic Expectations Sellers expect the sale to happen overnight and at their desired price, regardless of market conditions or their business's actual value. Managing these expectations can be a significant drain on your bandwidth from working on other deals.
How to handle: The key to handling these clients is to get early objective feedback from Buyers that you can show to the Seller. Does the Buyer think the valuation is too high? Tell the Seller. Is the business too owner dependent? Let the owner know. These pieces of feedback should help bring their expectations back to reality.
6. The Legal Labyrinth
Lastly, we have the Legal Labyrinth.Â
How do you know if your Seller is a Legal Labyrinth? How about having multiple HoldCos and a subsidiary in the Caymen Islands? Basically, the Seller's business is so entangled in legal complexities that untangling them for a clean sale becomes a Herculean task. A common example on Main Street is having a Seller who has a business with 2 divisions (say wholesale and retail), but only wants to sell 1 division. The catch? The P&Ls for both divisions are within the same corporation and not separated. Take it from personal experience, these clients are more trouble than they're worth 🥴.
How to handle: Ya gotta put your foot down and tell these Sellers they need to untangle their corporate structure before you can help them sell their business. This means encouraging them to spend the money engaging their accountant and lawyers - you can let them know if will be worth it in the long run.
Conclusion: Navigating the Haunted House
Identifying and avoiding these challenging clients can help you focus on more profitable and less stressful engagements. Remember, not every listing is worth pursuing, and sometimes, the best deal you make is the one you walk away from.
Stay tuned for Day 20, where we'll get back into the deal-making weeds covering Unorthodox Deal Structures.
Happy brokering, we wish your journey is free of nightmares on Main Street! 😂
If you want to learn more about automating your business brokerage with DealBuilder, please visit our site or book a demo here.
