I have had conversations with three prospective buyers in two weeks who have read my blogs or sought my advice about businesses. They were either interested in buying or wanted to discuss how the seller and/or his broker could justify the asking price. In each situation, we came to the realization that the seller and/or broker could not justify the asking price, but that is what it was going to take to get the owner to sell.
We wish these sellers the best. We hope that they are simply testing the waters and once reality hits they will give us a call. We would love to help them once they become committed to the selling process. If they are following the advice of their broker, then shame on the broker for misleading their client. No wonder my profession can be thought so poorly of. According to my contacts, at least two of the brokers apologized for the asking prices of their listings! They confessed that this is what the seller wanted and that this is what they had to do to get the listing. Heaven forbid that these ‘professionals’ would be honest with their client or educate them as to why an unrealistic expectation is a bad expectation. While there is always a chance that a buyer might be found, the more realistic outcome is frustration and failure. As noted in the latest IBBA Market Pulse Report, unrealistic business valuations are a major reason why businesses do not sell. It looks like the Wichita and KC markets can be included in this.
One of the most dangerous people in the business world is a business broker who is desperate for a listing or to close a deal. If this broker is lazy or ethically-challenged he can even be more dangerous! These people have been known to agree to, say, or over overlook anything with the hope that it will lead to a listing and eventually a sale. This philosophy ends up wasting the seller’s time, getting them geared up for a payday that will never come and causing undo emotional stress. If the broker is lucky, the seller will wear down and agree to the selling price where the business should have been listed in the first place. (I have been told this is called seasoning.) Hopefully by this time, serious buyers have not been scared off, insulted or made mad.
In the early years of our office, we tried to help sellers by accepting listings with at higher prices than we were comfortable with. Sometimes, we felt like we needed to apologize. We learned from experience that is better to educate than placate. Why apologize when you can tell the truth, and back it up with fact. This philosophy has caused us to miss out on a few listings. We are OK with that. We think it has also gained respect in the circles that matter the most to us, industry professionals, business owners and serious sellers.
What experiences have you had as a seller or buyer?