Reasons to Run from a Business Broker
- They request an up-front or advance fee which they promise to credit against their future commission which presumably will be earned upon the closing of a purchase/sale transaction.
- Notwithstanding the fact that today many buyers of businesses in California are from foreign countries such as China, Taiwan, Japan, Korea, Philippines, and Mexico, they don’t actively solicit buyers from outside the United Sates.
- They are not licensed by the California Department of Real Estate which issues licenses to business brokers. Instead, they refer to themselves as (unlicensed) business consultants.
- They are reluctant to accept a business listing unless the seller of the business is agreeable to paying for a formal business appraisal.
- They don’t value the importance to both the buyer and seller of a business of utilizing the services of a business escrow holder.
- They have minimal experience representing buyers and sellers of businesses in California.
- They are unfamiliar with the term NDA.
- They are not familiar with the term EBITDA and don’t know how to calculate it.
- They have minimal or no direct experience in renegotiating commercial tenant leases.
- They have no experience or minimal experience with the purchase or sale of commercial real estate that is often connected to the purchase/sale of a business.
- They don’t understand and can’t explain what determines the Cap Rate when buying or selling a business.
- They don’t have a website which is a sign they are not a legitimate business. Today, every small business has a website that explains who they are and what they do.
- Instead of selling the benefit of their services, they focus on attacking their competitors.