Beware the Door Broker

“Can you meet me tomorrow, 5:30AM at Starbucks in Hendersonville, I don’t want my employees to know anything about me selling the business.”

Against my better judgment, I agree to the meeting. I’m an early riser, going to a 5:30AM meeting doesn’t bother me. But, I should have realized the clandestine urgency in his voice was an omen of something not good. After we got our coffee (I’m a Starbucks fan) we sat down and he began to tell me his story … revenue growth for four straight years and profits climbing, so far so good. But knowing he hastily called a 5:30AM meeting, there had to be more to the story. And gee, was I right.

The business had been for sale two years earlier, and just when they were about to complete a transaction, the deal fell apart. That deal collapse 24 months earlier caused a split amongst the ownership group, and things hadn’t been the same since. A few weeks before our Starbucks meeting, one of the partners and several key employees walked away from the company with plans to start a competitor. The bleeding had just started.

As he’s telling me this story I’m thinking to myself, he doesn’t need a business broker, he needs an emergency room doctor. So after about 20 minutes of this, I ask the obvious “how can I help?” at which point he tells me he’d like to put the business back on the market and “just be done with it.”

I was definitely interested. Though beginning to bleed, the business was still financially sound, it had a good reputation, and the seller was definitely motivated. I quickly calculated in my head what an engagement like this could be worth, I was even more interested.

But I told him no, that I wasn’t ready because he wasn’t ready.

You see, there are two types of business brokers in this world, the business advisor and the door broker. The business advisor helps the business owner make a good decision about when to sell, how much to sell for, and how to get the business ready to sell. The door broker takes anything that walks through the door when it walks through the door.

Here are three ways to know you’re dealing with a door broker…

1.   A door broker will ask you what you want for the business then tell you they can get that amount for you. A door broker will tell you what you want to hear, and make you feel great in the process.

2.   A door broker will be proud of the number of “listings” he/she carries. When I was growing up the kid across the street had more Lego blocks than anybody else, but this kid didn’t have the patience or intelligence to put those Lego blocks together. I’m betting he could be a door broker today.

3.   A door broker will ignore problems in your business by telling you they won’t matter to a buyer. If you hire a door broker while you have problems in your business, you will have just added to your list of problems.

So back to my conversation at Starbucks. I told this business owner his business wasn’t ready to be sold. We talked for two hours about what he needed to do to get the business ready for optimal market value. He asked if I could get it sold in the summer of 2013, I told him if he was lucky it’d be the summer of 2014. He asked me for help, so I called a friend who does small business consulting, and six months into the assignment, they are still working together.

Sure, my desire is to sell the company, it will be a great engagement, and he tells me he will retain me once the consultant has helped fix the problems. But if he decides to not retain me or not sell at all, I still know I did the right thing by telling him to wait. The biggest difference between a business broker who is a business advisor and one who is a door broker is the commitment to the client’s long-term best interest. If you ever sense your business broker is focused more on what’s right for him or her, show them the door.

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Tennessee Valley Group

Jim Cumbee established Tennessee Valley Group to help business owners fulfill their dreams for life after business ownership. It’s a mission that his 30+ year career history had prepared him well for—in addition to being an attorney, transition mediator and business broker, Jim has been a buyer, seller, and entrepreneur. His broad range of experience gives him unique insight into how business buyers and sellers can achieve their goals.

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