“He said he had a buyer for my company, but he wouldn’t give me any details until I gave him my financials. I should have known he was just fishing.”

Zoe (not her real name) reached out to me on the recommendation of her financial planner. A few weeks earlier she received an unsolicited call from a local business broker who told her he had a buyer for her company. The broker’s call came at an interesting time, as she explained, “My husband and I have been able to manage our careers with two children. But we have a surprise third on the way this fall, and that might require one of us to make a big change. That’s why the idea of selling resonated, at the time anyway.”

Zoe went on to say she sent this broker the financial information he requested. It didn’t take long for him to tell her that her business wasn’t a fit for the buyer he represented, but that he’d be happy to take her business to market to the firm’s “list of business buyers.” Zoe instinctively knew she’d fallen into a bait-and-switch, so she wasn’t interested in being represented by that broker. But the guy’s call had gotten her thinking about the idea of selling (given her circumstances). At that point, she decided she should get serious about the possibility, hence her call to her financial planner who suggested she call me.

Here is what is particularly insidious about the broker’s faux outreach strategy. After he said her business wasn’t right for his client, he gave her a valuation expectation that is at least twice what the market business value is. Relying on the sensible advice of her financial planner and the market knowledge she learned from me, Zoe concluded the broker was telling her whatever he needed to get the engagement.

Suffice it to say, I find this all-too-common practice beyond annoying. It may surprise you to know there are no laws or standards of practice that regulate business brokerage in the state of Tennessee. You must have a license from the state to do nails and cut hair, but not to represent the best interest of an owner who is selling their business. Don’t misunderstand me, there are plenty of good brokers, intermediaries, and investment bankers in the state of Tennessee. Depending on the type and size of your business, you will have good choices when it comes time to sell. Just don’t fall victim to the “I have a buyer” scam.

JIM CUMBEE is President of Tennessee Valley Group, Inc. a retainer-based business brokerage and transition mediation firm in Franklin, TN. Cumbee is an attorney and has an MBA from HarvardBusiness School. Jim is the author of Home Run, A Pro’s Guide to Selling a Business. https://www.amazon.com/Home-Pros-Guide-Selling-Business/dp/1599329239 .  He has a wide range of corporate and entrepreneurial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee. The principles above are true, but the names and fact patterns are changed to preserve the parties’ identities.

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Tennessee Valley Group

Jim is an attorney (non-resident status with the Missouri Bar) and though he no longer practices law, he has read and negotiated enough legal documents to fill a cargo tanker. He has an MBA from Harvard Business School and knows how Wall Street and private equity operates. Jim is a Tennessee Supreme Court Rule 31 listed general civil mediator with tons of experience helping business owners (large and small) work through sensitive problems to achieve winning results. He is the author of "Home Run, A Pro's Guide to Selling Your Business, Seven Principles to Make Your Company Irresistible."

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