Business Broker Scams
This blog is about an incident that made me angrier than any other during my career as a business broker. I’ve seen good work from business brokers, and I’ve seen incompetent work. But, this is an example of pure outright dishonesty and theft, of a business broker who took advantage of someone who desperately needed help.
I received a call from an owner of a florist/card shop. He was a very nice, sincere older man with a simple goal He’d been having heart problems and needed to sell the store because he simply couldn’t work anymore. He wanted to get out as soon as he could, with as much as he could.
The store unfortunately was not in good shape, looking very outdated. His financials were also not in good shape. Though it’s far from impossible to sell a business that is breakeven or even losing money, this business was just not going to be worth a lot.
It would have been ridiculous for him to pay my fees to sell the business, and as a result I spent the entire meeting racking my brain to try to come up with suggestions that might allow him to maximize his value from the store: he could advertise and try to sell the business on his own or I could put him in touch with a buyer who had been contacting me about several businesses, but who had very little in the way of assets. I wanted no fees for any of this. My hope was that he might be able to achieve something.
When I was done, he said that he’d met with another business broker before he was referred to me. This was a broker from a firm that claims to be a national firm out of Atlanta, GA. The broker had a slick brochure (which the seller showed to me). This broker told the seller that he thought the business was worth about $150,000 (about 10x more than it likely was worth). He asked for and the seller paid him a $6,000 fee because he said he needed to have an appraisal done on the business.
Appraisals are a long topic on which I have some definite opinions, but even if they’re warranted in some instances, no one needed an appraisal to value this business.
So, I left, knowing that the seller had been ripped off to the tune of $6,000, and might be ripped off more if he paid the upfront fee this other broker wanted to represent him once the appraisal came back.
I never heard from the seller again, but I drove by the store a few months later and it was closed. Hopefully, the seller cut his losses at the appraisal, and hopefully, the seller will be able to enjoy his remaining years in relative peace.
But if he does, it will be no thanks to the con artist that ripped him off.