Met with two brokers last week. One threw out a number so low I thought he was joking. When I pushed back, he gave me some line about "market realities" and "efficient pricing." Feels like they just want a quick sale to collect their commission. Anyone else dealt with this? Am I crazy or is this a real thing?
Brokers
Why do some business brokers try to underprice your company?
Not crazy. Brokers get paid on commission, but a 10% fee on a quick $2M sale beats a 10% fee on a slow $3M sale that might not close. Their incentive is volume and speed, not maximizing your payout.
Or maybe your business just isn't worth what you think it is? Hard to say without num bers.
Fair point, but there's a difference between a realistic valuation and a lowball designed to generate instant interest. Some brokers deliberately underprice to create a bidding war. Problem is, if it doesn't materialize, you're stuck with a low anchor.
TheLawnGuy - I get that. But I've had an independent valuation done and it came in 40% higher than what this broker suggested. That's not a small gap.
Also consider how brokers get paid. Some charge upfront fees or retainers. If they underprice and it sells fast, they move on to the next client. The math often favors speed over maximizing your outcome.
40% is a lot. What kind of business? Some sectors are brutal right now.
B2B services, recurring contracts. Nothing glamorous but stable.
I had a broker try to talk me down by $500k. Turned out he had a buyer already lined up who was a friend of his. Not saying that's what's happening here, but... trust your gut.
And that's why you always get more than one opinion. Also, ask the broker flat out: how many deals have you closed in my sector in the last 12 months? What was the sale price vs. asking? Their answer tells yu plenty.