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Thread: Quality of brokers and their accounting methods

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    Quality of brokers and their accounting methods

    [[This thread was split from here: http://experienced-people.net/forums...g-a-site/page3 Kay]]

    So, I'd like to learn more about these good brokers y'all keep talking about. In my experience, which certainly isn't as deep as Clinton's but is certainly deeper than most other buyers, broker listings are typically as delusional as Flippa listings. They do tend to be delusional in a different way, of course. What usually sticks out like a sore thumb to me in broker listings is that there is absolutely no accounting for how much time and effort the current owner puts into the site (even though the site might be being marketed as a "passive income" deal). Rarely do I even see a broker accounting for anything beyond hosting on the expense side. I even had one broker tell me that the cost of an employee that had been working for the site wasn't an expense and shouldn't be counted because the employee wouldn't be continuing to work on the site after it was sold. That there is one that I never even saw on Flippa. So, where are these good brokers?
    Last edited by Kay; 30 May 2014 at 5:26 pm. Reason: split thread

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    LOL, Peter. I hear what you're saying. The quality of brokers varies, of course, and the quality of the individual staff member you're allocated differs as well. When dealing with brokers, not just website brokers but business brokers selling $1M+ properties as well (not properties I've bought myself, I hasten to add, but properties where I've "assisted" in the transaction), I came to approach it this way: They're there to sell something and therefore anything they say or provide is not to be relied upon. They're doing what they do because they're good at selling (or, in some cases, bullshitting). I'm doing what I do because I know more than they do about analysing the accounts, about traffic stats, about earnings programs, about everything related to buying sites. As long as you recognise that ...humour them, play along, let them dig their own holes. And don't take anything they say seriously! Some of these guys are earning less than minimum wage, and that's double what they're worth.

    I do judge brokers on the amount of BS I detect in the way they present the site, the way they reply to emails etc. Very often it's on the wrong side of comfortable for me, someone who doesn't like sales talk at the best of times, and often the seller of the site has lost me as a buyer simply because the broker or the broker's staff member .... sounds like an MMO monkey or is too clueless to cater for what I need out of the enquiry.

    Thomas, no offence. If I were buying sites I'd be quite happy to deal with you personally!
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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    aka "meathead1234" Thomas is a Premium Member
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    Quote Originally Posted by petertdavis View Post
    So, I'd like to learn more about these good brokers y'all keep talking about. In my experience, which certainly isn't as deep as Clinton's but is certainly deeper than most other buyers, broker listings are typically as delusional as Flippa listings. They do tend to be delusional in a different way, of course. What usually sticks out like a sore thumb to me in broker listings is that there is absolutely no accounting for how much time and effort the current owner puts into the site (even though the site might be being marketed as a "passive income" deal). Rarely do I even see a broker accounting for anything beyond hosting on the expense side. I even had one broker tell me that the cost of an employee that had been working for the site wasn't an expense and shouldn't be counted because the employee wouldn't be continuing to work on the site after it was sold. That there is one that I never even saw on Flippa. So, where are these good brokers?
    I was talking about a good broker being able to properly qualify buyers, not account for owner's time. Any broker who tells you an employee cost doesn't need to be included as they won't be staying on post-sale is obviously wrong. In my personal experience, there are *very* few good brokers. I can probably name you about 5 I would consider "good" (as Clinton says, the quality can vary within a firm, too). Lots of brokers come from a sales background so in those cases they are probably used to bending the truth a little. I'm far too English and honest for that

    Accounting for time is an interesting one. Based on feedback (mainly from here) it's something I tried a couple of years ago. I would allocate a cost (based on complexity of the task) based on owner's time spent so the valuation took it into account. It just didn't work. No-one understood it and buyers were always disputing how much things should cost. Nowadays, we just include the time the owner (claims) to spend, broken down by task. Passivity is quite subjective - we tend to use it for anything that requires less than 10 hours per week (there's no such thing as a truly passive business, we all know that).

    One thing I have found more recently is that quite a lot of buyers aren't bothered by the time a business takes to run - especially if it is of strategic interest. There are still a load of buyers who are (and tell us our valuations are far too high all the time), but ultimately, a broker's job is to price a business at a level where at least one qualified buyer would be interested. Not at a level where a group of regular buyers agrees is "fair". For example, we recently had an e-commerce store listed at 2.5x net and was a part-time job for the owner. The vast majority of buyers told us we were wrong and it was worth 1/3 of our listing price (it was quite small so replacing the owner would probably have made the business break-even at best). All it took was one buyer with other sites in the niche and he was happy to pay full asking price. His infrastructure and team meant he would probably double profits within a week and not have to worry about "overpaying".

    All in all, as Clinton says, you always need to remember a broker represents the seller, not the buyer. While there is some merit in building trust with buyers as a broker, that's not ultimately our job. This thread was about poor quality buyers, so my main point was a good broker should be able to properly qualify buyers, not make friends
    Last edited by Thomas; 30 May 2014 at 5:33 am.

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    I would love to see your list of five good brokers Thomas, and if you dont' want to post it then pm it to me.

    To me the time issue is often something that is a red flag for me. What I mean is, if they can't be honest about that, then that indicates to me that they're not honest about anything else. It's not always as simple as the example I mentioned, of course it is clear that if the business being sold had an employee and the broker is showing you a P&L statement and the employee's salary isn't' on the P&L, that's a problem whether or not the employee will continue to work with the business.

    I don't think it's necessary to come up with a dollar value for the time the owner put into it. What I would like to see, though, is some honesty and disclosure. If the owner is working 40 hours a week on a business, I don't want them to tell me it's a passive income site. I think it would be next to impossible to find any ecommerce site that is a passive income business, but I'm sure everyone here has seen them advertised as such just as I have.

    Really, all I need from a broker is just the facts and none of the bullshit. To be honest, I couldn't care less if I'm dealing with the best broker in the business or someone who was born yesterday. If it's a site I want to buy, and all the facts are laid out for me, and the price is right, I'm going to buy whether it is from Flippa, a dealer, the owner directly. But, yea, seems I've taken the thread in yet another direction....sorry

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