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Thread: When you should AVOID using a broker

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    Administrator Clinton is a Premium Member
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    When you should AVOID using a broker

    There've been a couple of discussions in the comment sections at Elliot's blog and domainnamewire which started off about valuation and then got into discussing the merits of using a broker. I made a couple of detailed posts there which got me thinking about an article I could put together.

    I'm working on it now. It's about why you shouldn't use a website broker. (We already have several threads on when you should use a broker, example)

    I have regularly advised that for higher value sites (say $100K+) a broker is the best way to go for most sellers. And I maintain that very emphatically. However, there are many circumstances in which it's better to handle the sale yourself and many broker claims and sale pitches that don't hold up to scrutiny if you're an industry insider. I aim to discuss those claims and how a seller can examine them to see which have merit.

    The idea isn't an anti-broker rant, it's to empower sellers to decide when to use a broker and how to judge if a broker is any good.

    Any suggestions from any of you? Any good reasons for not using a broker? In what circumstances is it better for a seller to go it alone?
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

  2. #2
    Administrator Clinton is a Premium Member
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    Nobody?

    I'm working on finalising the article now.
    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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    Administrator Clinton is a Premium Member
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    OK, seeing there isn't much interest here, I posted it on the other site. I've laid it out listing the reasons people feel they should sign up with broker. The top ten reasons are:

    1. He has given you a high valuation
    2. He claims that broker sales get a higher multiple
    3. He has a buyer database that nobody else has access to
    4. He understands buyers/ the market and knows how to deliver
    5. He is best placed to guide you on info to provide
    6. He'll ensure the transaction and your money is safe
    7. He can give you other specialist advise such as CGT
    8. He's registered to do this broking business
    9. He takes your long term interest into account
    10. He has glowing references.

    I then cover why some of them are worthless and how you can verify the ones that matter.

    Any comments? Especially from brokers. I'm looking to encourage those owners of $100K+ sites that are best handled by a broker to come here to the forums to find one.
    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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    Yesterday I was typing up a fairly lengthy response to the original post here. Unfortunately my power went down and I lost what I had wrote. I wanted to share some of my comments with the current list above as to why people go with a broker. While this list is very specific to certain reasons why sellers use brokers, there really is one general rule that I follow. Sellers who are uneducated about the selling process and do not have the patience & time to handle the sale themselves are typically the sellers who use a broker. If you have an educated seller who understands his market, knows how buyers evaluate businesses, knows the selling process and is able to contact the appropriate people who would be interested in his site, he really does not need a broker. It all comes down to education. You can compare this to the real estate market. There are plenty of reasons to go with a real estate agent, but there is a growing trend these days (at least in Canada) to try and sell a real estate property on your own. The people who attempt this understand the market, are typically in sales themselves and have the time and patience to deal with the entire sales process. The only real exception to this would be an educated seller that understands the entire process but simply does not have the time or could not be bothered doing it themselves.

    Everything mentioned on the list are important factors to consider when a seller is considering to use a broker but the bottom line is that a seller will go with a broker if they feel that the broker is more educated about the entire process and can get the job done. Now, whether or not the broker is ACTUALLY more educated than the seller is the question at hand, and which is why this discussion is taking place. Clinton has covered what to look out for in each point, and I would like to provide my own comments on the 10 reasons he has given.

    1. He has given you a high valuation --- We value sites at realistic multiples of earnings and factor in anything that can add value to the site.
    2. He claims that broker sales get a higher multiple- In most instances, we do. This is really only because most brokers only take on businesses that can fetch higher mutliples as Clinton pointed out. We are no different.
    3. He has a buyer database that nobody else has access to - This is one is partly true. While we do have access to a large database of buyers, i believe there is a lot of overlap with the buyers in each broker's list. We all list in similar places so we are bound to get a lot of the same buyers on our lists. I have not put this theory to the test, but I am quite confident this is the case.
    4. He understands buyers/ the market and knows how to deliver - This one is very true, if we are dealing with less educated sellers. The more educated ones may very well understand their market and their buyers more than we do. That being said, they may not know how to deliver which is where we would come in.
    5. He is best placed to guide you on info to provide -Not true. There are so many places online to find out what one would need to sell their website. Clinton has gone over this many times before.
    6. He'll ensure the transaction and your money is safe -Having a third party in the transaction is always beneficial, but if the buyer and seller understands the sales process and understands how escrow works, this point is fairly moot.
    7. He can give you other specialist advise such as CGT - depending on the broker, this is true. Since we do this all the time, we are bound to know a little more about the special details regarding a transaction.
    8. He's registered to do this broking business - In most countries, a license is not needed to conduct website brokering services. Brick and mortar business brokering is another story. That being said, I do not think that having professional designations to handle the brokering process is necessary at all. I work with a ton of people who are more knowledgeable on specific subjects that the people who have trained their entire lives to be an expert on said subjects. I am sure a number of you can relate to that. I personally do not have a broker license but I can guarantee you I o my best to get the job done right.
    9. He takes your long term interest into account- I have not met a seller yet that didn't want a fairly quick sale. They obviously want their site to be successful in the future, but as long as they are not legally tied to the success of the site through the contract of the site sale, they really do not care too much. That being said, the buyer side of the sale definitely has long term interests for obvious reasons. We pride ourselves in providing support for buyers post sale. Not only are we website brokers, but we have a sister web development company, ayceinternet.com that will assist buyers once they purchase the site. We want them to succeed.
    10. He has glowing references. - References are very important. This is probably the most important item on the list. The majority of our business comes from referrals so we make sure that we do a good job for our clients. Sellers should absolutely try and seek out references from brokers.

  5. The Following User Says Thank You to WSYSBroker For This Useful Post:

    Clinton (5 October 2010)

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