Flippa Brokers

[hooperman]

Those auctions that involve brokers who sell websites on behalf of their clients: who is (or should be) held accountable if the stats are faked?

Can "selling a website on behalf of a client" be a convenient way to avoid tarnishing your glowing reputation as a trusted seller if the "client" slips up with the stats? Or does the broker have a responsibility to ensure that everything published is ship shape?

Personally, I think the broker has a duty to make sure that figures published are accurate. But that might require a little bit of due diligence, and some fakery is harder to spot than others. Should a broker ensure that everything is accurate? Or simply trust the stats they are given by the seller. If they trust the client to provide accurate stats, but the stats turn out to be distorted to some degree, should they be held to account?

[meathead1234]

As someone who sells sites for clients on Flippa from time to time (maybe 1 a month), I would take responsibility for conveying the facts and doing basic due diligence to the potential bidders. I always make it clear to interested parties what I have done and haven't done - and that ultimately they are responsible for due diligence and everything I say is "to the best of my knowledge" (or along those lines). I'm also very picky who I deal with, so most of the time I'm only selling for someone I actually know or has been recommended from a business associate so I've never had an issue where stats have turned out to be fake (yet!).

To answer your question: I think the broker should be responsible for being clear about what they have/haven't done and ensuring the bidders are aware that due diligence should still be conducted. If they misrepresent what they have actually done "I can confirm with 100% certainty these stats are real" or something along those lines, and they turn out to be fake, then they should be accountable. It's a fine line between being a unbiased 3rd party and a salesman, so it's an interesting question you have posed.

[Clinton]

who is (or should be) held accountable if the stats are faked?

Both. And Flippa for allowing the ambiguity and not having a clear policy like businessesforsale does.

To broker a business in the US you need to have a licence, have various safeguards in place, have public liability insurance etc. You have to operate to certain codes and can lose your licence to practice. There are rules like that in other countries as well. As far as Flippa is concerned any criminal in the world can come and be a broker on their platform.

No offence, Thomas, but the fact that you operate in a decent and honest manner doesn't change the fact that there is no requirement on brokers to do so - which makes for "anything goes".

Personally, I think the broker has a duty to make sure that figures published are accurate.

While that might appear to protect buyers, bear in mind that there is no comeback against brokers who've published fake figures. They can simply disappear into the ether. The broker is simply a username on Flippa and a gmail address.

[meathead1234]

No offence, Thomas, but the fact that you operate in a decent and honest manner doesn't change the fact that there is no requirement on brokers to do so - which makes for "anything goes".

I agree, I'm just giving my opinion based on my experiences/how I operate which can be agreed with or disagreed with as you all see fit. I think the term "broker" is used quite loosely on Flippa and smaller marketplaces, it's not a term I would use to describe myself in day to day operations as it's a tiny % of my income, although technically I am "brokering" the sale.

Perhaps the best way to go would be to have a set of rules (and different seller accounts) for brokers on Flippa - who, with the addition of confidential listings should become more prominent, whereas right now, there are just a few part-time "brokers" like myself. It's something I know Andrew (at Flippa) was thinking about when I met up with him before Christmas, so he's probably the man to ask on that front. Whether or not those rules are enforceable (by law or otherwise), is a question for another day.

I do like the question though, so I'd be interested to hear what others have to say. It can be hard to cost effectively conduct proper due diligence when a sale is only XX,XXX (if I'm getting low XX%) and I'm sure I'm not the only one in that same boat.

I've never dealt with a B&M broker, so how do B&M brokers work? Are they responsible for accuracy of figures/accounts etc?

[hooperman]

Both seller and broker have something to gain from having bidders believe that the site's profit is greater than it really is. What stops them conspiring to create that illusion? The seller is protected as they are anonymous (to a certain extent, anyway) and the broker can deny responsibility as they are simply passing on the information that was given to them. If they are both seen to be blameless, then doesn't this setup make it easy to get away with faking your stats to get a higher price? If I want to sell my own site I could say I'm a broker, make up some fictitious seller I'm working for, and any misdemeanours won't get reflected in my reputation. And there's no seller to trace.

I suppose this kind of trick is only good for one go, though. But then if it's a high value sale, maybe that one go is worth a lot. You could build up trust as a broker with relatively small transactions that go smoothly and then go for a bigger sale with inflated numbers.

It can be hard to cost effectively conduct proper due diligence when a sale is only XX,XXX (if I'm getting low XX%)

Don't take the job!

[Clinton]

But he hasn't taken the job to do DD. He has simply agreed to list a sale under his name. The payment could be seen at least in part as compensation for the credibility a "broker's" name brings to the listing.

So if you've been banned from Flippa and don't know where to buy a phone verified Flippa account it makes sense to pay someone to list in their name.

[WSYSBroker]

Personally, I think the broker has a duty to make sure that figures published are accurate. But that might require a little bit of due diligence, and some fakery is harder to spot than others. Should a broker ensure that everything is accurate? Or simply trust the stats they are given by the seller. If they trust the client to provide accurate stats, but the stats turn out to be distorted to some degree, should they be held to account?

I think we certainly do have a duty to make sure the figures that we publish are accurate. Some due diligence must be done before we list any site so we can have some sense of comfort that what we are listing is 100% provable. That being said, sellers sometimes make mistakes and they are very hard to catch. Take an e-commerce business for example. The seller can track to the best of his ability the cost of goods sold for any given year. He gives us his best guest at what those figures are based on his purchases, his merchant accounts, bank statements and every other method that he uses to prove his cost of goods sold. If the e-commerce business has 7000 sku's there is certainly room for error. So, we would go ahead and list a site knowing the cost of goods sold was $XX,XXX and tell our potential buyers that we think this is very accurate because that is what the seller told us. Once we find a buyer and he is two weeks into due diligence the seller realized that he missed some costs of goods sold....it was in fact, $YY,YYY of costs of goods sold. Because this is still in due diligence the buyer has a chance to adjust his offer and does not need to go through with the sale if he does not want to. BUT, what if the seller did not realize his mistake until after the sale went through? Are we, the brokers, liable for that mistake? Does the buyer have any recourse? At the end of the day I agree with Meathead1234 that everything we say is to the best of our knowledge and the buyer is the one who is ultimately responsible for the due diligence. We try and pick sellers that we can trust, and we conduct as much due diligence as possible to prove the numbers that are presented to us.

[hooperman]

The payment could be seen at least in part as compensation for the credibility a "broker's" name brings to the listing.

I'm not sure what that credibility is worth if the broker has taken only a cursory glance at the site's figures. If a broker represents a client, aren't they accountable for what they claim on the client's behalf? After all, regardless of who owns the website, the details listed by the auction holder are supposed to be accurate and truthful. Maybe I'm expecting too much from broker's, though. I mean, I really don't know the extent of their responsibilities. What I do know is that if I was putting my name to an auction I wouldn't be happy unless I'd made very sure everything was squeaky clean. Maybe that's why I'm not a broker

I think we certainly do have a duty to make sure the figures that we publish are accurate. Some due diligence must be done before we list any site so we can have some sense of comfort that what we are listing is 100% provable. That being said, sellers sometimes make mistakes and they are very hard to catch.

On the other hand, some "mistakes" are very common and easy to uncover if you spend the time. For example, the well known mistake of erroneously attributing earnings to the site being sold that were actually generated from other sites. 3 different sites all contributing to a pot of money in one Clickbank account, and the site being sold claiming to be the one and only source of that revenue. The same affiliate id on all 3 sites, one screenshot of earnings purporting to be for only the site being sold. Should the broker check something like this?

[WSYSBroker]

On the other hand, some "mistakes" are very common and easy to uncover if you spend the time. For example, the well known mistake of erroneously attributing earnings to the site being sold that were actually generated from other sites. 3 different sites all contributing to a pot of money in one Clickbank account, and the site being sold claiming to be the one and only source of that revenue. The same affiliate id on all 3 sites, one screenshot of earnings purporting to be for only the site being sold. Should the broker check something like this?

A broker should definitely check something like this out.....like you said, it is very common and easy to uncover. I have been lucky in that I deal with smart sellers who are not trying to scam people out of a few bucks. I guess it helps when you are dealing with sites upwards of $50K.....people tend to be a little more professional.

[Clinton]

hooperman, when an estate agent lists a property there are very strict rules on what he can and can't say. In the US he can't claim that a room is a double bedroom unless it can take a double bed, has a window, has a wardrobe etc. In the UK, there is no rule on double bedroom sizes but there are rules on almost everything else.

And the same thing applies to business listings. Brokers have to be compliant. But it's not in the way you think.

OK, if he knows the figures are fake then I stand by my earlier post and he should be held accountable. But when I sold my first business the broker took three years' worth of annual accounts and that was that. The fact that the figures were signed off by an accountant absolved the broker of all responsibility for verifying their accuracy. Buyers, however, can't rely on those figures. The accountant would have prepared them based on convention, accounting rules and legislation governing their structure. A buyer would recalculate the "real" profit the business is making, recalculate the "real" value of the assets in the business etc. Just because a company was allowed to write down a $100K IT investment at 25% at the end of the year doesn't mean that this asset is worth only $75K. It could be only two days old! The buyer has to come to his own conclusion as to the worth.

The responsibility of verifying figures is with the buyer. 100%. This is so not the broker's job.

But then I'm guessing the average listing in Flippa does not have three years' worth of audited accounts, the average sale makes the broker less than it costs to register a new domain, and the average broker is a spotty faced sixteen year old in his bedroom scratching his bawlz.