Beware the Rogue Business Sales Agent….
31st October 2016 by Jeremy Channon
Although this is an issue that has been picked up and pretty widely covered in the press it still seems to be one that catches some business owners out.
You should by all means consider using an experienced and established business sales agent based locally and this is often a very effective way to sell your business.
Often this will be a business which you will have worked very hard at over often a life time to develop.
The rogue agent’s sales patter is a generally a fairly familiar one: the agent will come in and promise you a better than expected price for your business and tell you they have several buyers lined up. They get you to sign an agreement under which a fee is paid up front and a much larger fee is then payable as a commission on sale. The problem is that often under the contract a “withdrawal fee” is still payable even if they don’t sell the business and this is often runs into thousands of pounds. As a business customer you do not benefit from the laws put in place to protect consumers and the business sales agency will look to enforce the agreement through the courts. As you can imagine many small businesses find this quite intimidating. A significant portion of the business sales agency’s income will come from these “withdrawal fees” rather than genuine commissions earned from selling the business. Plus very little is often done to by way of actually marketing and selling the business.
Hence as a business owner you have to be very careful about what you sign. If in doubt about an agent then Google them first before signing anything. Do not be rushed into anything. If you want to use an agent here’s a few points to keep in mind
- Try to use an agent who has been recommended and when you meet the agent don’t be scared to rely on first impressions. Be prepared to ditch them if there seems to be anything unprofessional about them, act on your instincts. Don’t be conned by a winning smile and generous promises.
- Wait until the agent suggests an asking price. If it seems overly generous then this could be a danger sign. Have your accountant give you a realistic idea before the meeting so you know roughly what to expect.
- Negotiate the best possible terms on the agent’s commission but beware promises of discounts on signing up immediately. This is unethical behaviour.
- Never sign an agreement with the business agent on the spot. Get a specialist commercial solicitor to look at it first.
If you would like any advice on selling your business then please contact Jeremy Channon at j.channon@laceyssolicitors.co.uk or on 01202 557256.
Jeremy Channon
Partner — Corporate and Commercial
Direct dial: 01202 377831
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Jeremy qualified as a Solicitor in 2002 and is now a Partner within our Corporate and Commercial team advising businesses, shareholders and directors on all legal matters relevant to their businesses, ranging from sales and acquisitions, shareholder agreements, restructures and corporate governance.
Jeremy adopts a responsive and expert approach to matters which is always well received by his clients.
Jeremy’s career path to Laceys was somewhat unconventional having spent 4 years out from the legal profession working as a professional mariner, 2 of which were on a superyacht and 2 on a commercial fishing boat!
Outside of work he is an active sportsman and plays squash, real tennis and touch rugby.
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Beware the Rogue Business Sales Agent….
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