Imagine a person coming to a doctor and lying about his or her health condition. It doesn't make any sense, does it?.. Of course, it doesn't. How stupid a person should be to alter or hide the truth necessary for protecting their own interests?! Unfortunately it happens quite frequently with business owners who hire business brokers to help selling their businesses.
Not long ago we were approached by the owner of a limousine company asking for help in selling his business for 25 years. He also claimed that considerable portion of his income is paid in cash. Usually we discard cash portion of revenue altogether. However, the owner convinced us that he can prove every single penny. Long story short, we signed up the business and spend substantial amount of money and time on marketing it. We found a good buyer, negotiated terms of the deal and started due diligence, only to find out that the claimed income was a complete hoax.
Have we known true situation about the business, our valuation would be different, our marketing strategy would be different, our presentation to prospective buyers would be different, and we had realistic shot to sell the business. Somehow, some business sellers think that they can fool the business broker and the buyer, and sell their business under false pretenses. It doesn't work this way. Your lie can be discovered fairly quickly and from this point the trust to everything that you're saying is lost. Even the correct and true data will be scrutinized by the buyer or they will turn around and walk away altogether.
Remember that business broker is your ally, and good business broker is very powerful ally. We know how to expose the best angles of your business and subdue shortcomings. However, it's all done without lying to business buyers or hiding any information from them. Buyers will get complete and true information presented the right way. However, if you're hiding some negative aspects of your business from the business broker, he or she can't do necessary damage control and, when you're eventually caught on lying it damages the deal. Even, if by some miracle, you were able to sell the business under false pretenses to inexperienced buyer, it's a recipe for a lawsuit.
Do yourself a favor and disclose EVERYTHING about the business to your business broker. It will save you a lot of time, money and keep away from the court room.
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