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4. How to Tell Your Business Broker is Screwing You

How to Tell Your Business Broker is Screwing You

If you plan on selling your website or expanding your digital portfolio by buying more online businesses, there are a lot of benefits to using a brokerage. Here are just a few:

• Vetted websites will be available to you. This means buyers are protected and know they are buying a legitimate business.
• You will have a huge buyer reach. Most brokers have a huge audience of buyers that can greatly increase the speed of sale. Plus, these buyers are willing to pay what the business is actually worth. Our list is sitting at over 30,000+ people right now.
• Leverage deal consultants that have brokered hundreds of deals, from AdSense businesses to complex Amazon FBA deals, will assist you.

Yes, working with a brokerage has a lot of benefits. There are also a lot of potential drawbacks.

Not all brokers are made equal.

If you want to learn an overview of what a business broker is and what it does, make sure to check out our Youtube video below:

Some brokers are only looking to sell a handful of sites a year. For these people, selling even six or seven websites could be a very good income. In this kind of scenario, they may not push for the best deal for you. They might just be looking to get the deal done, or they might not even feel any urgency to find a buyer for your business quickly.

Other times, a brokerage might be using flat-out shady practices. We discuss these incompetencies and dubious practices below and give some advice on how to spot them BEFORE listing or purchasing a website with these types of brokers. After all, using a bad broker could seriously hurt your bottom line. You might get screwed out of selling your website at a good price, or you might get swindled into buying an overpriced online business.

The priority for most buyers when searching for a business is due diligence. Just as you carefully research the business you are looking to buy, you should assiduously research the brokerage you’re looking to use. This is made difficult by the very nature of what online business brokers represent, which is sellers who can be secretive about their niche or business. As a result, brokers can often be very secretive in how they operate their business, making properly researching web brokers an incredibly frustrating process.

Often, the businesses that brokers are selling are niche sites, and many business owners fear that if others knew what their website was, they would be copied, thus losing their competitive advantage in an open niche and losing money. This problem is something we talk about in depth in “Why Hide the URL.”

Niche site owners have an obvious concern here. The last thing they want is a bunch of people who see that their website is for sale making a ton of money by ripping off the exact niche or website that is pulling in all the profit. It is a calling card for copycat marketers from across the internet.

Brokers know this well, which is why brokers can often be secretive themselves. Usually, this type of behaviour is to protect their clients; however, there are other reasons a broker might be secretive. They might not want to talk about deals they have done because, in spite of their fancy site, they haven’t done any at all. Or they might lie about the size of their team to impress their visitors into thinking that they are a legitimate authority on buying and selling online businesses.

While brokers will always be secretive, we are going to dive deep into how to spot a broker you don’t want to be doing business with. A bad broker can hurt your earnings, whether you are a website seller or business buyer.

So we are going to help you out.

Here is how to intelligently source a high-quality, highly effective online business broker.

The Dirty Tricks Handbook of Online Business Brokers

Being in business for as long as we have in this space, we have seen some competitors use some pretty silly and shady tactics. The desperation to get deals coming through their brokerage can result in brokers deploying some pretty low tricks.

We are going to discuss each of these tricks, why each one matters, and what kind of impact they can have on your business.

Overvaluing Sites to Entice Sellers

Why It Matters

You might think that, as a seller, it sounds great to have your website listed at a huge sales price. It can certainly feel good. Alas, this is a terrible practice desperate brokers use to pull more sellers into their marketplace.

Impact

By listing your business for these super high multiples, you increase the likelihood that your business is not going to sell anytime soon — or ever, for that matter. Business buyers that actually have the money to purchase such a listing are going to do their due diligence, and they are going to find out what your business is really worth.

The best case scenario is that you will sell your business — probably for far less than what the broker originally listed the business at —after a long period of frustrating negotiations, that could had been avoided with proper pricing. Worst case is that you never sell the business at all.

Misrepresenting How Fast and Easy the Sales Process Will Be

Why It Matters

Brokers are always trying to convince sellers how easy the process will be. A seller wants a smooth, quick sale, so it can be an attractive lie to fall for. At Empire Flippers, we have data showing that the vast majority of the online businesses we sell are purchased in under 30 days. However, we would never tell a seller anything about the process being quick or easy, as every deal is different. Since every deal is unique, it is impossible to guarantee a time frame for when a site will sell, but we can make fairly good estimates based off past sites sold and the current sites listed on the marketplace.

There is simply no guarantee. If a broker is giving you lines about just how easy it is to sell your business, you might want to do a double take.

Impact

Should you go with a broker peddling a “get rich quick” mentality, there are a few things to watch out for. They might just take any lowball offer that comes along and be angry when you reject the offer, claiming that you are prolonging the process, or they might give your website an overly high valuation to get you to list with them. Sometimes these brokers might advertise deals they have done, but the deals didn’t actually happen, or they weren’t the actual broker who did the deal. These are all things you should be paying close attention to.

The False Promise of the Secret Premium Buyers List

Why It Matters

A ton of brokerages have a secret buyers list. These buyers lists are supposedly vetted buyers who come back to the broker over and over again to buy more businesses from them. How it works is that, once a business is listed, the broker will not publicly announce the listing to the rest of their audience. Instead, they release the information to a small list of buyers that are put on a premium list where they get first pick of available businesses.

By feeding business listings only to their premium buyers, a lot of brokers think they’ll kick off a faster sales process.

Impact

By using a premium buyers list, brokers limit the opportunities for other buyers who do not have access to the sweetheart deals being featured to this secret list. This means that outside buyers are only seeing the leftovers, which creates an unfair advantage for those on the premium list. Everyone who is not on the curated list will only see “second-rate” sites, and might not find the best opportunities.

While it is hard to tell if a brokerage is doing this without having some good intel, you can rest assured that, at Empire Flippers, we do not do this.

Each and every business goes through the exact same process, and we have created an equal playing field for every buyer that has put their trust in our brand. While some repeat buyers have asked us to create a secret premium list, we refuse to do it, preferring to give everyone the same opportunities.

So sellers beware. When it comes to brokers using a premium list, a lack of competition within potential buyers for your website could lead to you getting less of a good deal than if the broker was promoting the listing to their entire rolodex of potential business buyers.

No Vetting Process

Why It Matters

Most brokerages are not physically vetting the businesses they are selling. Instead, they are just accepting screenshots at face value when sellers come to list their businesses with them. Vetting takes a lot of effort, time, and skill, so most brokers just avoid it completely.

Impact

The biggest thing a buyer needs to be aware of is whether the broker is selling a legitimate business or a false flag. If the brokerage is not vetting these websites, you are going to be putting yourself at risk.

Our advice is to be extremely wary of any broker who is basing their vetting on screenshots alone. In our process, we literally log in to the seller’s affiliate dashboard or payment portal so we can verify earnings. We also do this with their traffic analytics. This process significantly mitigates risks for the buyer.

Shady Backlink Profiles

Why It Matters

A website buyer has the right to be a little paranoid about what kind of links are pointing to a website. If the business being sold is mainly getting traffic from Google, then assessing the links associated with the site should be part of the vetting process.

Unfortunately, many brokers will not reveal the fact that a private blog network (PBN) was used with the website, much less any kind of spam link packages that could seriously threaten the site as Google’s algorithm gets tighter and tighter.

Sometimes a negligent broker will say, “All the links are fine,” whether or not they actually know this to be the case.

Impact

The buyer needs to be aware of the risks. If there were spam links involved with the website, they should know about it so they can assess the risk themselves. While PBNs are often a mainstay for many web properties, they can still pose a risk, and the buyer needs to know that there was a PBN involved.

PBNs are not inherently bad, but a buyer who is investing in a website that was created on the back of a PBN, without knowing it beforehand, is at risk of being downgraded in Google’s algorithm.

Every website that comes through our vetting process is specifically combed for a PBN if the seller does not willingly tell us. Again, PBNs are not the end of the world, and they can often be super effective. Still, a buyer should be aware of every risk associated with a business they are going to buy.

Hands-off Approach in Disputes Between the Buyer and Seller

Why It Matters

A lot of brokers are lazy when it comes to handling the interactions between a buyer and a seller. Many brokers more or less make the seller do all the work of selling the buyer on the website, which undermines the value of using a brokerage in the first place!

Such brokers are more focused on getting more deals into their hands than seeing a deal through from start to finish.

Impact

When this happens, a seller can often feel as if their broker has totally stranded them. When disputes pop up, the seller and buyer might end up in an endless back and forth of frustration as they both clamor to get what they want.

Without proper processes in place to handle disputes or disagreements between buyers and sellers, you might be facing a pretty painful exit or acquisition.

One thing we do is hold onto the funds, acting as a “middleman” between buyers and sellers. We make sure every expectation is met before the funds are released. Not only that, but also our deal consultants are always present on any call between a buyer and a seller.

This is something to watch out for — especially if you are a new seller or buyer that might need a bit more hand-holding your first time around. Look for brokerages that will be present throughout the entire process.

Pretending to Be a Buyer to Get a Listing

Why It Matters

A lot of smaller brokers will do email outreach to various online business owners. In these emails brokers will masquerade as a buyer and pretend to be interested in buying the website. When they get someone that is receptive to the idea of selling, the fake buyer goes into broker-mode and solicits the seller to list with their brokerage.

Ultimately, this is a fairly desperate tactic and shows that the broker is not getting enough business, since they’re reduced to pretending to be a personal buyer to drum up interest.

Impact

Someone that goes with a broker utilizing these practices is going to be in for a tough ride. They likely have zero processes in place, and — if they had to do a bunch of spammy email outreach efforts just to find people to sell their businesses through their brokerage — what do you think their audience looks like? There are probably not many buyers built into their marketing when there are barely any sellers to begin with.

Yeah, not good.

Outright Lying

Why It Matters

Brokers are notorious for lying, or overstating things. They do this to appear to be more of an authority. Examples of outright lying are when brokers exaggerate the size of their team (saying they have the biggest team in the industry, for example, when some Google searching might show otherwise). Another common lie is inflating the number of deals they have done to win over a buyer or seller.

Impact

This kind of practice is a toxic foundation for any kind of business. If they are lying in their marketing tactics to get your business, what are they doing on the backend once they actually have these listings? Are they making huge promises to the buyers looking at these sites?

It is best to avoid brokers like this, as your business, money, and time are far too important to deal with these kinds of people.

Sometimes Brokers Are Just Incompetent

Bad brokers may not necessarily be employing shady practices. Sometime brokers are just bad at what they do. As with any business, some are just completely incompetent and do not understand what to do to give their clients a quality service.

Here are some signs of incompetence to look out for when it comes to selecting a broker.

Do They Have a Buyer Qualification Process?

If a broker is just revealing your site to anyone without any kind of qualifying process, it’s bad news. They are doing exactly the thing that niche site owners are afraid of, and this practice is the reason many brokers keep details about their clients’ businesses confidential until the sales process is underway.

There needs to be some kind of buyer qualification process to weed out the tire kickers. Keep this in mind when shopping for a broker.

Zombie Listings Still Being Advertised

Zombie listings are something that happen with smaller brokers all the time. They will leave listings up that have expired weeks or even months ago, and are no longer active listings.

Whether it is through neglect or forgetfulness, a broker advertising a business that has already been sold, or otherwise taken out of the sales process, is a broker you should closely scrutinize before doing any kind of business with them.

Zero Migration Assistance

One of the most tedious parts of selling or buying a website is actually handing the business off to the new buyer. There is hosting to change, migrating all the files over to the new account, changing all the affiliate links, and a hundred other small tasks that all need to happen in quick succession after a business purchase.

Look for a broker that offers to help with this. It might be just a few portions of the migration process that they help you with, or the broker may handle 100% of the migration. This is what we do here at Empire Flippers.

The Letter of Intent (LOI) Time Trap

An LOI is often used as a way to screen out serious buyers from the tire kickers. The prospective buyers fill out the paperwork and are given the right to check out the actual website. The problem with LOIs is that they often include an exclusivity clause which prevents other potential buyers from looking at the site while the terms of the LOI are in place.

If that buyer takes an entire month to research the site and decides at the end not to buy, the seller just lost an entire month where they could have been meeting serious buyers who might have bought their business.

If you want to sell your business quickly, we highly recommend using a broker that does not use an LOI system.

Finding the Right Broker

A good business broker can be a tough thing to find. There are a lot of moving parts in this business, and a level of trust needs to happen between all three parties (the buyer, the seller, and the broker) if the relationship is going to succeed.

There are some good questions you can ask yourself before choosing a broker. These questions can help you decide which broker to go with:

• Is the broker transparent about their operations? Do they have any kind of income reports? Testimonials?
• Does the broker have a system in place to qualify buyers so as not to waste a seller’s time?
• How big is the brokerage? Is it just a one man show? If it is, tread more carefully versus choosing a brokerage with a trained team of professionals.
• Go outside of the broker’s marketing. Start Googling them. Try to find what other people are saying about their business brand outside of any properties that they control. If you find nothing being said about them, they might be extremely new, in which case you should be using extra caution before choosing them as your broker.
• Is there a way to contact an actual person at the brokerage? If the broker refuses to get on the phone with you, that is a very bad warning sign. What happens when you actually list your business for sale or give a deposit down on a six to seven figure business when they won’t even return your initial calls to introduce yourself?
• Do they have any kind of migration process in place? Or will you be left with the job of transferring the site to the buyer?

Bringing It All Together

At the end of the day, due diligence is a foundational skill to have when choosing a reputable and reliable broker. I implore you to go through this article and apply the questions it raises to any brokerage you are considering.

Check Us Out

Empire Flippers is a brokerage committed to ensuring our corner of the online business sales market is fair and transparent. It’s for this reason that we have become the go-to broker for so many entrepreneurs, both in the niche site world and with other business models.

We care about providing an incredibly high-quality, high-value service for our clients.

Here are a few things we do for our clients:

• We have no “secret” buyer list. In our marketplace every buyer starts on an equal footing.
• We handle 100% of the migration of the business from the old owner to the new owner.
• We have professional deal consultants who represent both the buyer and the seller to make sure everyone walks away from the negotiations table feeling like they got exactly what they wanted.
• Our buyer qualification process is the safest way to protect your site from unscrupulous eyes. We have buyers provide a deposit which is a percentage of the business value to show they are serious about purchasing it.
• Our email list also has over 30,000+ subscribers, all looking for businesses to purchase!
• If you’re a buyer, we have got you covered, too, as every single business that comes into our marketplace is vetted by physically logging into the seller’s payment portals to verify that what they say about their traffic and earnings is true and not just based on photoshopped screenshots.

Because our aim is to be the go-to marketplace, we focus on quality.

There is a reason why the majority of our sites sell within 30 days.

We have spent so much effort building our community, our audience, and — most importantly — our brand so people will know, like, and trust us. Because people know and like us, it attracts more sellers (who often are repeat sellers) who list more sites on our marketplace. From a buyer perspective, this creates more opportunities for a buyer to find the perfect online business to purchase. Since the brand is strong, it creates more trust between both buyer and seller since the buyer knows the seller has had to go through our vetting process, and the seller knows that the buyer has had to put down a deposit to see their website.

Again, apply this article’s list of vetting points to Empire Flippers or any other brokerage you’re looking at. If you want to save some time and effort, just give us a call. We’re happy to talk to you.

Want to sell your website? You can click here to get started.

Or maybe you are excited by the fact that our marketplace doesn’t just feature leftovers from a premium buyers list? If that is the case, check out our marketplace.