Negotiating Commissions is Bad Business for Business Brokers
Negotiating commissions is not in the best interest of business broker’s clients, a leading business broker told the GABB Board.
In August, the board met for a strategic planning session with Andy Cagnetta, owner/CEO of Transworld Business Brokers, LLC., of Ft. Lauderdale, Florida. Andy is also past chairman of the International Business Brokers Association, and a current chairman of the Business Brokers of Florida.
To illustrate his opposition to negotiating commissions, Andy told a personal story. Andy sold a business to a friend, and within 3-4 months, the friend was upside down in the business. Andy decided to discount his minimum commission by $3,000.
While the listing was active, a Florida broker called Andy and told him he had a buyer for the business. But when the other broker heard the amount of the commission, he said, “I’m not showing it to the buyer.” Instead, he showed the buyer a similar business in his office.
“My guy crashed and burned. He never got his money back, and got sued by landlord,” Andy recalled. “I didn’t help my seller.” He explained that the commission is part of the process to motivate brokers in the marketplace to bring deals to the table.
So now, Andy says at every listing appointment, he tells clients we’re not going to negotiate the commission. If they start scratching their heads, he tells them the story and says he’d be doing them a disservice.
“You’ve got to believe that motivating the marketplace is the right thing for you,” said Andy.