The pitfalls of hiring a dual agent in a business sale transaction
Most people have heard of dual agency in the context of a real estate transaction and have some awareness of the issues surrounding dual agency. In spite of the inherent conflict of interest, many people do not mind transacting residential or commercial property using a dual agent. The reason is pretty straight forward - while there is risk of not getting good representation, the downside is typically small. Property values are driven by comps and cap rates and in most cases, the amount of money left on the table is a small percent of the transaction value. The commodity nature and relative liquidity of real estate also helps make buyers and sellers comfortable with the risk level.
But does this logic apply to business sale transactions? Businesses, compared to real estate, are illiquid and the valuations and the ultimate closing prices vary dramatically from business to business. The deal amount can also change dramatically through the duration of a deal. In Business sale transactions, not having a fiduciary agent working for you can cost you plenty.
Let us start with an explanation of "fiduciary duty". An agent used to represent a buyer or seller in a business transaction has a fiduciary duty. A fiduciary duty is the highest standard of care imposed at either equity or law. A fiduciary is expected to be extremely loyal to the principal. Among other responsibilities, a fiduciary must not put their personal interests before the duty and a fiduciary must not profit from the fiduciary position without express knowledge and consent of the principal. A fiduciary also has a duty to be in a situation where there is no personal conflict of interest and where there is no conflict of interest with another fiduciary duty.
In light of large sums of money at stake in a business transaction and these fiduciary responsibilities, let's look at the three key issues faced by a dual agent in a business sale.
1. Conflict of Interest
This is by far the most obvious and most damning part of being on both sides of a business sale transaction. A business intermediary is obligated to serve the best interests of his or her principal. Buyers and sellers by definition have conflicting interests. Who should the intermediary be loyal to? Is the agent looking after your best interests? Some agencies will tell customers that they will assign separate individuals to the buying side and selling side and create a Chinese wall.
In practice, the wall between the two sides in the same company, even in a large company with processes to cover this type of conflict of interest, let alone a typical small to mid market intermediary, is more akin to a sieve than Chinese wall. An agency in this situation is in violation of the standards of being a fiduciary.
2. Advocacy
Any competent agent will tell you that, when two principles' interests are in direct conflict, the agent cannot advise, advocate, or give allegiance to either party if such counsel gives one party an advantage over the other. Not remaining neutral or showing favoritism would be illegal and can make the agent liable to potential damages. A careful dual agent would shun the risk of advocacy and will tell you that they will be extremely careful to represent both parties equally and fairly. In other words, both parties lose "advocacy" for their best interests! Is this what you pay your agent for? Wouldn't you rather pay an agent that advocates your interests?
In practice, providing equal service to two parties is difficult and, even if the agent is highly ethical, agent's biases and self interests may tip the scales in difficult situations.
3. Sensitive Information
A business sale can take an extended amount of time and the seller or buyer may experience one or more personal events which, while not affecting the performance of the business being transacted, may have substantial impact on the negotiations. The agent may become aware of this sensitive information which, if disclosed to the other party, could harm one party and benefit the other. If the agent has one principal, clearly the agent will develop a strategy to minimize the impact to the principal. How does a dual agent handle this type of information about a client? Would you trust your sensitive information with a dual agent?
In practice, the agent ends up playing favorites or in a worst case scenario, one or both of the parties' interests are sacrificed in the interest of "getting the deal done".
Summary: Business sellers and buyers need to carefully pick their agent in a business sale transaction. Providing equal service to both clients is practically impossible in most deals. In the best case scenario, neither the seller nor the buyer is getting an advocate. In the worst case scenario, one or both of the parties are being sacrificed. For this reason some states do not permit dual agency. Much can be lost by employing agents who put themselves in the position of being dual agents and thus not living up to the fiduciary standards.
Tuesday, February 26, 2008
How To Make Selling More Really Simple
How many friends, family and associates do you know who have been employed in sales at some time in the past? How many of them weren't very good at it?
The answer to the first question is easy, probably quite a few. At some point or other in their lives many people have had a go at selling even if only as a student or in their first job. You may not know the answer to the second one... it's probably most of them!
Probably most of them.
Oh, for sure, they'll tell you that they did well. They'll tell you that they sold bucket loads! They'll tell you that they were a top sales performer. They'll even talk knowledgeably about how to sell. It's amazing what a good game people who only sold for a few weeks and never had any sales training can talk! They'll talk about open questions and wants and needs like they know what they're talking about but... seriously... most of them failed!
Not all, but most!
Top salespeople lead an enviable life. They earn great money. They win promotions. They have job security. They have respect, opportunity and friends. They have freedom, career choices and financial independence. They have fun, challenge and variety.
So if you had all of that, why would you leave? Mostly only if you weren't getting those things at all! I met a friend of a friend in the pub the other night and he looked scathingly at me when I said that I was a sales training expert and told me that he left sales for "more security" and opportunity. He earns in a month what I earn in a day. I recently heard that his company are looking to "cut back" in his department. Nuff said!
But why this tirade? And why today?
Simple. This week I worked with a really great team of salespeople. They were enthusiastic, interested, open and up for it. They embraced the fact that selling is simple and they wanted to master those simple skills. Sales is so simple in fact that nearly anyone could be very successful in sales. Selling is straight forward enough that everybody in the training room could achieve phenomenal success if they commit and take action...
So if selling is so simple why can't everyone do it?
Because selling is about attitude. Selling is an attitude. Selling is an attitude that leaves behind a trail of techniques. Now don't get me wrong here... sales skills are very important, very important indeed. Anyone who has been through a sales training programme with me or who has attended one of my sales seminars will know just how important I believe sales skills are...
But they're not the key factor in this equation. They're only a part of the equation. And on the other side of that equation is attitude. Without the right attitude you won't be able to access your skills. Frankly, without the right attitude, you're in trouble. If you can get and maintain the right attitude then you will make a success of yourself in sales and selling. Period. If you can't, you won't. It's goodnight sweetheart!
I would far rather hire someone with all of the right attitudes and potential and train them on the skills side than I would wrestle with someone with all of the skills and experiences who cannot be bothered any more! The former salesperson I can train because they want to learn, the latter I have to re-motivate and re-educate. Possible but much harder...
You've probably worked with or recruited a salesperson who had all of the right attitudes but was light on skills. They probably did pretty well. It usually gets put down to "beginner's luck" but it's not "beginner's luck", its "beginner's attitude".
And it's at this point that many people not in sales might be tempted to conclude that sales and selling is easy. Something for thickos, something that anyone can do.
Just so wrong!
The hardest thing in the world is getting, keeping, maintaining and improving the right attitude. In sales you never know when you might run into someone who is going to be your best ever client. You never know if the next sales call is going to win you a multi-million account. You never know which meetings are going to convert and which aren't...
And this makes it hard because you have to be on top sales form for every call. Top sales form for every presentation. Top sales form for every meeting. Top sales form for every negotiation. Top sales form for every conversation. Top sales form for every communication. Top sales form. Top sales form. Top sales form.
Not for you the mindless "going through the motions" that some non-salespeople can get away with for periods of time. You have to be switched on, tuned in, fully focused, up for it, raring to go, playing from a 10, on the ball...
Salespeople often say to me that cold calling (for example) is repetitive and boring...
Wrong attitude! You have to be on top sales form for every call. It could be your umpteenth call of the day but it is the initial contact with you for your potential clients. You have to be on top form, you have no safety net!
To make matters worse, salespeople get faced with problems and challenges every day. Problems, complaints, rejections and client objections are something we have to deal with every day and we must stay on top sales form.
So if selling is so simple, why can't everyone do it?
Because selling is about taking personal responsibility for your own attitude, your own behaviours and your own results. Selling is about smiling when you don't feel like smiling. Listening when you don't feel like listening, Caring when you don't want to care. Standing up when you feel like lying down. Pushing on when you feel like giving up. Firing on all cylinders when you feel like throttling down. Taking responsibility when you want to pass the buck.
Selling provides virtually unrivaled opportunities for anyone who is prepared to commit themselves. Your degree won't help you. Your qualifications and exams won't help you. Your CV won't help you. The only person who can help you is you. And that's too much of a leveller for most people.
The answer to the first question is easy, probably quite a few. At some point or other in their lives many people have had a go at selling even if only as a student or in their first job. You may not know the answer to the second one... it's probably most of them!
Probably most of them.
Oh, for sure, they'll tell you that they did well. They'll tell you that they sold bucket loads! They'll tell you that they were a top sales performer. They'll even talk knowledgeably about how to sell. It's amazing what a good game people who only sold for a few weeks and never had any sales training can talk! They'll talk about open questions and wants and needs like they know what they're talking about but... seriously... most of them failed!
Not all, but most!
Top salespeople lead an enviable life. They earn great money. They win promotions. They have job security. They have respect, opportunity and friends. They have freedom, career choices and financial independence. They have fun, challenge and variety.
So if you had all of that, why would you leave? Mostly only if you weren't getting those things at all! I met a friend of a friend in the pub the other night and he looked scathingly at me when I said that I was a sales training expert and told me that he left sales for "more security" and opportunity. He earns in a month what I earn in a day. I recently heard that his company are looking to "cut back" in his department. Nuff said!
But why this tirade? And why today?
Simple. This week I worked with a really great team of salespeople. They were enthusiastic, interested, open and up for it. They embraced the fact that selling is simple and they wanted to master those simple skills. Sales is so simple in fact that nearly anyone could be very successful in sales. Selling is straight forward enough that everybody in the training room could achieve phenomenal success if they commit and take action...
So if selling is so simple why can't everyone do it?
Because selling is about attitude. Selling is an attitude. Selling is an attitude that leaves behind a trail of techniques. Now don't get me wrong here... sales skills are very important, very important indeed. Anyone who has been through a sales training programme with me or who has attended one of my sales seminars will know just how important I believe sales skills are...
But they're not the key factor in this equation. They're only a part of the equation. And on the other side of that equation is attitude. Without the right attitude you won't be able to access your skills. Frankly, without the right attitude, you're in trouble. If you can get and maintain the right attitude then you will make a success of yourself in sales and selling. Period. If you can't, you won't. It's goodnight sweetheart!
I would far rather hire someone with all of the right attitudes and potential and train them on the skills side than I would wrestle with someone with all of the skills and experiences who cannot be bothered any more! The former salesperson I can train because they want to learn, the latter I have to re-motivate and re-educate. Possible but much harder...
You've probably worked with or recruited a salesperson who had all of the right attitudes but was light on skills. They probably did pretty well. It usually gets put down to "beginner's luck" but it's not "beginner's luck", its "beginner's attitude".
And it's at this point that many people not in sales might be tempted to conclude that sales and selling is easy. Something for thickos, something that anyone can do.
Just so wrong!
The hardest thing in the world is getting, keeping, maintaining and improving the right attitude. In sales you never know when you might run into someone who is going to be your best ever client. You never know if the next sales call is going to win you a multi-million account. You never know which meetings are going to convert and which aren't...
And this makes it hard because you have to be on top sales form for every call. Top sales form for every presentation. Top sales form for every meeting. Top sales form for every negotiation. Top sales form for every conversation. Top sales form for every communication. Top sales form. Top sales form. Top sales form.
Not for you the mindless "going through the motions" that some non-salespeople can get away with for periods of time. You have to be switched on, tuned in, fully focused, up for it, raring to go, playing from a 10, on the ball...
Salespeople often say to me that cold calling (for example) is repetitive and boring...
Wrong attitude! You have to be on top sales form for every call. It could be your umpteenth call of the day but it is the initial contact with you for your potential clients. You have to be on top form, you have no safety net!
To make matters worse, salespeople get faced with problems and challenges every day. Problems, complaints, rejections and client objections are something we have to deal with every day and we must stay on top sales form.
So if selling is so simple, why can't everyone do it?
Because selling is about taking personal responsibility for your own attitude, your own behaviours and your own results. Selling is about smiling when you don't feel like smiling. Listening when you don't feel like listening, Caring when you don't want to care. Standing up when you feel like lying down. Pushing on when you feel like giving up. Firing on all cylinders when you feel like throttling down. Taking responsibility when you want to pass the buck.
Selling provides virtually unrivaled opportunities for anyone who is prepared to commit themselves. Your degree won't help you. Your qualifications and exams won't help you. Your CV won't help you. The only person who can help you is you. And that's too much of a leveller for most people.
Subscribe to:
Posts (Atom)
Posts
