Lessons from the field
Client and Broker Interests: Who Takes Priority?
Every business broker eventually faces the same dilemma: do you tell a client to walk away from a deal, knowing it costs you a commission? Two experienced voices explain when to say “Don't do it,” the red flags that should stop a deal, and why putting the client first is the best long-term business decision a broker can make.
Quick answer
A business broker's duty is to the client's interest, even when that means losing a commission. The IBBA Code of Ethics calls a broker's loyalty and honesty to the client's interest “primary.” Brokers should advise a buyer to walk away when the price is above the business's value, the earnings don't hold up in due diligence or the business isn't what it appeared to be. Sellers' brokers should tell owners “Enough” when a buyer keeps re-trading for a lower price, longer payments or more training. Putting the client first builds the trust, referrals and repeat business that sustain a long brokerage career.
Every business broker at some time faces the same dilemma: Do you encourage a client to walk away from a deal?
It's not an easy call. Brokers work on commission. Months of prospecting, meetings, documents and negotiation can disappear with one honest sentence. Telling a client to walk away takes conviction. And a strong stomach.
A broker who has killed more deals than he's closed
Larry Jacoby is a business broker in the Northeast with more than a decade of experience. By his own count, he has killed, or watched die, more deals than he has closed. Most of the time, it's the buyer he has to stop.
“This is wrong. This is bad. Don't do it.”
There comes a point, Larry says, when that's the only honest thing to tell a client. It might be because you realize the business is not worth what your client is paying. It might be because the business is not even a real business, which you figure out during due diligence.
Either way, it hurts. As Larry puts it, “mentally eliminating a four- or five-figure commission from your future earnings does not help your sleep patterns.”
So why does he do it? Partly honesty. (“That whole sleep thing I was talking about before.”) And partly because he's playing a longer game.
“This guy might not buy the warehouse we were working on for three months, but he wants to buy a warehouse business.”
That buyer is still in the market. And, Larry says, “he'll refer me to friends and colleagues as a literal ‘honest Broker’ who will not put my interest in front of theirs.”
8 red flags that mean a client should walk away
Larry's reasons are the two big ones, but they're not the only ones. These are the red flags that should make any broker stop and have the hard conversation:
- The price is above the value. The financials don't support what the buyer is paying.
- The earnings don't hold up. Due diligence finds lower profit than the seller claimed.
- It's not a real business. Records, revenue or customers don't check out.
- Problems surface late. Undisclosed liabilities, lawsuits or lost customers appear after the LOI.
- The buyer keeps re-trading. Every week brings a new demand for a lower price, longer payments or more training.
- The financing won't work. The business can't support the debt payments the deal requires.
- The client is in over their head. A buyer without the experience, cash or plan to run the business.
- Someone is rushing. Deadlines that skip proper due diligence protect nobody.
The data backs up Larry's experience. In Axial's Dead Deal Report on 75 lower middle market transactions that fell apart after a signed LOI in 2025, the most common reason was diligence findings (25.3%), followed by quality of earnings discrepancies (21.3%) and failed renegotiations (14.7%).
In other words, the problems that should make a broker speak up are the same ones that kill deals anyway. Better to raise them early, honestly, than to watch a client walk into them. (More on what kills deals: the deal killers every broker should avoid.)
Sellers' brokers kill deals too
It isn't only buyers who need protecting. Many business owners are told by their own brokers to walk away, and in my experience, it usually happens when a buyer keeps asking for more after the deal is agreed.
“You have a deal, and suddenly the buyer wants a lower price and/or a longer-term of payments and/or more training time.”
In M&A, this is often called re-trading: renegotiating terms after a letter of intent has been signed. Sometimes it's legitimate, because diligence turned up something real. Often it's a tactic, betting that a seller who has emotionally committed to selling won't walk away.
If it gets to be that the owner is being taken advantage of, I know that the best brokers will tell them, “Enough.” Those brokers are “in it for the long-haul; they want to make it their careers.” They have consciences that won't let them close a deal that's unjust to their client, no matter what it pays.
| Legitimate renegotiation | Re-trading as a tactic | |
|---|---|---|
| What triggers it | A real diligence finding, such as lower earnings or an undisclosed liability | No new information; the buyer simply wants a better deal |
| How it's presented | With evidence and a specific, proportionate adjustment | Vague concerns and a broad demand for better terms |
| How often | Once, tied to a specific issue | Repeatedly, as each concession invites another |
| What the broker should do | Help both sides reach a fair adjustment | Tell the seller the truth, and be ready to say “Enough” |
Whose interest comes first?
The answer is in the profession's own code. The Code of Ethics of the International Business Brokers Association (IBBA), which member firms such as Certified Business Brokers publish on their websites, says a broker pledges to protect and promote the interests of the client, and that the broker's duty of absolute loyalty and honesty to the client's interest is primary.
Larry says it more personally:
“I simply will not allow a client to make a mistake that can ruin theirs and their family's lives.”
For a buyer, a business purchase often means a life's savings, a personal guarantee on a loan and the family's future income. For a seller, it may be a lifetime of work. No commission is worth helping a client make a mistake that size. (This article explains the broker's ethical obligations in plain terms. It isn't legal advice. Brokers should know the licensing rules and duties that apply in their own state or country.)
Why honesty is the best business decision a broker can make
Walking away from a deal costs a commission today. Over a career, it pays for itself many times over:
- Clients come back. The buyer who didn't buy the wrong warehouse still wants a warehouse business. As Larry puts it, “I'm the guy they call when they want to sell the business they bought five years ago.”
- Referrals multiply. An honest broker becomes the broker people recommend to friends, accountants and attorneys. (How to build that network: your best listings come from 20 people.)
- Reputation compounds. In a business built on trust, a reputation for honesty is the most valuable asset a broker has.
- You focus on the right deals. Recognizing the warning signs early lets you spend your time on deals that will close, and close well.
How to tell a client to walk away, without losing the client
- Name the problem. State the facts plainly, without hedging.
- Show the evidence. Walk through the numbers, the documents or the diligence findings that concern you.
- Explain the risk. Make clear what the deal could cost them, financially and personally.
- Offer a path. Renegotiate on the facts, pause to investigate further, or walk away. Let the client decide with full information.
- Stay in touch. Keep the relationship alive. The next deal may be theirs.
A CRM makes those last two steps easier. In Vertica CRM, every note, document and conversation is on the client's record, so you can show exactly what you found and when. Buyer criteria stay on file, so when the right business comes along, you're the first to call. And drip campaigns keep you in touch with buyers and sellers for months or years. (Follow-ups lead to fortunes.)
Karma, or just good business
Walking away from, or killing, a deal is never easy, especially after all the prospecting and relationship-building it took to get there. But recognizing the warning signs early helps you focus your effort where it belongs, and keeping your eye on long-term goals is what leads to lasting success.
“You can call it Karma, but if your true focus is on your clients benefit, they will see that very clearly.”
And in the end, the broker who puts clients first wins.
What's changed since 2019
The principle hasn't changed. The tools that help brokers spot problems early, and document them, have:
- Every document and release is tracked. Vertica CRM records which buyer received which information and when, so there's never a question about what a buyer was shown. (How Business Brokers CRM thinks out of the box.)
- Every conversation in one place. With a contact-specific inbox, every email with a buyer or seller sits on their record, ready when a hard conversation needs evidence.
- Clearer deal visibility. Pipeline tools show where every deal stands and where it's stalling, so warning signs surface sooner.
- AI that works from your data. The AI CIM generator drafts the CIM from the data already in the CRM, so the information buyers see starts from the facts. (More in our guide to AI for business brokers.)
Put your clients first, with the right tools
See how Vertica CRM helps brokers document every deal and stay close to every client. Contact us for a short demonstration.
Schedule a Demo Questions? Call +1 212 381 4994 (USA) or +61 3 8518 4759 (Australia).Frequently asked questions
Should a business broker ever tell a client to walk away from a deal?
Yes. When the price is above the business's value, the earnings don't hold up in due diligence, the business isn't what it appeared to be or the client is being taken advantage of, an honest broker should advise the client to walk away, even though it costs a commission.
Who does a business broker work for?
A broker owes loyalty to the client they represent. The IBBA Code of Ethics says a broker pledges to protect and promote the client's interests and that the duty of absolute loyalty and honesty to the client's interest is primary. Specific legal duties vary by state and country.
What is re-trading in a business sale?
Re-trading is renegotiating the terms of a deal after a letter of intent has been signed, such as asking for a lower price, longer seller financing or more training. It can be legitimate when due diligence uncovers a real issue, but repeated re-trading without new information is often a negotiating tactic.
Why do business deals fall apart after the LOI?
In Axial's 2025 Dead Deal Report on 75 failed transactions, the most common reasons were diligence findings (25.3%), quality of earnings discrepancies (21.3%), failed renegotiations (14.7%), seller decisions (13.3%), financing constraints (10.7%) and business underperformance (8.0%).
What are red flags when buying a business?
Common red flags include a price above the business's value, earnings that don't hold up in due diligence, records or revenue that don't check out, problems disclosed late, repeated re-trading, financing the business can't support, a buyer without the experience or cash to run it and pressure to skip due diligence.
Does being honest cost brokers business?
It may cost a commission in the short term, but honest brokers earn repeat clients and referrals. As one broker put it, he is the person clients call when they want to sell the business they bought five years ago.