BROKERS AND THEIR COMMISSIONS
I came across an alarm dealer who shared some new information about business brokers and their fees. As you know most brokers charge the seller a percentage fee based on an agreement at the time of the "listing for sale". But what happens when the sale is not for thousands of accounts, but rather less than lets say 500. In this case I know the buyer and the seller contracted with a broker to package the company for sale, put some lipstick on it and found potential buyers. However what the seller did not know was that there was also a buyers premium due to the broker picked by the seller.
The bottom line was that because the going commission was not enough to interest the broker, the broker also stipulated in the representation agreement that the buyer would also be required to pay a brokers fee. needless to say this was not disclosed early on in the transaction.
Just something I thought that would be interesting to your readers.
On another note, thanks for the support you give to SARRG. Every time you discuss us we get more opportunities to quote people and save them money. You were also correct about our commitment to maintaining the contract language in the contracts because without APPROVED and TESTED contracts there would be little to no value for RMR.
Bart A. Didden
Executive Claims Manager
Security America Risk Retention Group - SARRG
There are a number of competent brokers servicing the alarm industry. Check for them on The Alarm Exchange. They come in a variety of shapes, sizes, temperaments and personalities. There's probably one out there for you if you're ready to sell or looking to buy, though most of the brokers represent sellers. They generally work on commission, and the commission is typically paid by the seller. Brokers will generally work on commission rates that range from 6 to 10%. Some less, though not much more. Obviously the bigger the sale the more the commission. Too often the work is the same for the large and small transaction.
Brokers should memorialize their commission deal in writing. That agreement will have more than the commission rate and will include the scope of services the broker is agreeing to take. It will express when the commission is earned and how it's calculated. These broker agreements are negotiable. Agreeing to pay a commission based on listing price doesn't make much sense; base it on the sale price. Even that price may be ambiguous. Are we talking about the sale price at the time of closing or the reduced price after the guarantee period runs? What if the seller is permitted to add contracts post closing, will the commission be based on this added RMR? If the purchase price is paid over time when is the commission to be paid? At closing or over time when will the full purchase price be paid?
Sometimes a broker may not be satisfied with the percentage commission the seller has agreed to pay. The broker may want to charge a "buyer's premium", which means that the buyer will also have to pay a commission based on a specified formula, usually based on the sales price. The logic underlying this approach is that the overall commission will be partially paid by seller and partially paid by a buyer. Of course this ignores the reality that buyers know what they are paying and whatever goes to the broker isn't going to the seller. So if the seller agreed to a 6% commission is it fair if the broker also charges the buyer a buyer's premium of 2%. If the buyer is willing to pay the purchase price and the 2% why isn't the seller also entitled to the 2%? Well, that may be the deal that the seller struck with the broker. There's nothing wrong with that deal, but it should be disclosed and agreed to when the commission agreement is first negotiated and agreed to.
Incidentally, nothing herein is intended to denigrate the brokers and their services. In fact, those in The Alarm Exchange are highly competent, intelligent and alarm industry savvy. My one caveat is that brokers are not lawyers or accountants and the smart ones know that. They specialize in finding the right buyer or the right seller and then facilitating the deal.
HOW TO LOWER LEGAL FEES IN EMPLOYMENT DISPUTES
Here is an article by Judge Ruth Kraft on reducing your legal fees on employment disputes. The article was sent out on March 18 2015. To get on Judge Kraft's email list sign up for the Employment Law Newsletter here:
HOW TO LOWER YOUR LEGAL BILLS IN EMPLOYMENT DISPUTES
JUDGE RUTH’S TOP 10 STEPS
Yes, you are reading the title correctly. I am about to share insights on how you can actively participate in your own defense and keep the billing as low as possible.
#1—PLAN AHEAD. TRAIN YOUR STAFF. You may be served with process personally but, in a recent case of mine, plaintiff’s counsel served the Secretary of State, which then mailed copies of the summons and complaint to the employer. At some point, process must be served, often on the lawyer by consent. BUT, who opens your mail? The worst possible outcome to a lawsuit is to be in default because person opening the mail put the documents on a large pile and then ignored them. Having a pre-existing relationship with an employment attorney enables you to respond as quickly as possible to a demand letter or the commencement of litigation rather than needing to go lawyer shopping while under pressure.
#2—CALL YOUR LAWYER RIGHT AWAY. Don’t debate the issue internally. Once you have received notice of a suit, you will have a very limited amount of time in which to respond, and possibly to interpose a counterclaim.
#3—GET ORGANIZED. To reduce the amount of time a lawyer has to spend to get a preliminary grasp of the case, gather all the files and documents that are related to the employee. Retrieve the employee’s personnel records. Instruct everyone involved that they should not change or destroy any documents, e-mails or electronically stored materials. Some employers have document retention policies which result in automatic destruction at set intervals. Copy all your employee handbooks and policies. Don’t try to decide what is relevant or important; that’s the lawyer’s job. Create a specific confidential file for the litigation and designate a person who will interface with the lawyer and be the guardian of the file.
#4—PREPARE YOUR PRESENTATION. To give the lawyer a clear understanding of what happened, create a chronology of events so that the presentation can be linear and focused. This will enable you to make the most of your meeting and avoid delay in preparation of the answer.
#5-MAKE THE MOST OF THE CONSULTATION. Be prepared to discuss the case. Make sure that the right individuals are at the table. Discuss expectations going forward in terms of fees, time required, accessibility of counsel, and the members of the team.
#6--ATTORNEY/CLIENT RELATIONSHIP. Attorney-client privilege will protect all communications between you and your legal counsel. Understand that this privilege does not protect your communications with your accountant unless a Kovel letter is prepared, through which the attorney engages your accountant to assist in the defense. The privilege can be attacked if you share this confidential information with third parties, including friends and family. If both corporate officers/key employees and a corporation have been sued, it is essential to identify whether they have identity of interest. Who is the client? It is possible that, if there is a conflict, they may require separate counsel.
#7—KEEP COMMUNICATING. Some clients, fearing that clicking clock of hourly billing, try not to call the attorney and do not provide adequate updates regarding the case. Ultimately, that is against the client’s interests and may result in higher legal fees.
#8---THINK AHEAD TO RESOLUTION. I ask clients all the time if they have a “drop dead number”. What is the case worth to you? A negotiated or mediated settlement may be far more cost effective than time consuming litigation. The overwhelming majority of employment cases settle. A friend of mine has a great expression: every settlement gives heartburn to both sides! It’s totally true. But a verdict will give one side tremendous pain. Understanding that will go a long way.
#9—WHAT’S FAIR? Settlements should also produce a quid pro quo. In exchange for a settlement, you should expect a dismissal of the case and a general release so that the plaintiff won’t come back for a second dip at the trough. You may also request confidentiality as to the amount and terms of the settlement. Recognize that the plaintiff won’t get the entire amount. Many employment cases are brought on a contingency basis, meaning that the lawyer could receive between 33-50% of the settlement. Additionally, if you are settling a wage/hour case, the employer will be responsible for remitting Social Security and Medicare tax.
#10—LISTEN TO YOUR LAWYER. Understand that employment law is a multi-faceted, constantly evolving organism. Take seriously all your attorney’s strategic recommendations.
Judge Ruth Kraft heads the Employment Law department at Kirschenbaum & Kirschenbaum, P.C. represent management in all aspects of employment law, specializing in business and trial strategy. Contact Judge Kraft at (516) 747-6700 ext. 326 or email RKraft@Kirschenbaumesq.com