The Landscaping Account Nobody Was Supposed to Mention
You represent the owner of a 40-employee commercial landscaping company listed at $3.6 million. During a two-hour site visit, the seller mentions over coffee that his largest client - a property management firm representing 38% of trailing revenue - told him last week it will consolidate vendors and will not renew when its contract expires in five months. He says 'it isn't official yet, don't put it in the CIM.' The next day, the buyer's SBA lender emails you a customer concentration questionnaire and asks you to confirm that the top three customers are under contract and expected to renew. Separately, a man identifying himself as 'a serious buyer' calls, asks detailed questions about whether the company services that same property management firm, then volunteers that he owns a landscaping company 40 miles away. The seller has signed your standard listing agreement, which contains confidentiality and no-material-misrepresentation clauses but is silent on what you must disclose to lenders.
1. The lender's questionnaire asks you to confirm the top three customers are under contract and expected to renew. What do you do?
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You cannot sign it, and you cannot ignore it. Signing an affirmative confirmation you know to be false is a misrepresentation to a federally regulated lender - a far bigger problem than losing the deal. Ignoring it stalls the transaction and looks like concealment.
Correct answer: buy time, then disclose with the seller's knowledge. Within the day, tell the seller in writing what the lender asked and what you intend to say. Then respond to the lender that you are the broker, not the seller, that you cannot certify customer renewal intentions, that the seller must complete the questionnaire, and that the seller has information bearing on the top customer that will be provided directly. Route the actual factual statement through the seller, who owns the relationship and the risk.
This is not a confidentiality breach. Confidentiality protects the seller's information from third parties and competitors. It does not permit you to affirm false statements to a lender underwriting the buyer's loan, and it does not permit you to stand silent while a buyer relies on a CIM you know is incomplete. Your duty of loyalty to the seller runs alongside a duty of honesty to the buyer and its financing sources - and in practice, protecting the seller means forcing the disclosure now, while the deal can still be repriced, rather than after closing when the buyer sues for fraud and the seller's own broker is a witness against him.
Also correct the CIM immediately. Add the customer loss, remove the language implying the account is stable, and re-issue with a version date. Anyone who already received the prior version must get the update, and you should log who received which version and when.
2. How do you handle the caller who turns out to be a competitor, and what do you change afterward?
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On the call: disclose nothing, confirm nothing, and end it. Do not confirm that the subject company services that property management firm, do not confirm the company is for sale, and do not confirm you represent anyone. A competitor asking whether a named business serves a named customer is mapping the market for its own sales effort - and if the competitor learns the account is up for grabs, it can call the client directly and take it. That harm lands on your seller.
Practical script: 'I'm not able to discuss any company I may or may not represent, or its customers. If you're interested in acquiring a business in this sector, send me your acquisition criteria and proof of funds and I'll contact you if something fits.' Then verify. Require a signed confidentiality agreement with real identifying information, a financial-qualification statement, and a background conversation before any CIM goes out.
Afterward, fix the process:
- Gate every CIM behind a signed NDA that identifies the party and its affiliates, and includes a non-solicitation of employees and customers clause.
- Screen for competitors explicitly - ask 'do you or any affiliate operate a business that competes with the subject?' and make the answer a representation.
- Watermark or serialize CIMs so a leak is traceable.
- Do not discuss customer identities with anyone before NDA, and consider withholding the top customer's name in the CIM entirely, describing it by profile and contract terms instead.
Tell the seller about the call. He needs to know a competitor was fishing, both because he may want to contact the client and because if the client is poached later, the record of that call matters.
3. Draft the substance of what you tell the seller about his 'don't put it in the CIM' instruction.
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Be direct and specific, and put it in writing.
'I understand you don't want this in the CIM, and I understand why - it will cost you money. I'm telling you plainly that I can't comply, and here is what happens under each path.
If we disclose now: the buyer reprices, probably materially, because 38% of revenue is at risk. Some buyers will walk. The ones who stay will want an earnout, a holdback, or a price tied to retaining the account. That is painful but survivable, and the deal closes.
If we conceal it: the CIM contains a statement about customer stability that you and I both know is misleading. The buyer's lender relies on it. If the account leaves five months after closing, the buyer has a fraud claim against you and against me, the SBA guaranty may be at risk, and your purchase agreement almost certainly has a representation that survives closing with an indemnity behind it. The damages are not the lost revenue - they are the entire purchase price, plus defense costs.'
Then give him the options that actually exist: disclose and reprice; delay the listing until the account is replaced or renewed; or restructure as an earnout where he is paid on retained revenue, which is honest and lets him keep the upside if he is right about the client. Also ask whether the notice is genuinely final - a written communication may differ from a verbal heads-up, and if there is a renewal right or a notice requirement in the contract, that changes the analysis. Get the contract.
Close with the file note. Record the date you informed the seller, what you advised, and his instruction. If he directs concealment, you decline the listing.