Business Brokers: Should You Be Selective?

Should business brokers be selective when considering taking on an assignment to sell a business?

The short answer is, “Heck yeah!”

But while the “short” answer might be yes, little in our business can be reduced to one word.

Early in your career the answer might be “no” but with some conditions. That’s the way it was for me.

When I first got started back in 2001, the answer to that question was an emphatic “no”. I was going to take anything and everything that came along. It didn’t matter what the business was, what kind of condition it was in, what its value was or anything else as hum drum as that!

If it came my way, I was going for it! But, boy, did I waste a lot of time!

Got Inventory?

There are plenty of reasons to be selective, the most notable one is that you want to be able to sell something!

After all, if you accept an assignment to sell something that you know – or are pretty sure – won’t sell, why even get out of bed in the morning?

Selling a business – almost any business – takes time, energy and some of your hard-earned dough for marketing. If you have doubts about a business being able to attract a buyer, whatever amount of those precious assets are spent on the trying will, in all likelihood, be wasted.

Many brokers – even experienced ones – take anything that comes along, regardless of the likelihood of ever successfully finding a buyer. Aside from the wasted time, energy and money that such an approach entails, other downsides include unhappy clients whose businesses you were not able to sell and the potential for reputational damage as a result.

You want to get a reputation for being able to sell businesses and that will happen only if you actually sell some.

But the dichotomy of this situation is that you also need something to sell. If you’ve got nothing in inventory, it doesn’t matter one wit how good you might be. Inventory is the life-blood of our business and that may mean that, until you are able to build a practice with a steady flow of quality listings, you have to take some stinkers.

Why Don’t Businesses Sell?

Well, why DON’T businesses sell??? That’s the $64,000 question, isn’t it?

If you’ve been following this blog for any length of time, you may have read this post about the many reasons that an estimated 80% of businesses that come to market don’t sell. But the #1 reason is that they’re priced too high above value. That fact tells us that we have to know what the business is worth before we can take on an assignment to sell it with any confidence.

One mistake I did NOT make when I got started was taking a selling assignment without doing a valuation. Once you have a valuation, you’ll have an idea as to the sell-ability of the business at the price the seller wants.

Anyone who has taken our course to become a business broker knows how we approach a valuation and the way we deal with the client in relation to that valuation. Done properly, the process will significantly mitigate the chances of the client being unhappy if the business, being priced too high, doesn’t sell.

Why?

Because we “warned” them – or rather our valuation did!

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Our course, “The Basic “How-To” of Becoming a Business Broker“, teaches how to market and sell businesses.

Become a Professional Business Broker…

Almost every business is sell-able. Even if a business is not profitable, if it has assets – hard or soft – those assets are worth something to somebody. In such instances, the main reason a business won’t sell is the price.

The Other “Issue”

But price isn’t the only aspect to consider when contemplating accepting a selling assignment. Another is the business owner.

Some owners think they know everything, including how to do our job. Like any group of people, some business owners are simply unpleasant and have an exaggerated opinion of themselves. Others – or their legal eagles – are flat dishonest. You just don’t want to work with such people.

Granted, it’s often difficult – even impossible – to tell, during the initial stages of the process, whether a person will be difficult to work with. But the phase of the process that works for us involves the valuation.

When we meet with a potential selling client, we clearly state the need for a valuation and that we won’t accept an assignment to sell a business without one. During this meeting, we also tell the owner that it doesn’t have to be us that does the valuation but one must be done. (We are able to slide into the conversation that we do valuations all the time and that we’ll probably be a lot less expensive than the alternatives.)

We can begin to get a sense of the seller’s personality during this meeting and an idea if working with him or her will be tolerable. But we’ll have several phone conversations and at least one more meeting before we get to the point of deciding whether to take the selling listing or not. And it’s during this period that we’ll be able to see what we’ll be getting into.

Why?

Because it’s when we deliver the valuation of the seller’s business that we get to see the REAL seller.

The Bottom Line

Selectivity is important – but so is inventory.

In the beginning of your career as a professional business broker you may be reluctant – as I was those many years ago – to be too selective. After all, you want – you NEED – listings. But even at that stage you can be “selectively” selective by taking a couple of long-shots but avoiding assignments that – from wildly unrealistic prices to obnoxious sellers – will just wear you down.

With the amount of opportunity unfolding in our industry, life simply too short to work for nothing – or for knuckleheads!

Once you get a couple of deals in the sold column, you’ll be FAR more confident in being selective. My experience when I started Worldwide Business Brokers should give you ample proof.

If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.

I’ll be back with you agin next Monday. In the meantime, I hope you have a safe and profitable week.

Joe

#business #businessacquisition #sellabusiness #becomeabusinessbroker #businessbrokering #businessvaluation #MergersandAcquisitions

The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at joe@WorldwideBusinessBlog.com