Business Brokers: The Importance of Co-Brokering

Business brokers and co-brokering. Anyone that has gone through our course or who has been trained by me or anyone in our network, knows how much importance I place on co-brokering. In our course on becoming a business broker, we devote an entire lecture to co-brokering – and for good reason. If a business broker accepts an engagement to list and market a business, the best way to get that business sold is to put it in front of as many people as possible. And you’d be hard-pressed to find a better vehicle for that than other business brokers. Like real estate agents, business brokers usually utilize one or more internet-based multiple listing services that are specific to business brokerage. But unlike Zillow, Trulia and Realtor.com, there are no houses for sale on the websites we use; no farms, no waterfront lots, no two-bedroom apartments in Berlin, Wisconsin, Berlin, Maryland or Berlin, Germany. There are only businesses. Business brokers use these websites to put their listings in front of as many potential buyers as possible. But business brokers know that not every person looking for a business will be looking at the same internet listing sites. Just like with real estate, most business buyers contact a business broker, tell the broker what they’re looking for and hope that the broker has something listed in inventory that might fit. We get calls and emails like that all the time. But when we don’t have something that fits, we head out to the listing sites to see if someone ELSE has something that might work.

Business Brokers Looking for Businesses

Exposing your client’s business to as many potential buyers as possible will increase the odds of that business actually selling. Now, that statement assumes, of course, that the business has been valued and properly priced. But other business brokers generally have a database full of people that have contacted them about buying a business. Making sure that these other brokers know that the business you’ve listed is available would seem to be the proverbial no-brainer. We have informal co-brokering arrangements with more than 500 other business brokers throughout North America. The term for these other business brokers is that they’re “cooperating brokers”.  Add that to our network partners in Central America, Europe and South America, and we can put a business opportunity in front of thousands of potential buyers – simply by making sure all these other business brokers know about the opportunity and that we are “cooperating brokers”. As soon as any of our brokers accepts a sell-side assignment, many of these cooperating brokers are notified. There’s a good chance one or more of them will know a potential buyer.

Don’t be Greedy

Unfortunately, there are business brokers that won’t cooperate. One of our brokers – who was contacted by someone looking for a specific type of business – was cruising an internet site dedicated to the sale of businesses and stumbled on a business that seemed perfect for his buyer. It was listed by a commercial real estate broker that claimed to also be a business broker. Our broker contacted the listing broker and said he had a potential buyer. As I teach in our course, The “How-To” of Becoming a Business Broker, our broker wanted to confirm that the other guy would co-broker a deal. Our broker was stunned when the other guy said “No. Your buyer will eventually find me.” Such arrogance and greed is a disservice to the client. Our guy had a bona fide buyer but Mr. Greedy Bastard would rather let his client hang for a while in the hope that our guy’s buyer would somehow manage to find Mr. Greedy Bastard who would then be able to keep all the commission himself. Nobody likes a greedy bastard.

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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…

In another instance – this one in our office – we received an email from some broker’s assistant describing a business the broker just listed for sale and encouraging us to find a buyer for that business. The email went on to say that, if we sold the business, we’d be paid the magnanimous sum of 30% of the commission! There are two sides to every transaction – the listing side and the selling side. In my roughly 20 years of business brokerage, I’ve learned that listing businesses is FAR easier than selling them. The fact that the vast majority of businesses that come to market don’t sell should underscore that point for anyone with a three-digit I.Q. I know some brokers whose practice is solely listing businesses for sale. For the reasons I outlined above, they let as many other brokers as possible know about their listings. Inevitably, some other broker finds the buyer. Listing-only brokers realize two things: 1) exposure to as many buyers as possible will increase the odds of finding one that will actually buy, and; 2) having dozens of other brokers doing the hard work makes life easier. The reason many of these listing-only brokers are successful boils down to this: they are generous with the commission split. In no case have I ever heard of anything less than 50/50. Now, this is different from when we work with realtors. With realtors, we generally have to do the work of both sides – which means that we don’t do an even split. But with other business brokers, the split is at least 50/50. In fact, I know one broker that realizes incentives matter – in many cases, he offers the selling broker a 60/40 split. So, when I heard that the broker who emailed us offered 30% as a selling side commission, I drafted a curt response that was, essentially, thanks but no thanks. Don’t be greedy.