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Before You Select A Business Broker - Do They Co-Broker?

I recently went out on a listing call and during the course of a presentation I mentioned to the seller that I co-broker with other business brokers. She told me that she had the business listed with another broker some months prior, and he also said that he co-brokered with other business brokers. However, when she went to look at her ad online on BizBen.com it said, "No" under co-brokering. I was shocked that a person in a trusted position, such as my own, would do that. Obviously, her business didn't sell or she wouldn't have been talking to me. I told her that I am very professional in the way that I handle all my listings and I suggested that she take a look at all my other listing to see how they were handled and advertised online.

I share her frustration. As a member of several professional Business Broker Associations, part of our pledge is to foster a spirit of co-operation in working with each other. Also by eliminating co-brokering, non cooperating brokers are eliminating 70% of the opportunity to find a viable buyer for that business being sold. We, as business brokers are doing a disservice to our sellers and to ourselves buy not co-brokering with other business brokers. What's worse, many sellers are unaware that's even an option. They often just assume that a broker will co-broker but all too often I see business brokers that feel that they have good shot of getting the commission on both sides so they close that door. Don't get me wrong, I also love to get the commission on both sides, and I do a fine job of being a dual agent, but I won't hinder my clients chance to sell just to line my pocket.

In regards to residential real estate agents, I personally don't co-broker with people who primarily sell houses for a living. I believe that selling businesses is much more litigious and complicated than selling houses and unless the other agent knows how to handle the sale of businesses, I don't want to put myself or my client in jeopardy. On the other hand there are many fine business brokers that are working out of real estate offices and they are more than capable of holding up their end of the deal.

If you are selling your business and you're in the process of choosing a broker or agent, take the time to really look at other listings this person has. Does it say, "yes" to co-brokering? Are the ads well written? I've seen some business for sale listing ads that are poorly written and sparse. They give the impression that not much attention or effort was put into the listing.

Like every industry, we have excellent professionals who take what they do very seriously and then we have people who are not working with their heart in what they do. It's your responsibility to try and find a business broker that you can connect with, that shares your work ethic and standards. We are out there you just have to look.

Categories: Business Broker Information, How To Sell A Business, Selling A Business

Contributor:

Christina Lazuric, CBI
Areas Served: Orange County
Phone:  949-257-7823 Cell, 949-257-7823 Text
Premier Brokerage for selling Orange County Service based businesses since 2005! CBB provides a step by step approach to Business Brokerage, M&A Services, Business Consulting, & Valuations. Deal with a professional. Contact me about selling or buying service based businesses: 949-257-7823 Cell/Text.

Comments & Feedback From Pro Intermediaries & Pro Advisors On BizBen:

Posted By: Timothy Cunha JD, Business Broker: San Francisco Bay Area    

Joe brings up to really good points I'd like to pick up on:

1. Residential (and some commercial) real estate agents and brokers seem to be unaware that most real estate E&O policies do NOT cover business sales. And buyers and sellers should know as well that if such an agent or broker has no applicable professional responsibility insurance, they could end up with no one worth going after in the event they have a legitimate liability claim.

2. Often, we find it more effective, prudent, and efficient to "co-broker" by way of a referral fee. For a complex listing or transaction in which the listing broker is going to do all or most of the work in structuring the deal--price; terms; corporate structure; coordinating tax attorneys, business attorneys, accountants, and consultants; arranging for financing; coordinating escrow and due diligence; etc.--and the "selling" broker is doing little of that, for whatever reason, then the "selling" broker should be very happy with a percentage substantially less than 50/50.

Just recently, we have been approached to co-broker a deal for one of our listings in the high 7-figure range. We have a variable commission schedule ranging down as the price goes up. It's also a complex, unusual business that will involve intricate corporate and financial structuring. We proposed to the "buyer's broker" that if his client's offer was accepted, the buyer's broker would need to do none of the work in getting it from LOI to contract to financing to due diligence to escrow to closing; and, his firm would receive a straight 2% commission on closing from the escrow agent. That agent was more than satisfied with that arrangement, particularly since his expertise and experience is with much smaller, generic, simpler deals.


Posted By: Joe Ranieri, Business Broker: LA, Orange Counties, California    

I work for a company that has many residential real estate agents, and I've found that it's best to simply pay them a referral fee if they have a client who wants to sell a business or buy one of my listings. Many real estate brokers don't want their agents selling businesses if they don't know how, because typical E/O insurance does not cover business sales.


Posted By: Timothy Cunha JD, Business Broker: San Francisco Bay Area    

I agree with everything Christina has posted. The job of the professional business broker should be to get the business sold for the best interests of the seller, while assuring that the buyer is treated fairly and with the utmost of integrity. Whenever I am approached by another business broker, I am more than happy to co-broker. And, whenever I see listings that are not open to co-brokering, I am dismayed to think how many potential buyers that seller is missing. Can't be said enough: If your broker won't co-broker, don't sign with them.


Posted By: Timothy Cunha JD, Business Broker: San Francisco Bay Area    

Co-brokering is essential to the proper marketing of any business. In addition, to checking out the broker's other listings,a seller should ensure that the listing agreement with the broker explicitly states that the listing broker will co-broker with a selling broker. That selling broker, however, should specialize in business sales (certainly not residential real estate). But even for a residential real estate agent who brings a buyer to the table, the listing broker should be willing to pay a customary referral fee.






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