What percentage of businesses for sale that are advertised and/or sold are pocket listings? What is the best way to find out about pocket listings? Are they advertised? Are they a big part of the businesses sold marketplace? In this Discussion ProIntermediaries and ProAdvisors discuss this topic.
Comments & Feedback From Pro Intermediaries & Pro Advisors On BizBen:
As a business broker, I look at myself as a matchmaker. My job is to find just the right fit between a buyer and a seller. As such, I start with either a really solid business to sell or a strong buyer who is actively and aggressively seeking an opportunity. Either way, I make sure they are contractually obligated to do business with us, not just loosely hanging around. A serious, genuine seller will not be interested in a pocket listing arrangement. They will want to market the business to as large an audience as possible in the hopes of finding multiple buyers who will compete for their company. There is one legitimate exception to this idea - the owner who is highly concerned about confidentiality.
Some businesses are truly unusual and difficult to advertise publicly. The very uniqueness which might attract buyers can also be a dead giveaway as to who they are. This is the only justifiable reason a seller would want a broker to pocket a listing. Otherwise, if it’s a case where a seller simply does not want to pay a fee, I would encourage them to try selling the business themselves. Good luck with that. Our normal course of business is to represent Sellers. That is the only business model that really makes sense in our industry.
As specialty brokers, we do sign Buyer Rep agreements which require the buyer to pay our fee, on single, specific introductions. If we place them in a deal they otherwise would never have known, they are happy to pay our fee.
We don’t have much use for pocket listings. We do have sellers sign a single-party listing, creating an introductory structure with a specific buyer. And they do work. But that’s not what I consider a pocket listing.
In real estate, brokers pocket listings so they can double-end deals and not share the fee with a buyer’s broker. In business brokerage, that’s not a big issue. Consequently I don’t see much point in a pocket listing. We don’t really do them.