<img src="//bat.bing.com/action/0?ti=5203200&amp;Ver=2" height="0" width="0" style="display:none; visibility: hidden;">

BayState Business Brokers Blog

When You are Looking for a Business Broker, Don’t Choose a Cowboy

Posted by Marc Gudema on Tue, Feb 11, 2014 @ 01:25 PM

When I think of a cowboy, I think of a tough individual who doesn’t need anything or anybody to do his job.  That may work on the range, but it doesn’t work well when you are buying or selling a business. 

If you have ever bought or sold a house, you probably used a real estate agent to do so.  Why?  Because if you were selling a house, you knew that they could reach many more buyers.  If you were buying a house, they had an inventory of houses to look at.  Why was that the case?  Because they were part of a group of real estate agents that co-broke the houses they sold.  Co-brokering makes for a much more efficient market and allows an agent to give better service to buyers and sellers.

If you are selling a business, you should use a business broker that co-brokes because itbusiness broker exposes your business to many more potential buyers.  Your business will be listed on all of the group members’ websites.  In addition, you have many more business brokers who may find a buyer for your business.  Your business should sell faster for more money by using a business broker who co-brokes.  If you are buying, there are a few benefits also.  The first is convenience.  By working with one business broker, you can be introduced to many more businesses.  Also, if the business broker represents you, you have someone helping you to evaluate the business.

Although co-brokering is prevalent in the sale of homes, it is not in the sale of businesses.  In fact, the opposite is probably true.  Nationally, there are probably many more business brokers who are not in a co-broke group than the number that are.  Why?  In my view, the primary reason is greed.  They do not want to share their commission with another broker.  But, if you asked, of course, they wouldn’t give you this reason because it is not a reason based on providing a better service to their customer.  They are likely to say that they can reach most of the potential business buyers or that many of the other business brokers are not competent.  Another reason they may give is the potential for vicarious liability.  These reasons don’t hold up to scrutiny.

We are members of BBANE, the only group of business brokers in New England that are co-brokering business sales.  There are 14 agencies with about 60 brokers in the group.  We recently had a $2,500,000 business sale between two brokers in different states.  The listing broker would not have known about the buyer without the participation of the selling broker in the other state.  The business-for-sale websites have certainly expanded the number of buyers that see an advertisement for a specific business.  But, it isn’t perfect; they don’t reach everyone.  Many business sales are started when a buyer talks to a business broker about what type of business they are looking for and the business broker finds a business that fits. (Isn’t the same true in the sale of homes?)

Another rationale for not co-brokering is that the other business brokers are not competent.  That’s simply not true.  Just like lawyers, doctors, or any profession, there are better and worse business brokers, but I’m comfortable working with the other brokers in BBANE.  Many of them have years of experience in the industry in which they have sold many businesses and have taken many classes to become better business brokers. 

Vicarious liability is a concern that can be dealt with.  If I’m selling your business and there is a co-broker involved who is working with the buyer, there is a potential for vicarious liability if that other broker represents the seller and me.  Vicarious liability means that the seller or I could be liable for a misrepresentation that the other broker makes to the buyer.  We avoid this by having the other broker represent the buyer, not the seller or me, and our Non-Disclosure Agreement clearly states this relationship.

When you need a business broker, you need one that works with other brokers.  Not a cowboy who thinks he can do it all by himself.

Tags: buy a business, sell a business, business broker, co-broke

Contact Us

Sign-Up for the Blog by Email

Latest Posts

Follow Me