Why a Buyer’s Business Broker Often Fails to Find a Quality Business

By Hoke - Last updated: Tuesday, January 28, 2014 - Save & Share - Leave a Comment

Let’s discuss what goes on when you have most brokers perform an acquisition search. It is simple. They get on the internet Business for Sale websites and start looking. It is important to know that about 95% of internet business listings are from brokers, not principals. It is also important to understand that there is no mandatory broker-cooperation agreements like residential realtors who use the Multiple Listing Service (MLS) must agree to. Business for Sale listings rarely publish the business name and address. The ONLY way to find out about the business is through the listing broker. The only way a buyer’s broker will get information about the listing is if the listing broker is willing to give it to them. Let’s do the math.A typical listing broker must share 50% of a 10% commission with his office. If the sells the listing as a dual agent, his take home is 5%. If he voluntarily cooperates 50% with a buyer’s broker, he takes home 2.5% once everyone else gets their cut. It is tough to make a living on 2.5%. So what do you think happens when the listing broker is contacted by a buyer’s broker? Needless to say the prospect of a 2.5% commission does not have him or her thrilled. Calls often don’t get returned and emails go unanswered. Unless…it’s a poor quality listing that is not getting much activity. Then 2.5% is better than nothing!

By now the buyer reading this article may realize that having five brokers looking for a business will not get five times better results. They are all looking at the same websites for the same thing and dealing with the same listing brokers. What if the buyer’s broker works for a large firm with many brokers? They have the inside track right? In the event the listing is sold within the same firm the office gets 5% and the listing and buyer’s broker each get 2.5% each. In this instance the when the listing broker has a high quality listing that will sell quickly he or she will make every effort to sell it to their buyers first. Because the listing broker controls the information flow he or she usually does sells it. If it is a poor or marginal listing the 2.5% is better than nothing rule applies.

Did a buyer’s broker ever let you know that listing brokers regularly do not return their phone calls or emails if they know a buyer’s broker is contacting them? Now you know what is going on behind the scenes. Don’t blame the buyer’s broker when they get poor quality results. They are at the mercy of the listing broker who cannot be fully blamed for not wanting 2.5%. Hint: The buyer will usually get better results if they contact the listing brokers directly.

Select Business Brokers has a unique system of acquisition search. We never waste time surfing the internet business for sale web sites. We are not at the mercy of other brokers. Our system works very well. We recently performed a Targeted  Acquisition Search for a buyer who had been looking two years for a very specific specialty niche business. He tried three brokers unsuccessfully. Within thirty days after starting the search we presented him with SIX candidates that fit his criteria. Five were not listed and not represented by brokers. He was the first to talk with prime, virgin sellers.He narrowed the field down and is buying two businesses. We created and refined this system, we do not know of other brokers using this unique system. Please go to Targeted Acquisition Search for details.

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Posted in Business Brokers, Finding My Business, Hard to Find Businesses • • Top Of Page