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What is Co-brokering and Why Does it Matter?

"Co-brokering in business sales is unfortunately one of the most confrontational and contested subjects in the business brokerage industry", Jim Parker, President, Business Brokers of Florida .  Transworld Business Advisors (the largest business brokerage in the world right now) globally, has a philosophy of co-brokering, but that is not true of most business brokerage firms. 

what is co-brokering?

In co-brokering, one broker works with the buyer and a different broker works with the seller and the brokers split the commission of the sale. 

statistics

According to Business Brokerage Press,  only 52% of survey respondents said that 15% or less of their deals are co-brokered.  And 38% said that co-brokered deals made up less than 5% of total deals.  Reasons brokers gave span from "no need" to "confidentiality and legal concerns" to "incompetent brokers, trust and control issues".  

why brokers don't co-broke

The reasons brokers provide for no co-brokering span from "no need" to "confidentiality and legal concerns" to "incompetent brokers, lack of trust or losing control".    While any one of these could be a concern, brokers are using these excuses to hide the fact that the true reason - is just plain greed.  

No need

Brokers feel they don't need to work with other brokers  because business is good without.  The reality is, they want to take all of the commission themselves, and the best way to do that is to find the buyer for their sellers.  But it is absolutely in the best interest of sellers, in order to get the highest and best price in the shortest amount of time for their business, that their broker be willing to work with other brokers, exposing their business to many more potential buyers.  Brokers are working with buyers all day every day, and they have a "pool" of buyers looking for specific businesses.  By closing their seller off to these pools of buyer other brokers have cultivated, the broker who refuses to co-broke is not doing a service to their sellers. 

confidentiality and legal concerns

In our opinion that these reasons to not co-broke is more of a cop-out than reality.  Co-brokering does not mean the listing broker is no longer involved in the transaction.  It is their responsibility to stick with the seller through to close, helping them negotiate and keep the deal moving forward.  Confidentiality is always a concern, one that is difficult to control under the best of circumstances whether working with another broker or not.  Once a buyer knows the name of a business for sale, there is no guarantee that they will keep it confidential.

competency, control and trust

Real estate and commercial brokers have been co-brokering for many years.  It is one of the major reasons buyers use agents.  If real estate and commercial brokers can co-broke, so can business brokers.  

why you should only work with brokers who co-broke

You have spent years, decades, nurturing and growing your business in to the success it is today.  You want to be able to pass on your legacy to someone who will be successful and continue to employee your staff and help your customers.  You want the highest and best offer for your business, as quickly as possible (average time to sell a business is sic months to a year).  You also want a competent, savvy buyer, who won't waste your time.   By refusing to work with others and share commission, brokers are doing a massive disservice to their sellers.  When brokers are retained to sell a business (most contracts are for one year) that is their one and only job.  They have the responsibility to use any means possible to get it done.

Joe Santora from Transworld North Carolina is working to bring co-brokering to the CVBBA (Carolina Virginia Business Brokers Association) and on a recent podcast said, "co-brokering is best for the business brokering community in general.  We're putting sellers under a 12 month agreement in most cases, we have a responsibility to get their business sold and I don't care who brings the buyer to the table, if I'm not exploring all options I am doing them a disservice.  MLS or co-brokering is really the way to do that.  If I'm getting ready to list my house for sale with Remax, and they tell me that they are not going to allow Coldwell or any of the other real estate companies to bring buyers to the table would I actually list my house for sale with them?  It's not going to get the proper exposure.  Most sellers don't know because brokers don't disclose that to them."

For a consultation with a Transworld business broker click here.

 

Lauren Altschuler
Lauren Altschuler
I assist buyers and sellers of privately held businesses in the buying and selling process. We help value your business for the best price, advertise it confidentially to qualified buyers, handle buyer interviews, discussions, negotiations and facilitate the due diligence investigation and the sale of the business.

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