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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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Ten Steps To Selling Your Busines

Our Sellers except us to achieve the highest and best offer for their business while taking the least amount of their time away from it as possible. That is because the absolute best use of their time is to continue to run and grow the company.  If revenue or profits begin to decline, buyers will walk away or decrease their offer. Transworld's philosophy can be summed up in a ten step, how-to strategy that culminates with the sale of a company. This proven method has been used to sell hundreds of businesses.  Here are the steps. Step1 Comprehensive Business Analysis and Feedback As your business broker, the first thing in our how-to strategy is to analyze your operation, finances, market potential and industry trends. We take that information and advise you on steps to prepare your business for sale, and  generate a business profile that represents your company in the most attractive way possible. Step2 Sale Structure We identify the best possible price range to sell your company. This is based on solid facts, the condition of the market, projected growth, sales potential and the sale of similar businesses within your industry. Transworld’s experts apply sophisticated, time-proven valuation techniques to ensure that your price is appropriate for the current market condition. The price must not be too high or too low. Yet, it must represent an attractive investment potential for the buyer. Step3 Confidentially Network The Business For Sale During the selling process, we utilize the latest technology to present your company to other business brokers and strategic buyers all over the world. This greatly multiplies the effort in your favor. With Transworld Business Advisors, you have literally thousands of industry professionals confidentially representing your company to buyers.   Step4 Confidentially Advertise To Buyers Our aggressive marketing program ensures your confidentiality and provides maximum exposure for your company. Your listing is placed in various industry databases, Internet sites, and publications which are constantly updated. We spend more money in advertising and marketing for buyers than anyone else in our industry. Step5 Control The Information Flow We organize all necessary documentation and release information only as needed. We use limited information when advertising to maintain confidentiality. Buyers are pre-qualified and required to execute a confidentiality agreement before receiving any sensitive business information. Step6 Create Competition For Your Company We attract thousands of buyers, creating competition for your business. Buyers are qualified for financial ability to meet the offer, and we engage you with only the most qualified buyers. Once you meet the best of the buyers, we urge them to prepare and present all offers. We can continue to engage potential buyers on your behalf as negotiation on an offer is in process and have another interested party ready to go should a buyer change their mind. Step7 We Negotiate For You To Achieve The Best Price Appropriate negotiation is crucial to achieving your best price and terms. We have the expertise to establish sound and resourceful negotiating techniques on your behalf. Transworld has trained all of its agents in the art of negotiating through curriculum that we have created specifically for our industry. Never negotiate without planning, expertise, or from a position of weakness. Step8 We Provide Exceptional Support To You Through The Due Diligence Process We take pride in our exceptional service. Only half of the job is finding the right buyer who will pay your price and meet your terms. The other half is getting that buyer to the closing table. We quarterback the deal, work with the accountants, lawyers, banks, landlords, and other third parties that could jeopardize the success of the transaction. We realize that you depend on us to guide you through the sale of your business. We make the transition simple and easy for you. We know when an opportunity for you may arise and are always there to take advantage of it. We also know when someone is trying to kill your deal or is being unreasonable and how to handle those situations. Step9 We Are There From Beginning To The Closing We help manage all administrative procedures, licenses, inventory counts and lease assignments that may be required. Transworld works closely with your advisors to ensure a smooth transition. Using the latest technology, we strive to be ready to work on your behalf to get the deal done! Step10 We Are There For The Transitional Phase And Beyond! Because we are in the business community, you may want to consult us from time to time after the sale. We will provide you with the assistance after closing. Transworld will always remain in your corner! Schedule Consultation Now

5 Tips For Keeping Your Business Sale Confidential

When selling your company, it is crucial for the health of the business and its future that the sale remain confidential. If your customers, vendors or employees learn it is for sale, it could have a negative impact on value.  Learning of a business sale may encourage customers to replace your product or service, employees to look for more secure employment, and vendors to demand payment of invoices.   If the value of your business is impacted, you will lose negotiating power with buyers and will not get the highest and best offer for it.  One way to protect the confidentiality during the sales process is to work with a business advisor, who will work on your behalf, use best practices, and allow you to continue to run your business.  Here are some tips we share with sellers on  keeping a sale confidential.

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