Business brokerage is like any other business. There are good brokers and bad brokers. So if you are selling a business how do you tell which is a “good” one?
One way to tell is to ask the broker if they cooperate with other brokers – commonly called co-broke. This is essentially the same as it is in residential home sales where one broker lists the home but another broker might bring the buyer to the transaction.
In my opinion the only valid reason why a broker will not co-operate with another professional broker is pure greed. In other words, they want 100% of the commission for themselves even if it means the seller loses out on a sale or getting the best price for his/her business.
A broker’s responsibility to the owner of a business is to help get the best price for the business. That goal is obviously accomplished by exposing the business to the greatest number of potential buyers. It also helps get the best price for the buyer by often bringing multiple offers to the table which creates a semi-auction situation.
I ran into this situation just a few days ago. A broker, actually a broker who is from out of state and has no presence in the state where the business is located, advertised a business for sale in a neighboring state.
I contacted the broker to find out if the business was still available for sale and if they would co-broke the listing.
The immediate answer was “no” we don’t co-broke. Not even with a professional and experienced business broker representing the Buyer. I asked him, “don’t you feel a fiduciary responsibility to your seller to bring him the best possible value for his/her business instead of worrying about what your commission would be?” A long pause followed.
Of course, the shame of it is that the owner of the business i’m sure had no idea that the broker was turning away a potential sale because the broker was unwilling to split a commission with another experienced broker that could bring a buyer to the deal.
Which leads us to tip #1: When selecting a business broker be sure to ask the broker if he/she will co-broke with other brokers. If the answer is no, say no to the greedy broker and find a broker that has your best interests at heart.
To see how Steve Ferber can help you sell your business honestly and fairly, contact Steve at 602-312-6808 or firstname.lastname@example.org