several years ago when I decided to expand our consulting business, I decided to get involved in the business brokerage industry.
I have long believed that when you want to learn something new, the best way to guarantee your success is to find someone who is already successful at it and just copy them. With that in mind, I approached several business brokers in the industry to pick their brains. This group included top producers and others barely making a living. I wanted to copy the former ones and be sure not to duplicate what the latter group was doing.
The most shocking comment one of the most successful brokers in the industry told me was “you have to always keep in mind that buyers are liars”.
The other brokers did, to a certain extent, back up these thoughts as well by suggesting that buyers mislead sellers, or there are very few buyers who are truly committed to getting to a closing, etc.
All of them expressed that successful business brokers simply cannot and do not focus on the buyer. The key to success they all concurred was in getting a lot of listings.
This strategy is the one that has been followed within the business brokerage field for decades. As someone who only works with buyers and has built a very profitable business in this sector, I was stunned to hear how brokers perceive buyers given the fact that it takes a seller AND a buyer to get a deal done.
Not much has changed in the brokerage industry over the past many years and that philosophy remains today, but before buyers start screaming, I have learned that there is in fact a degree of justification for this generally dismissive view that brokers have towards buyers, albeit less dramatic that labeling all buyers to be unqualified or liars.
This antiquated attitude is also why a large part why prospective business buyers find it so difficult to deal with many brokers or why most buyers find the entire buying process to be so frustrating.
Buyers have to keep in mind that regardless of market conditions, unlike real estate where the market switches between a “buyer’s” or “seller’s” market, in the business sale sector, it is always a seller’s market. There are always a ton of people looking and the majority (less than ten percent) will ever buy a business. And so, business brokers know that over ninety percent of the buyer inquiries they receive will not result in a successful transaction. It is hard to persecute an entire industry knowing that nine out of every ten inquiries they get will unfortunately be a waste of their time. Additionally, there are a lot of garbage businesses listed for sale but the good ones always sell quickly and at good price and terms.
I don’t condone the way most brokers work. In my experience and opinion, there are far too many incompetent brokers in the industry.
But, at the same time, I understand their dilemma. Further, they have a significant role to play in the process for many buyers and therefore it is critical for buyers to understand their perception of buyers and to operate in a manner that makes them an effective resource rather than an impediment to the process.
With that in mind, buyers must separate themselves from the crowd. They must first and foremost be serious about this project. Next, they must be educated. Third, it is useless to hide your financial situation or worse, to be delusional thinking you can buy a business for no money down. It is simply not going to happen.
Any contact a buyer has with a broker, and especially the first time, should be the opportunity for the buyer to distinguish themselves from the rest of the crowd by asking relevant questions, not expecting a seller to provide highly confidential information immediately, or by making any unreasonable demands.
This is the most effective manner to start the dialogue between the parties. Brokers and sellers are never impressed by “pushy” buyers or ones that come on as “know-it-alls”.