Late last week, I confronted a set of circumstances that is illustrative of the reasons why clients see business brokers as similar to real estate agents. At Negotia we refuse to model ourselves on Real estate practices, because brokers do not engage with the market in the manner that real estate agents do.
So, I take this opportunity to explain why brokers are different, and why the real estate model doesn’t fit business sales. In explaining why, I will be providing three of the better questions you should ask before choosing a broker.
What’s my business worth?
The faster the response – the less valuable to you is the answer… here are the facts:
The number of houses on the market is plentiful – easily observed and always being presented in multiple forums. Further, all the historic sales data for houses is readily available and importantly, that data is independently verifiable.
Businesses may be in similar industries, but they are not alike and they are barely comparable; each enterprise is unique. Unfortunately, the availability of real data recording recent sales made and similar businesses presently being offered in “the market” is very scarce and difficult to gather. Most accountants and broker firms do not engage in any form of research because gathering this detail is time consuming and costly to verify.
So; if you get an answer swiftly, without apparent thought, or without independent scrutiny involving some Q & A – that response to your question is quite literally foolishly stated.
Don’t forget also that the “books of account” don’t tell enough of the story to be a reliable indicator of value – nothing takes the place of informed, logical investigations.
A professional broker will pause, will suggest that an answer will require some work… and any attempt to gauge value without performing the work required would be too risky for all parties.
How many clients do you have?
And don’t think bigger is better. The volume of a brokers listing book is not particularly to your advantage. Your brokers response will identify themselves to you as either a “Listing Machine” or a “Selling Machine”
When a Listing Machine informs you that they have 50, 60 or maybe 70 businesses “on their books” ask yourself this question. With that many clients competing for the brokers time and attention; How many minutes per month can that person actually devote to selling your business?
A Selling Machine on the other hand will advise that they represent around 10 to 15 businesses at a time. Primarily because that broker is a professional. Additionally, all of this brokers clients are ready to sell; they are being presented professionally, the broker is well informed, well prepared. That broker is investing his or her time and effort in the clients already in hand.
How much is the investment for an average marketing budget?
Now bluntly put, a Negotia marketing plan is never predicated by the income we want to pocket and there is seldom an “average budget”
Marketing plans should be designed around the individual clients wants and needs … every marketing plan is different, and we cost the service with that in mind.
Therefore; when the Listing Machine broker cites to you a large fixed fee, you should do the math yourself. Because you now have the reason why that broker has 50, 60, or 70 clients – that marketing fee represents how the practice and that broker gets paid.
Your so-called marketing costs are paying the brokers wage. Which now explains why some brokers are “Listing Machines” rather than “Selling Machines”
As I stated, brokers should not be adopting the practices or behave like re-badged real estate agents.
I have found the successful brokers frequently come from the ranks of senior executive roles or have been a business owner (maybe owning multiple businesses like myself). A broker is also a holder of professional qualifications and at least understands the language of business… they are business owners who have achieved more than the minimum licence requirements.
I believe the characteristics of a broker who offers real value to business owners are:
• Transparency of their goals – and that should be selling success – not listings volume.
• Their thoroughness in preparation, investigation and analysis – all occurring before your business is placed on the market
Kevin Lovewell is a Director of Negotia Group, Based in Queensland. He is a licensed Business Broker, Registered Business Valuer and business advisor. He has built his career in successfully helping business owners. He is also an Accountant – retired from public practice. He holds the following qualifications. B.Bus (Accy). MBA (QUT). RBV.
Phone 0401 308 3855