I met a new business broker the other day. The jack-assery just oozed off of him.
In the first 30 seconds of the call he told me how fabulous he was. Then he paused to take a breath, and asked me two, brief questions:
- How big are the companies you work with?
- Are you willing to refer them all to me? (“Because I can sell anything.”)
I answered honestly, and he abruptly bailed. The call was two minutes long. I was relieved he was gone, but also reminded how easy it can be to hate business brokers.
I’ve had some unpleasant experiences with business brokers over the years (this call doesn’t crack the top 20 for unpleasant).
I know business owners that “hate all business brokers”. I’m not comfortable throwing all brokers in the “hate” pot, because I know too many exceptional brokers to do that. But there are more than a few brokers I’ve worked with that were unpleasant, unprofessional, and just downright hate-able. Even with the good ones pushing the profession forward, there is no denying that the broker job title carries some negative connotations.
I see two primary factors that create the “hate” that business owners so often share when they talk about brokers.
One is legitimate, and one is not.
Hate-ability Factor #1: Most Brokers Don’t Really Work for the Business Owner
Let’s acknowledge up front that being a business broker isn’t an easy job.
Selling a business is challenging in the best of circumstances. Complex details are engaged by numerous parties, counselors disagree, competing interests collide, and many other factors combine to make a successful sale a challenge.
It’s not an easy job, and most brokers don’t get paid for failure. Like real estate brokers, most business brokers are paid on commission only. That means . . .
Most Brokers Only Make Money When They Sell a Business
No sale = no paycheck.
Add that reality to a few others:
- Only a small percentage of businesses that a broker talks with will get listed.
- Only about 20% of businesses that are listed for sale will sell.
By any measure, the odds are against a business broker selling any given business – and those long odds, combined with the commission pay structure, create a stressful environment for the broker.
They get paid by the deal and it influences the culture they work in. I’ve heard brokers talk with pride about how they only “eat what they kill”. That kind of culture doesn’t reward teddy-bear personalities.
Has anyone shown this “eat what you kill” environment better than Glengarry Glen Ross?
Over-dramatized? certainly, but drama with at least some truth in the culture of some commission brokerages. Even when brokerage management is more humane than we see in the movie clip, the reality of a commission only compensation structure means that most brokers are aggressively driven by financial need to progress successfully and aggressively through each step in the process.
- They need to talk to you (not tomorrow, today).
- They need your listing (why won’t you sign?)
- They need to close the deal.
Because of that, some brokers will be tempted to push you, even if you don’t want or need to be pushed.
- Some will be urgent.
- Some will be aggressive.
- Some will try to eliminate deal obstacles – even if your wishes are some of the obstacles. They will challenge you to change your goals, assumptions and expectations.
- Some will prioritize getting the deal done, over any other consideration.
If the broker has spent hundreds of hours getting a deal to the closing table, and the owner suddenly gets cold feet, where does the broker’s loyalty lie? Will they meekly step aside because you are the customer, and you’ve changed your mind? Will they politely set aside their 100-hour investment because now, suddenly, you are not sure? If you were the commissioned broker would you?
The broker works for the deal.
From first meeting, to the closing table some commissioned brokers live in fear of losing. Will they lose the prospect? Will they lose the listing? Will they lose the deal? Experience has taught them that the odds are against success – and they need to pay rent.
This commission culture makes some brokers possessive, hyper-defensive, secretive, abrupt, rude . . . it encourages all sorts of hate-able behaviors.
Sometimes it's Your Fault
The commission structure can make some brokers hate-able, but business owners also need to consider that sometimes it’s our fault.
Far too many business owners would never make a successful sale if they weren’t pushed. Letting go of a business can be crazy difficult for a business owner. The broker’s nudging, or violent prodding, is sometimes required to make the deal happen.
Small business owners get in their own way all the time. When it comes to selling a business, we can be our own worst enemies. We think our business is worth more than it is. We have a list of unreasonable demands. We change our mind, then we change it again. We set unreasonable expectations. We can find a dozen good reasons to call off a deal at any time.
If the broker blindly followed our whims, it’s questionable if a deal would ever get done. In most cases closing the deal is the best outcome for the owner, and if the broker’s ultimate allegiance to the deal makes that outcome more likely, then maybe the owner benefits from that “close the deal” focus as well.
The commissioned broker is hungry, and that hunger makes some of them act hate-able. Often, it’s their fault, and maybe sometimes it’s ours, but either way I think it’s OK to hate the commission structure and the culture it creates.
Hate-ability Factor #2: Your Business Probably Can’t be Sold, and It’s Their Job to Tell You
Why do so many business owners hate business brokers? Because they said your dream was dead.
Are you like many small business owners? After working for years, maybe decades, building a business you’re finally ready to sell. It’s time to reap your rewards. You call the broker. The same one that’s been calling you for years. But now you are finally ready for the conversation.
The broker greets you with a smile and warms you up by asking you to “talk about your business”. After they let you talk for a few minutes, they’ll finally start to ask the real questions they want to ask:
- Net profit?
- Trend over the last three years?
- How important are you to the business?
You answer and see their face fall as they realize how much work and time is needed before your business will be ready to list, if it’s sellable at all.
Most small businesses are not sellable in their current condition. Brokers know that, but they also know that their job is to find the 1 out of 10 that are. Odds are that your business is one of the 9 out of 10 that aren’t ready, and it’s their job to tell you.
- They get to share the bad news that you have an ugly baby.
- From the moment they discover your unsellable condition, they have nothing to gain from it, except the slim hope that you defy the odds, fix things and come back to them in a few years.
- When they tell you it’s unsellable, you won’t want to believe them. You’ll argue, fight, disagree and say things like:
If the new owner did these three things the business would be crazy profitable.
And even if that’s true, the broker will still have to deliver the bad news. That news will dramatically change your retirement plans, your goals and your dreams.
You will hate it, and you might hate them.
Why it’s not OK to Hate Them (at Least Not for This)
10 years of blood, sweat and tears and I had to listen to the broker tell me that my business was unsellable.
I felt lousy. 50 employees. $5 million in revenue. Unsellable.
I hated the broker who told me. Who was he to dismiss my business so flippantly? I vented, doubted, and finally I just sat quietly and mourned the death of my plans to quickly sell the business.
What I should have done, and thankfully finally did do, was take a critical look at my business based on what the broker told me. How did my business need to change? What are the critical factors that make the sale of a business possible? Those questions, and the answers, allowed me to change my business and eventually sell it.
It wasn’t the broker’s fault that he couldn’t sell my business. I was my fault.
To be fair, not all brokers are gentle, gracious, or professional when they deliver the bad news. Some will cut you off as soon as they smell trouble, as they calculate that every second spent with “this loser business owner” takes them away from a business they can sell.
In fact, some will rudely drop you from a call after only two minutes.
I hate that.
Hate at Your Own Risk
They delivered the bad news, but it’s not their fault that the business is unsellable. If you’re smart, you’ll make a practice of having them talk to you about your unsellable business every year.
If you want to disparage business brokers that’s up to you, but I think you do it at your own risk. We owners play a dangerous game with brokers, and it twists our perspective about how easy it will be to sell our business.
There’s no question that some brokers are over-aggressive, dismissive and rude. In a word, hate-able.
But there are other brokers that are generous, engaged, supportive professionals. Even with the pressures of the commission structure, they play the long game.
But either type can help you see critical insights about your business, and what you need to do to be able to sell it when you are ready.
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