Business Brokering: The Value of Co-Brokering

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What is “co-brokering” and why is it important? The answer to the first part of that question is that co-brokering is the concept of working with other brokers. The answer to the second part is two-fold: First, because 50% of something is always greater than 100% of nothing – the short term benefit of co-brokering – and second, because you’ll get a lot more deals closed and other brokers will be glad to work with you and to recommend you to additional potential clients thus helping to grow your business – the long term benefit of co-brokering.

Since starting Worldwide Business Brokers in 2001, I’ve had many opportunities to work with other brokers, both those within the Worldwide Business Brokers network as well as with independent brokers. The former have always provided smooth and enjoyable experiences; the latter, not so much. More on that in a little bit.

The idea behind co-brokering is that one broker has a business listed for sale and another broker has a buyer. In most circumstances, this should be an ideal scenario given that each broker has a vested interest in getting a deal done. However, potential issues – ranging from ethics to loyalties – can arise and, no matter which side of the deal you’re on, if you’re a broker in a co-brokering deal, you should be aware of them.

Working With Other Brokers

As you can probably imagine, in spite of the fact that co-brokering a deal with another broker would seem to be a no-brainer from the standpoint of getting deals done and collecting a fee at closing, there are business brokers that won’t co-broker. I’ve received a lot of email from brokers wondering how to handle this; so many, in fact, that it has become a fairly oft-discussed topic during our Friday conference calls.

Why would a broker decline to co-broker a deal? Well, from some of the reasons those brokers have stated to us, they are either greedy or so egotistical and hubristic that they’ll tell you that if your client wants the business he represents, “he’ll find me.” (I use the male pronoun for the broker primarily because women generally are unlikely to be such jerks.)


When a listing broker will not co-broker with you and tells you that if your client wants the listed business, your client “…will find me…”, you may have a multi-level jerk on your hands. Here’s why.

What is a Broker’s Responsibility?

When a business broker takes a listing, one of the paragraphs that should be included in the listing agreement is a “best efforts” clause requiring the broker to do pretty much everything the seller could reasonably expect the broker to do to get the business sold. If asked, the seller would pretty much answer that he or she would “reasonably expect” the broker to work with another broker if this other broker had a buyer.

A broker’s resposibility to the seller is to get the business sold at the highest possible price in the shortest amount of time. Co-brokering certainly covers that last part and, because a business exposed to the largest number of potential buyers is likely to garner the highest price, it also addresses the first part. A listing broker that will not co-broker is shirking his responsibility to the seller – and the few that we’ve encountered have been jerks.

A listing broker that will not work with another broker simply to keep the listing and sale in-house and keep the full commission or success fee is almost guaranteeing that the business will remain unsold for a longer period of time.

Now, there could be a good reason why a listing broker would not co-broker a deal with a specific broker. If the broker with the buyer has a reputation for being untrustworthy or unethical, I would walk away from him, too. But this is ot often the case and there’s a way around this if it arises.

Here’s How We Handle It

When we run into a situation like this, I instruct our associates to explain to the buyer’s broker, as delicately as possible, that they won’t co-broker the deal with him but that they want to work with him on a referral basis; that is, he turns his buyer over to us and we pay him a referral fee at closing. Needless to say, this is not always successful but if the other broker has a reputation for treating buyers, sellers or other brokers unfairly or unethically, the simple fact that you are associating with that person could hit your own reputation as an honest, ethical professional business broker.

Sometimes, of course, the dicey broker will take offense at your refusal to work with him and, if you think the situation calls for finding a way to talk to the buyer, you might use a plausible excuse for offering to work on only a referral basis. One the I know has been used in our network is that the seller has insisted that you, as the listing broker, be the only person other than a pre-qualified buyer who has signed a Non-Disclosure Agreement (NDA) to have access to the financial details of the business. Again, this does not always work but it may be worth a try.

The bottom line is that you, as the listing broker, should always be open to working with another professional business broker, one with a reputation that you would like to associate with. Don’t be greedy. It’s a disservice to your client. If a broker comes along with a qualified buyer, get the deal done and get on to the next one. It is your responsibility to your client, the business owner, to do whatever you can to get the business sold. Besides, working with another professional broker will open up your other listings to other brokers and, if you’ve worked successfully with a couple in the past, you’ll find that they’ll likely want to work with you in the future.

Co-brokering; it’s the right thing to do.

We’ve put together a short report Six Things to Remember About Co-brokering”. It’s yours for free:

Joe

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