Acquirers: How To Get A Response From Business Brokers And Use Them To Your Advantage
Acquirers: How To Get A Response From Business Brokers & Use Them To Your Advantage
Business brokers are not responding to queries?
Various courses on how to buy businesses take different positions on business brokers. Some say brokers are the devil and buyers should avoid them at all costs. The claim is that business brokers just get in the way of a deal and it's better to go direct to the business owner.
Other courses take a different tack. They explain that with some businesses on the market, there's just no way around it - one needs to contact the broker. Therefore, they suggest, buyers need to learn how to use brokers. Various ideas and suggestions are provided and, for a payment, some 'inside secrets' to the tactics and techniques to use!
What none of these courses will cover is what really works with brokers. I write this as someone who has had more experience with brokers than all those course authors put together. It's literally my job to talk with business brokers (and corporate finance firms / M&A firms) every day and take the pulse of the broker market. They share their issues, their concerns, what type of buyers they take seriously and much more. Also, they share a lot about their fees (but that's a different story and as disclosed in my detailed PDF guide to business brokers' fees).
So, I hope you find this article useful.
First, Some Facts About Business Brokers
1. There ARE useless brokers, yes. Let's get that out of the way first! There are business brokers who exist just to get the sign-on fee from business sellers. They do very little after getting that fee. The sooner a buyer recognises these brokers and weeds them out, the better! These brokers are in the minority but it may not seem so because they're large corporates, heavy on the marketing and sales calls, and seem to be everywhere!
2. There are many, many excellent brokers in the UK! In fact, when moving move into the mid-market, almost every single player is a high quality professional, a qualified accountant, an M&A expert.
3. Business brokers catering for the micro businesses tend to be geographically limited ie they take on only local businesses (unless they are 'website brokers'). M&A firms, corporate finance firms etc are generally not limited to a geographic radius.
4. There isn't a lot of sector specialisation in the lower market. There is the odd broker who specialises in day nurseries or restaurants, but they are generally sector agnostic. In the mid-market there are many sector experts.
5. In fact, everything in the mid-market is different - better deals, more clued up sellers, professionals who know what they're doing, better buyer access to funds to finance the deal, everything.
6. There are about 1,000 business brokers in the UK! It's a huge market. I've published a directory here with some names.
Top Things Buyers Can Do To Get Results With Business Brokers
Here's how to get every 'business broker' to respond, to take the enquiry seriously, to press their clients to engage and provide information.
1. Have a CV/credentials document + proof of funds. Include them in the initial approach to demonstrate you're not a £1 Charlie. No, not 'investment criteria' and other such nonsense. That's just posturing and transparently so. Brokers want to see hard facts: What deals you've done, what experience you've got in their client's industry, what funds you have available etc.
2. Aim higher. If all you've saved is £10K and you're looking to buy a business, all you'll get is crap brokers at the very crap end of the market who take on every crap & unsellable business. They aren't going to bother replying, providing accounts etc. because that's just them. The better brokers won't reply either but ...
It's not them, it's YOU. They won't take you seriously if you are not a serious player!
3. Research the broker before you approach them. If possible, quote their reference number of the business in which you're interested. Going in blind with a "I'm an acquirer, send me details of all the businesses on your books," just doesn't work with good brokers!
4. Provide multiple contact options - ideally at least phone & email (and, preferably, LinkedIn profile). You won't believe how many people fill in the form on this website and mistype their email! If it's a mistake I spot, like hotmal instead of hotmail, I'll correct it. Otherwise, no. I don't follow up by phoning them. If the email bounces, I'll just ignore them. Some business brokers do that, too.
They shouldn't? Yeah, sure. But people need to learn how to type.
Some More Tips
5. Monitor your email. It's not a broker's job to tell you to check your spam! Monitor your spam folder yourself and, preferably, don't use gmail or other free service. Gmail, especially, is a stupid with false positives. Use a quality address to avoid mail YOU send going into the broker's spam.
Oh, the same 'check your spam' rule doesn't apply to brokers. They don't need to check their spam. Some use spam rules to filter out emails from less desirable acquirers. The last thing they want to do is look in their spam folder!
For example, many of them filter out all email from the Insead domain (all those young MBAs who were lured into their MBA programme by the glamour of ETA - Entrepreneurship Through Acquisition - and becoming a CEO immediately on graduation).
They also filter out known £1 Charlies. If you've already been identified as someone without money or without experience, or a low quality prospect, your mail is probably going straight into spam.
6. Move up, move up, move up. The larger the business you can afford, the more likely you'll be dealing with brokers who recognise quality acquirers & who respond. So if you can move up into the mid-market, all the better.
7. Ideally, get a professional to approach the broker on your behalf - an accountant, lawyer etc. Brokers take those approaches more seriously.
And Finally
8. Use the right language: You won't believe how easy for an experienced broker to see through any posturing, like claims on your "investment" website that you're "partnered with high net worth individuals". Or that you're backed by an (unnamed) "private equity firm". If you're claiming to be experienced acquirers, post examples of acquisitions made, portfolio companies from which you've exited etc.
9. Don't think the pros are fooled by the "team members" on your website. If none of those people's LinkedIn profiles show they're working for your company, then you lose credibility immediately.
10. Forget what the "How To Buy A Business For £1" gurus preach in their videos and elsewhere. Writing to a broker saying you're willing to sign an NDA doesn't say what you think it says about you. Don't talk about "win-win deals" or wanting "motivated sellers" etc. That language is straight from the £1 Charlie courses, as are terms like LBO (Leveraged Buy Out). Just avoid that language altogether.
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