Comments & Replies: 10 Topics: broker cooperation, business brokers, buying a business, for sale by owner, pocket listings, selling a business
Discussion Description: What percentage of businesses for sale that are advertised and/or sold are pocket listings? What is the best way to find out about pocket listings? Are they advertised? Are they a big part of the businesses sold marketplace? In this Discussion on BBN multiple brokers, agents, BBN Members weigh in.
Comments & Replies
My specialty is selling restaurants and bars. I have been involved in selling these types of properties exclusively for the past 30 years in Northern California. Naturally, I have met owners who have said to me if the right buyer comes along, I would be interested in selling and this would be considered a "pocket listing". Usually I have done deals with these people and they know and trust me - but with that said, it would represent a very small percentage of my overall business. I also have clients who tell me exactly what they are looking for and the specific area they are interested in.
The key to working this type of deal is to have an exclusive relationship with the buyer so that I can afford to spend time researching a specific area for them. Recently I was told by a client that they wanted to be in a specific suburban town. It was basically only two streets that had many restaurants. I walked the streets introducing myself to the owners and leaving my card for follow up. I actually got a listing by doing this and sold the restaurant but not to the specific client I was working for. After about 9 months I was able to put a deal together for the client who initiated the process and the restaurant I sold was never on the market.
The best advice I can give is to develop a relationship of trust with a broker who specializes in the type of business you are interested in and give that broker some exclusivity to find exactly what you are looking for.
This is a good reason for Buyers to establish a relationship with the broker they choose to work with. Pocket listings are often times the best listings. These can include businesses where the sellers are very private and do not want the business listed. In other cases it might be a business where the owner wants to sell but is on the fence about the idea and needs a detailed offer in order to decide.
For myself, I would say that 1/2 of the laundries I sell are in this category. A client asked recently how I decide who to contact when I have a laundry come available. I told him the client that was the most ready. More specifically, ready to perform, who's interest matched the model, price and income of the business. Actually, it all has more to do with a buyer/client being ready. When I have a ready Client, I will consider the businesses I know fit in this category that might be ready and also fit the buyers needs, and contact them.
Knowing the sellers that are ready is critical. When I identify these sellers I work closely enough with them to best assure I will get the sale when the time comes. Pocket listings require a relationship between the seller and the broker. In some cases the seller is very reluctant and nervous about listing the business and having people find out they are selling or often reluctant having people looking the business and documents over. In other cases the seller isn't comfortable with the price he believes he/she can get for the business. If I have a ready buyer and I believe the fit is right I will take the steps necessary in order to put the transaction together.
In my experience, a pocket listing is a business that is probably for sale to the right party but is not being advertised. One or more business intermediaries may know about that opportunity for a buyer, but since the business owner does not want to formally list the company for sale, the broker or agent will only be able to help generate a successful transaction by having the business in mind when talking to buyers. Perhaps one of the buyer clients will seem a good match for that business.
A business intermediary may have one pocket listing in mind for every two or three regular offerings that are represented with a written listing agreement. But some sales professionals are hesitant to offer an opportunity that they are not contractually authorized to sell. If a transaction results from a buyer being introduced to the seller of a so-called pocket listing, the intermediary who initiated the introduction and helped to create a deal has to be very careful about the way the buyer/seller match is handled. Otherwise, he or she may do a great deal of work without a contract and receive an inexpensive thank-you gift from the seller rather than a sales commission. There also is the danger that the seller will change his or her mind about selling after much broker work is invested trying to complete a deal.
The smart way for a business sales professional to handle a pocket listing is to obtain a single party listing which commits the seller to go through with a deal if the buyer named in the agreement offers the price and terms specified in writing. Actually, the seller may not be obligated to sell at those terms, but he will be obligated to pay a commission to the broker who meets the terms of the single party listing.
It is not a myth. After a great deal of time in a business a broker gets to know a lot of business owners who, under the right circumstances would like to sell their business. For myself, I am not anxious to take these listings until the seller has a true incentive to sell. If I am going to be responsible to each selling client it will require a great deal of time and continuous updates. However, sometimes that right Buyer comes along that causes me to recall the business and I will contact the seller to see if he is interested. I would estimate that more than 1/2 of my sales come this way.
In my experience, a "pocket listing" is a rare occurrence ... and should be so. First, the seller is not served by a situation in which the only prospects for a sale will be those randomly encountered by a particular broker.
Second, without a formal agreement between the broker and seller the business cannot be fairly or appropriately represented. And, third, such an informal arrangement is a legal minefield just waiting for one mis-step. And to avoid any misunderstanding, there should be a clear distinction between a pocket listing and a search by a broker for businesses not currently on the market that may fit the "wanted to buy" requirements of a prospective buyer.
I've found that when someone offers a broker a pocket listing then they are not really serious about selling their business. A pocket listing is kind of the equivalent of saying "broker, bring me a buyer and maybe I'll sell." Without advertising the seller would be doing himself a major disservice. Business brokers need a constant flow of new buyers who are inquiring about businesses for sale, and yes, sometimes a buyer will call on one business but end going to see another that the broker suggests, but since the vast number of businesses advertised end up not selling, and the high number of buyers who call end up not buying, the numbers just aren't there for a pocket listing to successful sell.
In my experience, "pocket listings" are a waste of time, energy, and opportunity.
"If you find a buyer, I might sell my business." "When you have a buyer, then ask me about selling my business, but not before." "See my business, but don't let anyone know that you have a business for sale."
Does any of that make any common sense at all? Once in a great while, every business broker receives an inquiry from a buyer about the business they might want to buy. These are mass-mailed to hundreds of brokers ... and they end up in the circular file. A serious buyer is going to look at the inventory on the market on platforms like BizBen.com; and they may place a listing on the BizBen "Wanted to Buy" area.
So, my only advice for business sellers who want to sell their business but don't want to market their business is to look at the "Wanted to Buy" section and see if there just might be a connection. However, if that is all you are doing to sell your business, you'll have a long wait.
Want to sell your business? Consult with a business broker to handle the whole thing, or a business marketing consultant to at least handle the details for you.
This Discussion's Contributors
Profile: I founded BizBen and BizBenNetwork to make the process of buying and selling small to mid-sized businesses more efficiently. I currently head up the Facilitator team at BizBenNetwork where we assist BBN Members with connecting with others to facilitate a deal. Thanks for using BizBenNetwork!
Key Words: BizBen, BizBenNetwork, facilitator, advisor, consultant, peter siegel, siegel, bbn
Profile: I am an experienced entrepreneur, attorney, & business professor. I & my EvergreenGold® team offer business owners sound advice & expertise to build business value & achieve profitable sales. Call me today for a FREE business evaluation & SWOT analysis for your business anywhere in the USA.
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Profile: Having owned businesses for over 22 years, my interest turned to listing and selling businesses rather than owning them. I specialize in high volume restaurants, fast food independents & chains, bars, liquor stores, small manufacturers & service businesses in Orange and LA Counties in California.
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Profile: Laundry consulting, due diligence, buyer representation: We preview laundries for you and evaluate them. 28 years laundry industry experience: buying, selling, valuing, retooling, analyzing, consulting services for laundry buyers and entrepreneurs. Contact us today about our services.
Key Words: chuck post, laundry, coin laundry, coinlaundry, laundromat, laundries, card laundry, laundrys, coin laundry, coin operated, laundramat, laundry mat, laundrys, coin laundries, laundry, laundries, coin laundry, chris mason, laundromat, laundromats, laundrys, laundry, laundries, laundrys
Profile: J. Back & Associates Restaurant Real Estate was founded in 1988 as the first bay area real estate company to specialize exclusively in restaurant real estate. I am the past President of Charley Browns restaurants and have been involved in the restaurant business for over 35 years.
Key Words: jeff back, j. back & associates - restaurant sales, restaurant, restaurant broker, fast food, hamburger, bar, quick service restaurant, pizza, gastro pub, pub, thai, mexican, hayward, alameda, san ramon, constra costa, san jose, santa clara, oakland, dublin, lafayette