Co Brokering the Argument
Co Brokering…the argument against and the response
Cobrokering in business brokerage refers to the practice of multiple brokers or intermediaries working together to facilitate a business sale. While cobrokering can have certain advantages, there are also arguments against this practice. Here are some common arguments against cobrokering in business brokerage:
- Lack of Control: When multiple brokers are involved in cobrokering a deal, it can lead to a lack of control and coordination. Each broker may have their own methods, communication styles, and priorities, which can result in confusion and inconsistencies throughout the process. This lack of control may hinder the efficiency and effectiveness of the transaction. It is certainly true that there can be control issues at play in cobrokering situations. The scarlet letter of C for Control has its genesis in a world of business brokerage that largely existed 30 some odd years ago. Technology, the internet, and the onset of educational tools from sources like the Business Brokers of Florida and the International Business Brokers Association have largely created a standard of ethics and procedural norms negating the reality of control as an issue.
- Reduced Confidentiality: Maintaining confidentiality is crucial in business brokerage, as premature disclosure of a potential sale can harm the business and its relationships. Cobrokering involves sharing sensitive information with multiple intermediaries, increasing the risk of breaches in confidentiality. The more individuals involved, the greater the potential for leaks or unintentional disclosures. True…there is risk but there is reward. Listing brokers must vet and ensure that nondisclosures are prepared, signed, and vetted. Buyer brokers must ensure that they police and defend the deal not their customer from confidentiality breaches. Again the onset of IBBA and BBF and other state organizations with codes of conduct and practices internalized in their training make this a nonissue. The benefit of cobrokering requires that the business brokerage industry steps up and professionalizes mitigating this apparent risk to a non-factor.
- Dilution of Expertise: Cobrokering can dilute the expertise and specialization of individual brokers. Each broker may have their own area of expertise or industry focus, and when several brokers are involved, it can be challenging to ensure that all aspects of the business sale are adequately covered. This may result in a less comprehensive understanding of the business and its specific market dynamics. The value of industry experience relative to a deal is largely nonsense. The resources of the business brokerage press and solid industry research coupled with a good seller interview negates the perception associated with “industry wisdom”. Indeed, the Business Brokerage Press has noted experts who routinely share expertise as respected colleagues….let just scratch this off for what it really is…. a market tool.
- Communication Challenges: Effective communication is crucial in any business transaction. When cobrokering, communication channels can become more complex, with multiple parties involved. Miscommunications, delays, or conflicting information may arise, potentially leading to misunderstandings, frustrations, and longer negotiation and closing periods. Really? With private chat rooms, deal rooms, texting, zoom, teams and more….this is a failure on brokers to keep up with the tools of the trade. Step on your craft and learn to use the tools available…..NO FACTOR
- Potential Disputes and Conflicts: Cobrokering can increase the likelihood of disputes and conflicts among the brokers involved. Disagreements over commission splits, responsibilities or decision-making authority can arise, potentially leading to strained relationships and negatively impacting the transaction. Resolving such conflicts may require additional time and resources. But why is this a seller issue? If we can agree that the free market is good for a seller and that more competition for a deal is the best environment for a sale the disputes/unprofessionalism of brokers needs to be resolved by brokers and their respective associations. Craft the rules and enforce them. The BBF provides a simple model as to how
- Increased Costs: Cobrokering can result in increased costs for the seller. When multiple brokers are involved, each may expect to receive a portion of the commission, leading to a higher overall fee for the seller. This can reduce the net proceeds from the sale and may be perceived as a disadvantageous aspect of cobrokering. Wow…this is a colossal pile of horse dung. In a market of cobrokering there is competition…for both the deal by buyers and for the listing by brokers. Sellers get to assess a broker’s resources, skills, results, reviews, tools, reputation etc. What actually happens in a competitive environment is that improvement of services occurs which is better for the client and competition for the listing which stabelizes pricing/commissions with the exception of when innovation and better services are provided….for example. For example, a one man broker with a low-level balance sheet may only be able to list on bizbuysell vs a large broker who will list on many sites and co-broker, email blast and execute social media…..which is best for the consumer is up to the client…not the brokers.
Tampa Business Broker Michael Shea routinely co-brokers the most of any broker in Florida. He is a zealous advocate of the practice and can be reached at 321-287-0349 or email mike@tworld.com .
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