SORRY, BUT YOU ARE A BROKER'S WORST NIGHTMARE ... AND HOW TO FIX IT

Consider the following thought experiment.

You run a small shop that sells very custom and complex used machinery. It's a modestly successful and pretty dynamic shop, but it's a serious grind to keep the business afloat. Service is the key to getting the machines sold, but your real lifeblood is getting a hold of the best in-demand machines. Getting those makes it real easy to hook the right buyers and sell quickly.

There's this young MIT-trained mechanical engineer named Nick who's always coming in and asking really complex questions about each of your products. Nick wants to know every imaginable detail - how it works, how and by whom each component was made, where it came from, whether it's had any problems and their nature, etc. Many of the questions require going back and pestering suppliers, who you really don't want to irritate. Many are unanswerable without considerable research, if at all. Nick is always trying to get your attention and pull you away from your other customers. On top of that, he's been coming in for over a year and has never actually bought a machine before - not from you, not from anyone. You're not sure how serious he is. He seems committed and interested, but what, if anything, can he even afford?

As the shop owner, how would you treat Nick?

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If you haven't caught on yet, the shop owner is the broker, and you are Nick.

Many of us searchers, without realizing it, are a broker's absolute worst nightmare customers ... picky, needy, uninformed, under-capitalized, under-resourced, and inexperienced. In the eyes of the broker, we bring little value beyond a very remote chance of a successful transaction. Brokers quickly catch on and treat searchers accordingly. In response, many searchers have assessed the broker channel as ineffective or incompetent. Some experienced searchers determine that the broker channel ought to be avoided altogether, and spread the useful, time-saving advice to beginner searchers: Don't waste your time with brokers. The deals off-market are better, so focus there.

This is awful advice.

To understand a bit about why, it's worth delving into the world of the business broker.

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An excellent broker once told me buyer-focused brokers starve. For brokers, sellers are where it's at. Sellable businesses are the scarce commodity that drive the market. A typical buyer only ever buys one business. The thought of going full-cycle (e.g. help someone buy, then help them sell years later) with a buyer is nice, but a very remote possibility. It's simply too far afield to motivate a broker. Seller satisfaction, on the other hand, drives the most referrals, which create tomorrow's meals. It's far more important for a broker to control the experience for the seller than for the buyer. That reality imposes practical limitations on the quality of the customer experience a broker can deliver to the buyer,

So, complain about brokers all you want. You may be entirely justified based on the treatment you've received. What? My money's no good here? This broker is an idiot. But, that's a feeling, not a fact. It's easy to fall into the self-victimization trap when a broker ghosts you. The broker's process is not optimized for you, and it shouldn't be. They've assessed you as a bad customer, and they are likely correct. You need to altogether re-think your approach to enhance the value you contribute to their process. This is the only way to alter their calculus in deciding how to treat you.

Your broker image is mostly determined by the value they get from you as a potential buyer, and far less about your likability or how often you request meetings. They aren't looking for more nice people to help them pass the day. As a buyer, you should, at minimum, think carefully about how to avoid the nightmare customer behaviors as you refine your evaluation and underwriting process. For example, I suggest aggressively trimming your initial question lists before sending, and making sure you know exactly what risks you are underwriting with each remaining question. Then ask those questions in a minimally research intensive, and minimally intrusive way. It will ultimately help you avoid doing the things that can lead to those really bad buyer experience situations.

While avoiding the broker blackball is critical, you can do much better. Searchers and brokers have potential to build a highly productive and symbiotic relationship. For the searchers, they can get the pipeline access, market intelligence, transaction experience, and seller perspective of a broker. In exchange, brokers need buyers who offer more than a remote chance of a one time sale. Brokers crave buyers who, when they don't buy, actually help them sell the business to someone else.

To begin moving toward this kind of partnership, start by introducing yourself in the context of a specific deal the broker is currently marketing. Position yourself upon an initial deal inquiry as a potential buyer the broker should want to know because of the value and network you bring, regardless of what happens with the initial deal. Like any sales pitch, keep it tight or your message will get lost. Once you receive a deal prospectus, review it quickly and send feedback or observations. It's okay to send an initial perspective and tell them you want more time to think about it. It's also okay to DQ it, but offer something useful. A simple "pass" is more polite and professional, but fairly useless. It's not much better than no reply. A succinct message rich with feedback and suggestions is the most useful. For example, "This is not a fit for us because [X], but I know 2 people who might consider. I've sent this to them and they'll reach out if interested. I think the best buyer to approach on this might be [Z]. I know one person you could probably talk to if you want to test the idea." Honest feedback from real potential buyers helps the broker adjust their marketing and earn credibility with the seller by conveying progress. If you aren't engaging in this way, your broker relationship will start to feel one way, and the old mutually dissatisfying way of working invariably creeps back in.

Executing this is tough, especially if you're doing a lot of deal evaluations, covering multiple industries, or multiple geographies. Developing the ability to provide actionable suggestions to the broker requires deeply networking yourself in your regions and industries. It also requires expending extra energy writing clear and concise feedback. This all takes time and commitment, but gets easier with repetition. Meeting other searchers and keeping track of what they're looking for is an efficient way to do some of each. Those interactions will expand your perspective on your own search and help you hone your search strategy, while making you more valuable to your broker network. Just be careful not to send your new broker friend 5 tire kickers like Nick!

Lastly, clearly documenting the feedback may also prove helpful to you. I always find that writing my observations and feedback in a way that someone else can understand (and object to) is brings clarity and discipline to my own thought process. It teaches me about myself more than a simple "no" would do. It also creates the opportunity for the broker to check the logic and correct the record when I've misinterpreted something or the business has changed from what is presented in the prospectus. If it was worth inquiring to begin with, then it's worth writing down the decision to check if it's accurate. You might be surprised!

I hope this is helpful and actionable search advice to improve your process. If there are any brokers here reading, I'd love to hear your thoughts. Please post in the comments.

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Connect to me here on Searchfunder if you want to chat about your self-funded search or email me at [redacted] and I'll send you my searcher resource compendium. You can also check out our self-funded search partner site at cubinvestments.com/searchers/ which contains a lot more about our strategy and approach to search in the SMB marketplace. I always appreciate hearing from people doing unique and thoughtful work in ETA. You can also follow me on Twitter [redacted]



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