Business Broker: Champion a Niche

A growing number of business brokers are specializing in specific industries. This trend has expanded their geographic reach and enabled them to become domain experts. But is this strategy right for you?

Goal: Highlight the benefits and negatives of specializing in an industry and help determine if this strategy is right for you and your practice.

Disclaimer: Tupelo is a CRM designed for SMB M&A; we specialize in a specific industry.

Introduction

Specializing in a niche generally means focusing on a specific industry, but it does not have to. Many brokers specialize in selling businesses within a specific geographic region or cater their services to other niches, such as specific languages or buyers seeking certain types of visas. For the purpose of this article, we will focus on industry specialization.

A growing number of business brokers are selecting industry verticals and specializing exclusively in selling businesses within those industries. This trend offers strategic advantages such as expanded geographic reach, improved SEO, better targeting of prospective sellers, enhanced buy-side advisory opportunities, and overall more effective marketing. However, there are also disadvantages, such as the reduced influence of local referral networks and the potential to overlook viable businesses outside the chosen industry.

Deciding to specialize in a vertical should be carefully considered and weighed against potential downsides.

Why Business Brokers Specialize in an Industry Vertical?

Business brokers who specialize in selling businesses within a specific industry have three primary advantages over generalist brokers:

1. Develop Domain Expertise: Specializing in an industry allows brokers to deeply understand its operations, terminology, and market trends, enabling them to better communicate with business owners. This expertise provides a significant advantage during the pre-listing engagement and buyer connection process. Brokers who can demonstrate industry-specific knowledge can easily differentiate themselves from generalists. Brokers who build their careers around a single industry can confidently ask sellers, "Who would you rather trust to sell your business? Someone who has successfully sold numerous businesses in your industry or someone with only a handful of deals in it?" Specialization builds expertise over time because it provides more relevant experience.
2. Enhanced Search Visibility: Business brokers who focus on an industry can promote their services more effectively and increase the likelihood that sellers find them. All of their content and marketing efforts are tailored to a specific industry, leading to stronger SEO performance and more targeted keyword searches. For example, searching "Sell my HVAC business" will almost always return Business Modification Group on the first page of Google. This firm specializes exclusively in HVAC business sales, meaning their content is highly relevant to sellers in that industry. By narrowing their focus, specialized brokers improve their discoverability in online searches.
3. Easier to Move Upmarket: Specializing in an industry makes it easier for brokers to handle larger deals. Over time, they build a strong track record within their niche, establish themselves as the go-to experts, and develop relationships with key players at industry events. Even at the highest levels of finance, top investment banks like JPMorgan and Goldman Sachs have dedicated teams specializing in verticals to provide their clients with superior service and access to the right buyers. Similarly, business brokers who specialize in an industry can develop relationships with larger industry players, increasing their ability to close bigger transactions.

Lastly, while it is not always the case, those who specialize generally are able to command a higher fee.

What are the disadvantages to specializing in an industry vertical?

While industry specialization offers significant advantages, it also comes with drawbacks, particularly for brokers who have established practices or focus on smaller transactions:

• Reduced Local Referral Influence: Brokers who traditionally relied on a local network of CPAs, attorneys, and financial advisors for referrals may find their deal flow reduced when shifting to an industry focus.
• Ignoring Viable Businesses Outside the Industry: A hyper-focused approach may cause brokers to overlook profitable businesses that fall outside their niche, especially in regions with limited deal flow.
• Market Vulnerability: Specialization means tying a practice’s success to the health of a single industry. If that industry experiences a downturn, brokers may struggle to find deals.
• Longer Ramp-Up Time: Becoming an industry expert takes time, and brokers new to a vertical may face an initial learning curve before building credibility and a steady pipeline of deals.
• Pigeonholing: Business brokering requires adaptability. Over-specialization may make it harder to pivot later. Clients, referral partners, and even a broker’s network will associate them with a single industry, limiting future opportunities.

Selling a business is relationship-driven. Many brokers thrive without specialization because they’ve built strong reputations over decades. They focus on execution rather than narrowing their scope. Specialization, while beneficial for some, can limit flexibility and make it harder to maintain a full pipeline of listings.

Deciding what industry to specialize in?

If you’re considering specializing in an industry, ask yourself these key questions:

• What are my skills? Does my background give me an advantage in a particular industry?
• Where is my knowledge? Am I already familiar with the industry’s operations and key players?
• What is the size of the market? Is there enough deal flow to sustain a specialization?
• Will market dynamics continue? Is this industry growing, stable, or declining?
• Does specialization genuinely help the seller? Will industry expertise allow me to better serve business owners looking to exit?

Conclusion

Industry specialization can be a powerful strategy for business brokers, but it’s not for everyone. Those who commit to a niche can expand their reach, improve their marketing, and command higher fees—but they must also consider potential risks. Carefully analyzing your strengths, market opportunity, and long-term goals will help determine whether specialization is the right move for your practice.