Your Vendors Health - Can They Go The Distance

Some 25 years ago I was in logistics. When we would go to bid on work we were often asked by the prospective customer for what equated to our balance sheet. We had to report cash reserves, revenue, management profiles, lines of credit and basically demonstrate to the customer that we were capable of handling the work we were bidding on.

You see it we were a critical element of that companies business handling what equated to vital operations and resources (being purposefully vague here). We were presenting this data to some pretty smart folks skilled in our industry but also in the purchasing process and vetting process...they knew what was required of us when times got tough and if they hired us they wanted to make sure we could go the distance and survive as we were essentially embedded in thier operations.

So what does this have to do with Business Brokerage? Well quite a bit. I am sure we have all heard the line "you get what you paid for". Well, nothing is more true than that statement and it should go hand in hand with "you need to make an apple to apple comparison". All too often business owners large and small look at the fee of a business broker or investment banker and decry how expensive it is. I often give a retort to them of do they challenge their brain or hear surgeons the same way...only to get a hurumph and guffaw (yes I just used those two terms) as if our skills, degrees, and certifications pale in comparrison.

Well, here is reality. A broker is in business. We have carrying costs and overhead: subscriptions, ad platform fees, staff, rent, travel, fuel, legal and admin expenses etc. We like you operate in a ever more expensive space...so what does this have to do with my trip down memory lane with the vendor selection?

Today brokers are under ever more tightening squeezes...and rising expenses. The available inventory has dramatically tightened over the last 18 months (the reason for that is for another article on another day) and as such of late I have seen brokers having to pivot to branding as "experts" operating in niche categories. Now this is supposed to be a clever marketing tactic but what it really is, is an effort to sharpen their ad spend dollar to raise the success probability.

A brokers ad spend largely is where their costs lie. With a pull back in spend the customer must really train their eye on their vendors ability to spend properly and "go the distance" on an engagement. If your broker is niche how do they in a tightened market spend on your listing.

Real scrutiny must be used by vendors when selecting their brokerage partner. Here are some questions to ask:

• How many deals have they done in the last 12 months? This number indicates their ability to fund future operations...it is in effect their working capital
• Do they have inventory? Without inventory buyers do not traffic their site. 80% of buyers do not buy what they first inquire on so with that stat in mind current inventory is vital to creating competition to your business.
• What are their advertising tools deployed and how are they reactive to algorithm shifts and pivots. Advertising is skill and brokers need to have demonstrated skill in pivoting in marketing: voice, eblasts, blogs, video, podcast, buyer and seller loyalty and education are just a few of the marketing tactics that need demonstrated action items relative to your engagement.

If you think that a broker on two sites is the same as a broker on 14, if the one who has 100 buyer the same as one with 200,000, as one who is a one man band verse one with staff to respond to inquiries and engage buyers, as one who now deployes ever advancing AI tools and techniques the same as the broker who sends all to voice mail....well I can't help you.

Good Luck and Good Hunting