What Type of Listing Should I Sign?

Similar to when you are selling a house, when you engage a business intermediary you are going to sign a listing agreement. There are several types of listing agreements: Exclusive Listing, Exclusive Agency Listing and an Open Listing. An exclusive listing gives the broker the exclusive right to sell the business. An "exclusive agency" listing allows a broker to list and market your business, guaranteeing them a commission if they sell the business but it also allows sellers to seek out buyers on their own. An open listing allows the Seller to list with multiple companies.

Over the years of have had many business owners tell me they do not want to enter into an exclusive listing. Their reasons included: I want to be able to have many brokers try to sell my Company; What if I am not satisfied with the job you are doing; and, why should I pay you if I find a buyer myself. These are all understandable concerns that a Seller may have. However, it is important for the Seller to understand that not only are they less likely to sell their business with and open Listing or an exclusive agency listing, they are also at risk of harming their Company. Unlike the sale of a house, confidentiality is extremely important in the sale of a business. If employees find out the business is for sale they may leave out of concern for their job. Competitors can use information of a business for sale to steal customers away. Even vendors can become concerned and problems can result in the business operations. The more brokers trying to sell the business, the greater likelihood that confidentiality will be broken. However, more importantly, if a broker does not have an exclusive listing, they are less likely to spend time and financial resources promoting the business for sale knowing that another broker may find a buyer and earn a commission. Frankly, there is just not a lot of incentive for a broker to work hard knowing they may not make any money. So what can a Seller do to make sure that there are as many brokers working on their business as possible? There are two proven things to do. First, you want to work with a broker that is part of a National or International network. This way your business can be marketed through multiple offices. Second, work with a broker who is willing to co-broker. This will motivate other brokers to present potential buyers to the listing broker knowing they will be able to share in the commission. Finally, work out in advanced a reduced commission if you find a buyer for the businesses. I usually will reduce my commission by 40% if the Seller brings me the buyer. For more information on selling your business, please visit my website at www.empiresandiego.com