What percentage of businesses for sale that are advertised and/or sold are pocket listings? What is the best way to find out about pocket listings? Are they advertised? Are they a big part of the businesses sold marketplace? When I was an active business broker (many moons ago) I always knew of business owners willing to sell their business (provided the right buyer present themselves, etc), and business owners (and sellers) who didn't want to advertise since they wanted to maintain a very high degree of confidentiality, etc. Even though these owners didn't provide me with an Official listing agreement I still consummated many deals (via one party agreements) by putting owner and buyer together to transact a successful deal.
So fellow BizBen Users - several questions and ideas to discuss:
1. What percentage of listings advertised are "pocket listings"?
2. What percentage of businesses sold are "pocket listings"?
3. What percentage of businesses do you have for sale are "pocket listings"?
4. What advise would you give potential business buyers who want to reach these business owners who fit in the "pocket listing category" and want to sell?
Here is my response on this subject:
In my experience, a pocket listing is a business that is probably for sale to the right party but is not being advertised. One or more business intermediaries may know about that opportunity for a buyer, but since the business owner does not want to formally list the company for sale, the broker or agent will only be able to help generate a successful transaction by having the business in mind when talking to buyers. Perhaps one of the buyer clients will seem a good match for that business.
A business intermediary may have one pocket listing in mind for every two or three regular offerings that are represented with a written listing agreement. But some sales professionals are hesitant to offer an opportunity that they are not contractually authorized to sell. If a transaction results from a buyer being introduced to the seller of a so-called pocket listing, the intermediary who initiated the introduction and helped to create a deal has to be very careful about the way the buyer/seller match is handled. Otherwise, he or she may do a great deal of work without a contract and receive an inexpensive thank-you gift from the seller rather than a sales commission. There also is the danger that the seller will change his or her mind about selling after much broker work is invested trying to complete a deal.
The smart way for a business sales professional to handle a pocket listing is to obtain a single party listing which commits the seller to go through with a deal if the buyer named in the agreement offers the price and terms specified in writing. Actually, the seller may not be obligated to sell at those terms, but he will be obligated to pay a commission to the broker who meets the terms of the single party listing.
Any past stories, strategies concerning "pocket listings" would be helpful to this discussion - ProIntermediaries & ProAdvisors - let's hear your stories and opinions below. Thanks all.