Becoming a Better Business Broker Day 3: How To Filter Sell-Side Leads

Welcome back to Becoming a Better Business Broker in 30 Days!

This concise series title describes exactly what we hope you get out of it - becoming a broker who can close more deals with less work.

If you missed yesterday, check out The Art of Business Valuation.

Today, we're diving into another crucial aspect of your brokerage success: filtering sell-side leads. Signing the wrong client is a headache for 2 reasons:

1. You will spend a lot of time and resources, with no payday at the end.
2. AND you will limit your bandwidth to work with other (better) clients.

This makes it essential to build strong systems to quickly qualify a great sell-side prospect - so let's get after it 👇

Understanding the Sell-Side Landscape

Before we go into the specifics of filtering leads, it's essential to grasp the sell-side landscape for business brokers. Sell-side leads can come from a variety of sources - the primary sources:

1. Centre of Influence (COI) Referrals: The most common are accountants, lawyers, commercial real estate brokers, bankers, exit-planners, and wealth managers. Our anecdotal experience has found that corporate lawyers and accountants often provide the highest 'quality' of referrals as they are working on deals themselves.
2. The Down Referral: this is one of our favorites. Different from a COI referral, these are referrals that come from either investment banks or M&A firms that work up-market from you. The benefit of this referral source is that they will actually quote you an accurate estimate of EBITDA and will be familiar with the difference between saleability and value (read our last article to understand the difference yourself).
3. Social Media: if you're active on social media, you will likely start to receive inbound inquiries from business owners who see your content and reach out. This is a real crapshoot in regards to quality, given your content can reach a business owner of any size. A quick trick is to always match your content to the attributes of your ideal client. For example, if you are hoping to work with a business with an enterprise value exceeding $5M, use examples with high revenue or $1M+ of pre-tax profits. Your readers will resonate with the content you put out (i.e. using the $100K revenue example will resonate better with small owner-operated shops).
4. Direct Outreach: the benefit of direct outreach is that you can do a lot of qualification work before speaking to the client. Research their number of employees, and estimated revenue, maybe even chat with someone who is connected to the owner and try to get an introduction if they seem like a good fit.
5. The Random Caller: you are also going to have prospects who did some Googling and came across your firm and called your main line. If you have an admin assistant, it is key to develop a call script for these types of clients - the call should:

And so forth, until you or your admin is confident the client is worthwhile having a deeper introductory call. This will save you a lot of time from having hour-long introductory chats where you find out in the first 5 minutes the client is a great prospect.

Okay, you've started to get leads, let's chat about how to filter them.

The Filtering Framework: A Step-by-Step Guide

1. Initial Screening: Begin with a broad filter. Look for clear deal-breakers that disqualify a lead early on. A few example deal-breakers:
2. Financial Health Check: Next, assess the financial health of the business. Leads with solid financial records, profitability, and growth potential should move to the next stage of your filtering process. If the prospect is below your target deal size - partner with another broker or brokerage that is happy to take on smaller transactions OR refer them to BizBuySell to list independently.
3. Market Compatibility: Evaluate whether the business can actually sell. For example, is the business operated by a family of 5 with all family members working 80 hours a week? If yes, it will be next to impossible to sell that business. Save yourself the headache and refer them to an exit planner or EOS Consultant to reduce their owner dependency.
4. Seller Motivation: Understanding the seller's motivation can provide valuable insights into the urgency of the sale and what deal structures they are open to (for example: longer-term transition, rolling over equity, earn-outs, etc.). Highly motivated sellers may be more open to flexible deal structures.
5. Deal Potential: Finally, consider the overall deal potential. This includes the business's scalability, the industry's future outlook, and any unique selling points that could attract buyers.

Leveraging Technology to Streamline Filtering

In today's digital age, technology can significantly streamline the lead filtering process. Utilize CRM systems such as Deal Studio* to manage and track your leads through each filtering stage. On DealBuilder, brokers can automate their valuation process, reducing the time to complete a valuation to 15-30 minutes, and reclaiming hours of your time. This time can be used to have a deeper conversation with the owner about their goals and concerns for the sale.

*Deal Studio clients are eligible for a 50% discount to DealBuilder - learn more here

The Human Touch: Beyond the Checklist

While the above framework provides a structured approach to filtering sell-side leads, at the end of the day, you need to trust your gut. Sometimes, a lead that doesn't tick all the boxes might still be worth pursuing based on your market knowledge and gut feeling. Unfortunately, sellers aren't immune to hiding information from both brokers & buyers. It's our service to buyers to do our best to filter these bad actors out of the sale process (as best we can, after all, we're not forensic accountants nor hired for that job).

Conclusion: Filtering as the Foundation of Brokerage Success

Filtering sell-side leads effectively is more than just a step in the brokerage process; it's a way to prevent hearing your future self say, "Why on EARTH did I take this client on?" it also helps prevent stress-induced hair loss*.

By applying a structured approach, leveraging technology, and trusting your instincts, you can ensure that your efforts are focused on leads with the highest potential for success. Stay tuned for Day 4, where we take a deeper dive into part 1 of this article - How To Build a Strong Business Broker Referral Network.

If you want to learn more about automating your business brokerage with DealBuilder, please visit our site or book a demo here.

*not medically proven