Deal flow is the life blood of the business buyer. It is our pipeline. It is the same in any other sales machine. You need a consistent flow of leads in order to make your business work. When you are a small shop, or even a one man shop, this takes time and effort. You need to develop a source of leads. In our business there are pretty much two ways to do this. With a broker and without one.
I teach buying businesses with brokers. This is for several reasons. One is time management. It’s more efficient to use a broker. For those of you who have contacted me and can’t seem to find deals you can also use a “buy-side broker”. Most brokers charge the seller a fee at closing. The buy-side broker charges the buyer a fee upon closing and you can get such a guy on your team to find deals for you pretty much free until a deal happens.
Probably about 25% of all brokers are buy-side brokers. Sometimes I wonder why they do it because they can spend months and years without closing a deal. However the smart ones charge front fees to search and can provide a valuable service to buyers who need to further leverage their time. The sell side brokers are prone to ignoring you and will move on to the next buyer once your hand is played. Nevertheless I do not want to be in a position of having to discover all the realistic sellers out there. That is the broker’s job and once the broker leads then down the rosy path and they get a taste of reality, that is when we want to meet them.
To be fair not using a broker has many advantages as well. Among the obvious ones are that there is no competition, no fees and a very effective principal to principal dialogue. The downside is that the seller is usually not ready to sell because he never thought about it before you contacted him. So how do we get deal flow outside of the broker network? There are always other networking outlets. Attorneys and accountants are the most common source of leads. Mostly accountants. Business buyers should visit accountants as well as sellers in their travels. Sourcing these types of deals isn’t easy since you have to build relationships. However, this is just one tool in the mix. Email and mail campaigns are probably the most prolific source of leads. You can obtain any business database and do mass mailings to targeted businesses in a geographical area.
Going the non-broker route will take more time to develop leads. If you do so make sure your effort is extremely consistent. In other words make your goal to send out a certain number of mailers per day to keep up the deal flow. That will pay off in the long run.
