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 How To Filter Sell-Side Leads.
Today, we are expanding on that topic and exploring how to build a strong referral network as a business broker. Specifically, systems and processes that you can implement into your daily practice to enhance your referral relationships.
Today, we are expanding on that topic and exploring how to build a strong referral network as a business broker. Specifically, systems and processes that you can implement into your daily practice to enhance your referral relationships.
The Power of Referrals
In the world of business brokerage, your network is your net worth. A robust referral network can be the lifeblood of your brokerage, providing a steady stream of high-quality leads. But how do you build a network that delivers and grows with you? Let's dive in.
Step 1: Identify Potential Referral Sources
Start by identifying who can be a part of your referral network. The primary sources include accountants, bankers, lawyers, realtors, M&A professionals, and wealth managers.
Each of these sources has its own pros + cons. But, like any other human on the planet, each source has symptoms of WITFM (what's in it for me). As such, you need to tailor your communication for each referral source:
- Accountants
- Pro: arguably the most trusted advisor to business owners, receiving an accountant referral leads to a much higher rate of listing agreements signed.
- Con: many accountants will provide their client with an unsolicited opinion of value - results may vary 😬
- WITFM: more than anything, most accountants want to ensure their clients are well taken care of. As their professional reputation (and designation) is on the line. As a result, building a solid referral relationship takes a lot of time. Our best advice? Educate them on the value you bring to the table by sending them success stories + case studies.
- Bankers
- Pro: bankers are inherently transactional - meaning that when they are ready to give you a referral - the prospect is probably very likely to buy or sell.
- Con: most bankers are involved later in the deal process - when clients already have a broker. You can, however, receive the occasional referral from their 'business banking' clients so make sure to keep them in the loop.
- WITFM: the more deals you send bankers, the more likely your name will get put in front of their clients.
- Lawyers
- Pro: similar to accountants, lawyers are well-trusted by their clients. Further, most 'Main Street' clients don't speak to corporate lawyers regularly, making a client referral from a corporate lawyer of higher quality/size.
- Con: Similar to bankers, most lawyers are late in the deal process. Expect to 'give' more referrals than you receive.
- WITFM: Cold hard cash (billable hours). Yes, corporate lawyers make a good living when they are working on lots of deals. Helping them by matching your clients (either buyers or sellers) with a legal referral will get reciprocated over the long term.
- Realtors
- Pro: realtors (both residential and commercial) work in a fast-moving industry and are familiar with the commission model. The commission carrot is typically enough motivation to start receiving referrals.
- Con: Many realtors are under the belief that business brokerage is so easy even a realtor could do it (sorry realtors, that was uncalled for 😂). As a result, you may find the same realtor keen to hand over the $200,000 bakery client but get weird about referring you to the $2,000,000 HVAC deal. To combat this, we will loop our preferred commercial brokers in on deals that involve real estate. We might make a bit less of a commission, but realtors will recognize what we're saying in our lane, so they should do the same.
- WITFM: Referral fees (we pay anywhere from 10-25% of our commission depending on the relationship and how much work the realtor will do on the deal).
- M&A Professionals
- Pro: M&A Advisors have a sophisticated understanding of the business-for-sale process, often pre-screening prospects for you in advance. Further, because they typically work on larger deals ($20M+) their 'small' deals will still hit most broker’s ideal deal size criteria ($1M - $20M).
- Con: Business brokers are sometimes seen as the 'used car salesmen' of the M&A profession. As such, you need to prove why you/your firm is different. You also need to stand out in a sea of brokers that are trying to get 'down referrals' from M&A firms.
- WITFM: similar to accountants, M&A Advisors' primary focus is on upholding their brand. This means they won't trade their reputation for a quick referral fee. You will need to prove your value with these advisors. In the past, we've overcome these hesitations with
- Wealth Managers
- Pro: another trusted advisor, clients of wealth managers have already trusted them with their retirement, making an introduction to a business broker a natural fit.
- Con: You're going to have to do a bit of arm wrestling with wealth managers as they would love a referral from you since you're working with a successful business owner who is about to receive a ton of cash. As we all know, our relationship with business owners isn't always close enough to make this introduction.
- WITFM: this is where you got to play the reverse UNO card - show a wealth manager how they can benefit from working with you. Specifically, how you can provide a business valuation for their client (giving the wealth manager clarity on how much in 'illiquid funds' their client has tied up in their business). Second, how you will help unlock this liquidity, which will ultimately go to the wealth manager (increasing the amount of fees they receive).
As you can see, there are a ton of different referral partners for business brokers, each having their own MO - make sure to understand this motivation for each referral source you speak to.
Our advice is to try and create a list of 12 referral sources (2 per type) that you can meet at least once or twice a year - resulting in 2 referral network meetings per month.
Step 2: Cultivate Relationships
Like a farmer, building a network isn't just about collecting contacts—it's a cultivation process. This process starts with engaging with your potential referral sources regularly. This could be through:
- One-on-One Meetings: schedule a quarterly coffee or lunch to discuss recent deals, the macroeconomic environment, or life in general.
- Professional Gatherings: Attend or even host industry events. Bonus points for remembering to invite your network more than 24 hours in advance of the event 😂
- Value-Added Newsletter: We know what you're thinking - ANOTHER Newsletter? While we agree there are a lot of them out there - there is no better way to keep in regular communication with your network than your newsletter. Not sure what to talk about? Send them updates on tricky deals you're working on (anonymously of course), success stories, exit-planning tips, and/or leverage 3rd party reports like BizBuySell's Annual Insight Report.
Step 3: Set your Networking Schedule Cadence
Whether you're an introvert or an extrovert - you're going to have regular meetings with your network either online or in person (sorry introverts).
To do this, we've created a simple Notion dashboard template allowing you to easily keep track of your core 12 referral contacts - see how it works below:
This Notion template gives you high-level visibility over your 12 core referral sources with built-in reminders to schedule a meeting with them. Send us an email at support@dealbuilder.co with the subject line: I WANT THE NOTION REFERRAL TEMPLATE*
*The subject line must be in all-caps to be eligible to receive the template
We'll be honest about something, this system is only as good as your habit of following it. As it is super easy to fall off the wagon and not book these critical meetings.... we may know this... because of personal experience 😅
Ready to Build Your Referral Network?
Referrals are often referred to (we promise that wasn’t intentional) as the greatest source of leads in the sales & marketing world. Why? Because they're free and, if you do it right, you can coach your referral sources to pre-filter leads for you.
By following the steps outlined in this article you can build up your referral network to get an abundance of leads. Once you start receiving referrals, make sure to read our last article, How To Filter Sell-Side Leads, so you know how to qualify them correctly.
If you want to learn more about automating your business brokerage with DealBuilder, please visit our site or book a demo here.
