Are You Prospecting for Listings Effectively?

The most recent Business Brokerage Press Industry Survey (Available for purchase at www.bbpinc.com) reported that the average business brokerage office has about 45 listings and the sole practitioner has about 13, at any one time. 13 seems about right, although we feel that 15 to 20 is a much better number of listings for a one-person office. Therefore, forty-five listings for an office with multiple associates seems quite low. Our offices in the “old days” had 75 plus listings in an office of about six associates plus a manager in production. A successful office needs at least the same number per agent as the sole practitioner. The average listing period seems to be about 10 months, but for estimation let’s use six months. This means that each associate only has to get about two General Business listings a month to maintain 13 or so listings at any one time.

Many owners would say: “we’ll take 45 good listings any time.” That’s tough to argue with, but office owners are assuming that they are all good listings. In most offices selling one out of three listings is pretty good; in reality one out of four is probably the norm. The smaller the deal the worse the percentages and conversely the larger the deal the more likely the percentage of listings to sales will be better.

Regardless of percentages, the real issue is getting listings. Each individual sole practitioner or office owner has to decide for himself or herself how many listings they feel their office should have at any one time. The source of listings is a big challenge. Over the past few years our surveys and conversations with business brokers indicate a reliance on referrals for leads; and less on other typical methods. Direct mail is second with cold-calling tied for third place with the Internet. The largest source for referrals are coming from satisfied clients and customers. However, “other” is in second place. We suspect that many of the “others” come from the various forms of mailing that is being used by business brokers today.

Years ago cold-calling was the mainstay of prospecting for listings. Today it seems that referrals and direct mail now make-up over 40 percent of what we call prospecting, although we’re not sure that one could call referrals prospecting since it is certainly not pro-active. But, if it works, it works. As we have mentioned, referrals only make up 25 percent of the listings source and 23 percent of that figure comes from “Other,” which may mean that they weren’t really direct referrals.

Mailing has been, and still is, an effective method of putting (and hopefully keeping) you and your company name in front of potential sellers and those who might refer sellers to you. Although 61 percent of offices and 56 percent of sole practitioners report that they have an on-going direct mail program. If you or your office are not maintaining a direct mail program, you are not only in the minority, but you’re missing a lot of possible listings. No listings means no commissions and eventually no sales force. The office has to do whatever is necessary to keep the listings flow.

A direct mail program is an absolute necessity. Assume that you mail 2,500 mailings a quarter and get a one percent return which means you receive 25 calls from potential sellers. Of that 25, 10 turn into listings and two actually sell. The average fee is $15,000. This means that the mailing should create about $30,000 in commission dollars. It costs you about $1.00 for each mailing piece or $2,500 per quarter. It would seem that spending $10,000 on a one-year mailing program should generate approximately $100,000 + in commissions. So, why aren’t you mailing?

For information on newsletters [Today’s Business Scene and/or the Privately Held Company] that can assist in a successful mailing program visit www.bbpinc.com.