If you are considering going into the business brokerage profession, the following information should greatly assist you in making the right decision. If you have already decided to go into business brokerage—welcome!
This material will provide you with the knowledge, education, and information you need to start on the road to success. For those readers still in the decision-making stage, this program will help you in two ways.
First, it will provide you with the same knowledge, education, and information as the individual who has already made the decision to become a business broker. Everyone seems to have their own idea of just what business brokerage is or perhaps what they want it to be.
Here are the basics and how-tos of business brokerage. If you are uncomfortable with any of the information, you should either rethink your decision about entering the business, or spend some time with an experienced business broker and discuss just what it is that makes you uncomfortable. As with many sports, activities, and business endeavors, you have to first master the basics before you change them. We encourage new entrants to the business to learn the basics and follow them for the first year before attempting to change them.
What you will be reading is drawn from experience—the experience of many, many successful business brokers. After you have been successful, then, certainly, tinker all you want. However, when all else fails, always go back to the basics. In other words, when the tinkering ends up with few sales, reread this information, and start over again.
As you will see, there are many ways to become involved in business brokerage. You are making the right step by mastering the basics. What other business can you be in that allows you to control your own time, is always different and exciting, and places no limitations on your earnings? We wish you well in your business brokerage career. We receive many calls from people who are considering the business brokerage field.
Perhaps a short history of business brokerage will dispel this idea of a new industry. To be Sold a good Penniworth, a Slitting Mill completely finished and furnished, situated in the middle of near 29 Forges in the Compass of 12 Miles, with a well built Forge with Two Fires, and conveniency for a third; together with a well built and well accustomed Grist Mill, all standing on one Dam; on as constant a stream as this Land affords; with accommodations for other Water Works; A good Dwelling House, Coal House, and above 6 Acres of Land, and a good Orchard upon it, said Works stand on Namasket River in Middleborough, 13 Miles from Plymouth, and 10 from Taunton.
Any Person or Persons minded to purchase the same may inquire of the Rev. Peter Thacher of Middleborough aforresaid, or of the Printer hereof, and know further. The Reason of this Sale is because the Person wants the money for it, and intending to leave off that Business. No one can pinpoint exactly when business brokerage began—or how or why.
However, the above may indicate a beginning and might be one of the first business opportunity ads in the United States.
We also suspect, although interpreting the ad is difficult, that Rev. Thacher is one of the first business brokers. So much for business brokerage being a new industry.
It is possible that the first business broker was a minister. That might shake up the industry. Also note that in all these years, the reason for sale has not changed! There have been many changes during these years. When we first started in the business in , we dealt with the blue-collar worker who was leaving the factory job and was willing to take a chance owning a small business. This buyer would buy bars, small fast-food and coffee shop operations, donut shops, and small retail operations.
Book checks were few and far between, because most owners of these small businesses rarely maintained documented financial statements. They came from many countries, and because of their language problems and their hard work ethic, small business was very appealing. In many types of businesses, franchises replaced the traditional mom-and-pop business. The large restaurant chains and franchises replaced the family-owned restaurants.
This trend continues today. However, on the plus side, franchising created new opportunities for business brokers. It made available new types of operations to the first-time buyer going into business.
For years, business brokers did not sell printing businesses because the prospective buyer had to have a working knowledge of printing, thus reducing the market substantially—then came instant or quick printing.
These franchisors wanted business people, not printers. The result is that there is a new industry for business brokers to handle.
The same is true for many other industries. Business brokers have had to learn to adapt and be creative. Prior to franchising, new business brokerage offices were started by those that left their existing offices and ventured out on their own. These people had experience in the business and usually knew it well. Franchising brought in a lot of people who had no experience with the profession, and in most cases no experience in small-business ownership.
They faced two major problems: Most of these new business brokers had come from the corporate world and did not understand the small-business-owner mentality. This new business broker had no one to replace the light bulbs, do the typing or administrative work, or even empty the trash.
The new owner had to resolve all the issues that had previously been taken care of by the corporation. Additionally, there were no perks or benefits, paid vacations, sick days, or—to make matters worse—no paycheck. Those who realized that they could change the light bulbs and take out the trash succeeded. Unfortunately, many of the new business brokers, when the going got rough, retreated to their offices, shut the door, and studied their business plans.
Others, however, went out to where the action was, worked with their agents, the buyers and the sellers, and, consequently, did quite well. Many of these people did bring something to the table. They understood business and numbers and were comfortable in dealing with outside professionals and advisors. They also brought a great interest in handling the sale of the larger business. Their experience in corporate America provided them with a background, or at least a perceived background, in the workings of the larger business.
This allowed some of them to actually make some sales in the mid-size company arena, but also forced others to abandon the business because of the lack of sales—of any size business.
If the business brokerage business changed with these new entrants, so did the buyer with whom business brokers had to deal. Those corporate people, who lost their jobs through downsizing, mergers, acquisitions, and all the other reasons provided by corporate America did not all become business brokers—many became buyers of businesses.
Because of their background, many of them wanted to be CEOs of their company, but had the money to only buy a business that required them to work in it as well as manage it. Others dissipated their funds during the search process looking for that perfect business.
Many were overly cautious. The first decade of the new century brought many more changes to the business as well as some major highs and lows. Certainly the many uses of technology would be paramount in listing the changes over the past few years. Where does one begin: These days, every office must have a website. Whether a seller is looking for a broker to list his or her business or a buyer is searching for the right business to buy, everything now begins on the Internet for better or worse.
The good news is that website options are plentiful and not very expensive. The brokers that returned to the basics were able to hang on during this tremendously difficult time. There is still nothing wrong with seller financing; it has worked for many, many years. There are several benefits to this change. Advertising costs online are much less than in newspapers; you normally pay a flat monthly fee to post unlimited listings, and, since these ads are online, you are able to reach a global audience.
A couple in Cleveland that wants to move to Miami and buy a business need only log on to their computer and search the inventory of listings. There is no longer any need to buy a Miami Herald and comb through the classified ads.
The biggest downside has been the fact that buyers now have so much information available to them that they are making up their minds before they ever contact a broker. The newspaper ad was normally three lines and contained just enough information to excite buyers and cause them to call the office and, hopefully, come in to meet with the broker.
Nine out of ten times, these buyers bought something other than what they called about. Once the broker learned about the buyer, they were able to match them with the right business, which was normally something the buyer had never considered. They are much more attached to a specific business and much less open to alternatives. Brokers need to be able to provide enough information in the online listing while still leaving the buyer curious for more and encouraging them to make contact.
These online sites are tremendous tools if used properly. Business brokers must always keep in mind that the goal is to get the buyer in the door. In it seemed as if anyone could get deals done. Financing was plentiful, confidence was high, and the money was rolling in. By early many brokers had left the business while many others were picking up paper routes to keep the office lights on.
These tremendous swings reminded us once again that the basics of this business always apply. Despite the advances in technology, business brokerage remains a people business. Except for occasional periods where banks seem to give away money with both hands, seller financing continues to drive the small- business market. Those with a mastery of the basics survived the downturn and will likely thrive going forward. One can only imagine what changes the new decade will bring!
For our State of the Industry issue of the Business Broker newsletter, we asked the following question. It adds to our comments about the history of business brokerage in the mids. What have been the biggest changes in the business that you have seen over the past few years—technology what part , the Internet listing sites, etc.?More...