While each business broker at Transworld is an independent contractor, we are all part of an office, and ultimately a company with an owner and, frankly, BOSS. This man is mine.
He is an impressive team captain, selling as many businesses himself as the team. The Florida team sold 352 businesses in 2015. Our average transaction value was $350,000. As you can imagine, I’m proud to be part of such a terrific team.
Andy was recently interviewed by
What should you look for in a business broker?
You want a business broker who has a track record of successfully selling businesses. You also want to look for one that will market your business to a large audience of potential buyers, understands the importance of confidentiality, and can help present your company financials in the most positive light.
Some good questions to ask a potential broker include, “How many transactions have you completed?”, “What is your marketing plan for selling the business?”, “Do you have professional certifications, like the CBI from the IBBA?”. The question about the marketing plan is important for several reasons. You want your business to be listed on the major business directories and likely buyers to be contacted regarding the availability of the business. However, you also want to know the business broker’s philosophy. Many business owners don’t want their companies marketed in the same way that you might a house or property. For example, will your business broker protect the identity of the business for sale or will he/she post a yard sign saying business “for sale?” In many circumstances, knowing a business is for sale and about to change ownership might make existing customers choose alternatives, which is not good. So, you need to know your broker’s philosophy before you agree to anything.
How important is it for a business owner to find a broker who has sold businesses similar to the one the owner hopes to sell?
That is common question among buyers. Honestly, I believe finding a business broker with lots of industry experience is not very important for businesses with under $2 Million in annual revenues. In my opinion, finding a business broker that is skilled in the marketing and negotiating process of selling businesses far outweighs the importance of having sold a specific type of business.
One misconception is that the most logical buyer is a company that engages in the same exact business. In fact, those in adjacent industries or coming from outside of the industry may pay a much higher price for a business. An outside buyer is paying for the company’s goodwill (name and reputation) and knowledge of running the business as well as the physical assets and customers of the business. An industry insider will tend not to assign a high value to the goodwill or knowledge that will be acquired with the sale and will therefore pay much less than an outsider might.
Is it possible to sell a business that is not currently profitable?
Yes, we have sold businesses that are unprofitable or ones that have not even actively operated for a period time. We have even sold businesses where one might think the business was completely dependent on the business owner. This is not to say every business can be sold. For example, it would be very difficult to sell a dog-walking business generating $15,000/year in revenues.
Many people might think that it would be difficult to sell a therapy practice. We have sold many therapy practices. Actually, in the example that comes to mind, there were lots of potential buyers. However, the seller rejected most buyers. The practice owner was a female therapist and wanted a female therapist with similar treatment philosophies and practices to replace her. Money was not her top consideration. Believe it or not, we run into quite a few business owners who are looking for buyers with certain traits or experience, not just the one who will pay the most money. While many businesses sell for 2 or 3 times seller’s discretionary earnings, this transaction went for 1 time earnings.
Many business sellers are very involved in the business and want to know the business is in good hands after their departure. When a potential buyer meets a business owner, we really recommend they put on their “A” game. We find many sellers are willing to be flexible on terms when they find the “right” buyer.