Business Brokers Intermediaries in Small Business Deals
Businesses sometimes run into issues that are difficult and demanding to deal with. They can be issues with customers, issues with products, issues with services, issues with employees, and issues with a general cash flow or income stream. Businesses, especially small businesses, may struggle with costs like rent.
Maybe, the business owners think, it’s time to sell.
According to the BizBuySell.com Insight Report, 7,842 businesses were sold in 2016. Across the board, the number one reason cited to sell a business was retirement, according to the IBBA Market Pulse Survey, which took place in the first quarter of 2017. That was across all sectors.
So, while the issues mentioned above may not be the full reason for a business owner selling his or her business, they may have a factor in that decision. Many business owners might sell their business while it is profitable, avoiding the risk of the business becoming a debt issue for their retirement.
And there is quite a market for those looking to sell businesses. For one, it is true that owners care about more than just money when it comes to selling a business. The 2017 IBBA Market Pulse survey indicated that “cash at close” was the number one most desirable factor for sellers; however, “taking care of employees” came in at a close second.
Therefore, many business owners care about their employees, which sends possibly a message to prospective buyers that this business has been run by someone who cares and has not been mishandled through neglect and lack of maintenance. Prospective buyers may feel that this person is someone who is capable of running a business and just decided to leave it.
According to the Q1 2017 IBBA Market Pulse survey, 50% of people who bought small businesses (less than $500K) were first-time buyers while 34% were serial entrepreneurs. According to that same IBBA Market Pulse survey, 75% of people who bought small businesses lived within 20 miles of the business they acquired.
At any one time, there are 15 prospective buyers for every small business that is on sale.
Therein, comes the business broker. What does a business broker do?
A business broker is an intermediary, someone who links prospective buyers together with people who are looking to sell their small business. A business broker works directly with the small business owner who is look to sell to see what their needs and desires are for the sale.
What does a business broker do (part II)?
A business broker may be a good person for a small business owner to talk to, as many small business owners who are looking to sell don’t even talk to their attorney. 32% of business owners discuss exiting their business with their spouse or other family members, and only 13% had spoken with an attorney about their plans.
What does a business broker do (part III)?
A business broker helps by talking with the small business owners to determine exactly what they want out of a prospective buyer and deal. A small business owner certainly wants cash at close and the taking care of their employees but there are other financial and social situations that are dictated by this as well.
What does a business broker do (part IV)?
On the flip side, a business broker might move to talk to prospective buyers to find someone who is interested in buying the business and has the money or can raise the money to do so. A business broker, according to statistics, should not have much trouble finding a prospective buyer. But finding the buyer to suit the owner’s wishes may be difficult.
A business broker may look to certain people to give him information about who to choose in the process, looking into the credentials and the reputations of the people he is selected to purchase a company. The business broker then acts as a complete intermediary, facilitating the process.
A business broker may specialize in acquisition services, divestiture strategy, businesses for sale, business acquisition strategy, things to consider when selling a business, and more. There are many things a business broker will specialize in, which may aid or not aid their prospective clients.
A small business owner will sell the business when he is ready to sell the business, or not.