AudioBlog: A combination blog post and podcast.
10 Things You Need to Know About Business Brokers
Ever wonder how some small businesses get bought and sold? This is a great starting point to help you learn the basics of business brokerage. We talked with Tony Calvacca and Marsha Barnett-King, two seasoned, savvy business brokers to find out. Here are our takeaways:
They bring buyers and sellers together
Business brokers work with both buyers and sellers to complete successful business transactions. They can represent someone looking to purchase a business, sourcing appropriate businesses for them to buy. They also represent sellers and put them in contact with a potential buyer to complete the sale.
They divvy the world into three groups.
Main Street, Lower Mid Market and Big Businesses. Brokers typically don’t work with Big Business (investment bankers tend to deal with them).
They deal with a lot of BS from sellers.
Business brokers need to have a good BS detector. They need to be able to tell when sellers are messing with them and when they are hiding personal expenditures in their financial statements. They deal with a lot of business owners who evade taxes by writing off personal expenditures as business purchases.
They deal with a lot of BS from buyers.
The BS detector goes both ways. Brokers have to vet buyers to make sure they aren’t wasting their time.
They have hugely high failure rates.
Being a broker is hard work. Making a sale is difficult, and many times buyers decide not to pull the trigger. Also, building a good reputation in the business community takes time and money. You have to be strong to be a broker.
They work with everyone.
People, small businesses, big businesses and giant private equity funds.
They make a percentage of the total selling price.
Business brokers work on a contingency basis, generally making anywhere between 10 – 15% of the total selling price.
They help sellers find financing to facilitate the buyer’s purchase.
Brokers try to line up financing for a deal to make it a more credible transaction. It inspires confidence in potential buyers if lenders are already willing to risk their money on a deal.
They tell it like they see it.
Brokers don’t sugar coat things.
Do’s and deals.
Looking for a “geek-out” moment? Listen to the clips below to get a more in-depth look at the world of business brokerage and how deals get done.