Business Brokers: Finding Buyers

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Business Brokers: Finding Buyers

One of the questions we get most often from folks who are interested in enrolling in our business brokering course – especially real estate agents – relates to finding buyers. How do we do it?

Well, there are dozens of ways to find buyers – and many of them are laid out in our course, The Basic “How-To” of Becoming a Business Broker. But this post is about one that is not in the course – because I’ve never experienced it; until today.

This post is about an amazing email I received this morning from a buyer that underscores what I’ve been periodically posting about for the past 18 months; specifically, how frenetic the current business-for-sale market is.

First, a quick recap.

Strategic vs. Financial Buyers

There are two types of buyers: strategic and financial.

Strategic buyers are interested in expanding their product or service offerings, moving into new complimentary or related verticals or entering new geographic markets without having to build a new hub from the ground up.

Financial buyers are more interested in the cash a company is generating and the prospects of increasing that cash flow in the near term.

One of the best examples of a strategic acquisition was the 2017 deal in which Amazon bought Whole Foods, immediately giving Amazon hundreds of physical store locations (where Amazon’s online customers could pick up their stuff while at the same time increasing grocery sales at Whole Foods) and providing the company a strong and sudden entrance into the competitive grocery and food industry.

Another example is Apple’s acquisition of Shazam which Apple planned to use to boost Apple Music.

An example of a financial acquisition is Berkshire Hathaway‘s deal to buy See’s Candies. Though Berkshire was in other food and beverage businesses at the time of the acquisition, See’s offered both an excellent net return as well as significant prospects for growth.

What About Smaller Deals?

Granted, the examples above are significantly larger than most business brokers would be involved in but the concept is the same as what we deal with everyday.

An example of a strategic acquisition on a smaller scale comes from our files. One of the major hardware and building supply operators, with dozens of locations in the Eastern United States, bought an existing regional hardware chain that we brought to market, immediately given the buyers access to markets that would have taken them years to enter.

In an example from our files of a financial acquisition, a group of friends – investors – bought a specialty wholesale and distribution company. They were eager to pool their capital and invest in a money-making business that had the potential for significant growth.

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Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.

Become a Professional Business Broker…

But in each of those two categories – strategic and financial – there are sub-categories of buyers

Finding Buyers: Strategic or Financial?

If you plan to work as a business broker – or are currently working as one – you’ll likely be focusing on Main Street or lower Middle Market companies; businesses with revenue in the $500,000 to $25 million range. At the lower end of that range, most buyers are financial. But once you get up into the $2 million (revenue)-and-up neighborhood, strategic buyers begin to emerge.

As I’ve written previously, the past two years has seen an unprecedented level of activity in business acquisitions. And though the typical buyers have been the usual suspects – individuals, partnerships, husband and wife teams and the like – we’ve seen an explosion of buying interest from professionals – private equity groups (PEGs), family offices and high net-worth individuals. These are buyers with management experience, plenty of capital and a vision to grow whatever business they buy.

And this gets me back to the email I received this morning.

Incoming!

As I’ve written often lately, we get contacted all the time – two or three times every week – by private equity groups from throughout North America. Three or four times each month, we get an email from a family office – not one the size of the Rockefeller office but one of the thousands of more modest ones. About once a month we get an inquiry from a high net-worth individual. All these people have been and continue to be looking for businesses to buy. Almost all these inquiries state that the revenue levels they are looking for range between a low of $2 million to a high of $30 million.

This morning, I received such an inquiry. What made this inquiry different is that it resoundingly underscored the contention of dozens of experts – including mine – that we are in one of the most robust business-for-sale markets in memory.

How did this email do that? By stating that the buying group, a small PEG, would pay our firm a finders fee for any business we steer to them that they buy; and that fee was $100,000US.

We wouldn’t have to do anything! No valuations, no marketing, no time invested, no ad costs, no mailing costs, no staff costs, no negotiations. Unbelievable!

If any more evidence was needed to illustrate how frothy our industry is, this was it.

The Bottom Line

It’s a great time to be both a business owner ready to sell and a business broker ready to help such owners sell. And for us brokers, this strong market is expected to continue for quite some time as the baby-boomer-business-sell-off is just getting started!

If you’re a business owner considering selling and want to learn a little bit about the process and visit our website for more details. But if you’re a realtor – or anyone else, for that matter – that would like to learn how to value and sell businesses, you can get our course syllabus by simply entering your email address below. It will be sent to you automatically and it’s FREE.

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Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.

Become a Professional Business Broker…

If you have any questions, comments or feedback on this topic – or any topic related to business – I want to hear from you. Put them in the Comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.

I’ll be back with you again next Monday. In the meantime, I hope you have a profitable week!

Joe

#business #businessacquisition #sellabusiness #becomeabusinessbroker #businessbrokering #businessvaluation #MergersandAcquisitions

The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 600 in the world. He can be reached at joe@WorldwideBusinessBlog.com

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