Business Brokers Needed? More Evidence

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Business Brokers Needed: More Evidence

Are more professional business brokers needed? More evidence surfaces every day.

Older Business OwnersJudging by the volume of email we receive every week – from reports in business magazines, newspapers, financial planning journals, demographers and countless other sources – the resounding answer is “YES!” And this demand will only grow.

And the primary factor driving this demand? The Baby Boomer business sell-off.

Yesterday, I received an email detailing a situation in just one county on the Left Coast of the United States. The largest city in the county has a population of about 200,000; a relatively small number. According to the report, there are roughly 4,000 Baby Boomer business owners in the county. On average, they employ roughly 10 people.

The subject of the email was a report from a non-profit that bills itself as being dedicated to “advancing economic resiliency.” The nonprofit studied the potential transfer or closure of many businesses in one Western state as baby boomers retire over the next 15 years.

The report was focused on the challenges these owners are facing as they get ready to retire and describes its findings as illustrating “the vulnerability of … communities in terms of job and revenue loss as aging business owners, many of whom don’t have a succession plan, sell or close their businesses.”.

The report further states that Baby boomers own close to half of all privately held businesses in the state studied and that nationwide a third of business owners older than 50 say they’ve had trouble finding a buyer for their business.

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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…

Trouble Finding Buyers

But why would owners have trouble finding buyers?

Yes, some businesses will be rendered obsolete by advancements of technology or simple human development.

A well-known example of the former would be manufacturers and distributors of typewriters which came under assault by “word processors” in the 1980s and eventually succumbed to computer revolution.

As an example of the latter, in the 18th and 19th centuries there were businesses in most cities that provided a much-needed service: cleaning the streets of all the horse poop deposited daily by the main form of locomotion available at the time. (I’ll spare you a picture of this particular example.)

A dozen other examples come easily to mind.

But any business that does not fail – and those just mentioned did – or whose demise can be seen on the horizon (think small hardware and building supply stores in areas where one of the Big Box stores opens) should be able to be sold.

So, why are these owners unable to find buyers?

Well, the most obvious reason of course is that the price asked for the business is too high.

We see this all the time and we decline taking engagements to try to sell such businesses.

Another is that the seller either tries to sell the business him- or herself or hires someone – such as a real estate agent or their cousin the mechanic who also sells cars – to sell the business. Even if the business is priced at a level that bears some remote relation to reality, hiring a real estate agent to sell a business is like hiring a podiatrist to do your kidney transplant.

But there are other, less obvious, reasons.

One is that the the current owner, in an early fit of glory, named the business they started after themself. Many buyers of small businesses – especially first-time buyers – are equally vainglorious and, unless their name is “Bob” will be hesitant about buying Bob’s Building Supplies. And other than those named “Wilson”, think about how buyers will react to an offering for the “Wilson Family Restaurant”.

Preparation

But the majority of small and mid-size business owners don’t think about these issues – or even think about what will eventually happen to their business – until they decide to sell. In most cases, that’s far too late to prepare.

Ideally, a business owner should be taking steps to set up a succession plan at least five years before deciding to retire – and assemble a team of advisors that can help the owner devise that plan.

_____________________________________________________________________________

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

Become a Professional Business Broker…

The Bottom Line

Drafting a ContractSo, are more business brokers needed; professional business brokers? You bet they are!

There are a lot of buyers out there but to successfully sell a business it and its owner must be prepared. And that preparation requires time and forethought.

What’s the value of the business? What will the target price be? Will that price, if realized, be enough to support the seller either in retirement or in realizing the seller’s next venture? And as important as any question, who will assist the seller?

(How to value businesses is a topic we cover at length in our course, The Basic “How-To” of Becoming a 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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