Business Brokers

My bro-inlaw is out of work now for a couple of months. He's dealing with some health issues and finally getting them squared away. My question is this: He's got an accounting degree but he's looking into an offer that came to him from a business broker. Commission only selling other people's biz. The franschise this guy owns is the #1 business selling franchise in the US. Seems like a good deal. BUT I'm just wondering how tough this business is being all commission. It seems to me business's don't just sell everyday. Are there any business brokers out there? Or someone with experience in this field? thanks... Ron

Hi,

Since no one took a stab at this I'll give you my 2 cents...

I seriously looked into the opportunity a few years back and here's my impression of it.

My background was in Economic Development and I've seen just about every kind of transaction you can think of between businesses, including the sale of various businesses. I was also a licensed Real Estate Broker and packaged a few 'businesses' for sale.

First, like anything else, if you want to make it in that kind of business you have to be able to sell yourself and your services. Nothing sells by itself. If your bro-in-law is an accountant and doesn't have sales experience he will have a tough time adjusting- IMHO.

Second, if he's not a licensed real estate agent or broker he'll have to bring someone into the deal (in most states) to handle just the real estate side of the business transaction... which could seriously cut into his commissions.

Third, most businesses being listed and sold by 'business brokers' are in the Mom and Pop category with the majority selling in the $20,000 to $100,000 range-- mostly retail establishments and very small manufacturing co's. Which is fine, but the commissions are small.

Fourth, don't expect to see a commission check for at least 6 mo's (if you're lucky). A lot of businesses being sold are 'seller financed' and in some cases your commission is 'deferred' until the owner gets a certain percentage of the sale price. But also keep in mind that businesses take longer to sell than say, residential real estate, etc...there just mosre involved in a business sale, including the due diligence and packaging of the business for sale.

Fifth, the really big money is in the hands of M&A (mergers and acquisitions) Specialists who handle the sale of businesses $1,000,000 and up.

I never really got into it that much. Most 'business brokers' are commercial real estate brokers who do it on the side.

If you live in a large metro area, he might have better luck in business brokerage. When I live in Boston, I know there were some that really thrived.

But the area I'm in now (upstate NY) is pretty small by comparison and there isn't much demand for buisness brokers.

Anyway... those are just my observations and opinions...I'm sure others have a different point of view...

-Dave


The #1 Website for Digital Product Creators and Entrepreneurs

Thanks for the input Dave. I'm not sure what he's going to do. Times here are tough. I looked at the list of business's he got from the broker. There are 2 or 3 over 1.5 million. Ten or so from $500,000 to 1 mill. About 10 from the $100,000 - $500,000 range and the rest (about 5) under $100,000. He does have sales experience. BUT like you stated it takes a while to get your feet wet and I'm not sure if he can go 6 months to a year without income from this job. I use to sell real estate and you would see people coming in thinking they were going to make a killing in a couple of months. You need at least 6 months (preferably a year) worth of cash reserve to make it in the real estate business. I suspect its about the same in the business brokerage biz. The only thing I can do now is pray the he makes the right decision and give him what guidance I can. Anyway I appreciate and value your input. Thanks... Ron

> Hi,

> Since no one took a stab at this I'll give
> you my 2 cents...

> I seriously looked into the opportunity a
> few years back and here's my impression of
> it.

> My background was in Economic Development
> and I've seen just about every kind of
> transaction you can think of between
> businesses, including the sale of various
> businesses. I was also a licensed Real
> Estate Broker and packaged a few
> 'businesses' for sale.

> First , like anything else, if you want to
> make it in that kind of business you have to
> be able to sell yourself and your services.
> Nothing sells by itself. If your bro-in-law
> is an accountant and doesn't have sales
> experience he will have a tough time
> adjusting- IMHO.

> Second, if he's not a licensed real estate
> agent or broker he'll have to bring someone
> into the deal (in most states) to handle
> just the real estate side of the business
> transaction... which could seriously cut
> into his commissions.

> Third, most businesses being listed and
> sold by 'business brokers' are in the Mom
> and Pop category with the majority selling
> in the $20,000 to $100,000 range-- mostly
> retail establishments and very small
> manufacturing co's. Which is fine, but the
> commissions are small.

> Fourth, don't expect to see a commission
> check for at least 6 mo's (if you're lucky).
> A lot of businesses being sold are 'seller
> financed' and in some cases your commission
> is 'deferred' until the owner gets a certain
> percentage of the sale price. But also keep
> in mind that businesses take longer to sell
> than say, residential real estate,
> etc...there just mosre involved in a
> business sale, including the due diligence
> and packaging of the business for sale.

> Fifth, the really big money is in the
> hands of M&A (mergers and acquisitions)
> Specialists who handle the sale of
> businesses $1,000,000 and up.

> I never really got into it that much. Most
> 'business brokers' are commercial real
> estate brokers who do it on the side.

> If you live in a large metro area, he might
> have better luck in business brokerage. When
> I live in Boston, I know there were some
> that really thrived.

> But the area I'm in now (upstate NY) is
> pretty small by comparison and there isn't
> much demand for buisness brokers.

> Anyway... those are just my observations and
> opinions...I'm sure others have a different
> point of view...

> -Dave

Perhaps he could arrange to get a finder's fee,
much like Jim Straw has done and teaches in his
course.

> Thanks for the input Dave. I'm not sure what
> he's going to do. Times here are tough. I
> looked at the list of business's he got from
> the broker. There are 2 or 3 over 1.5
> million. Ten or so from $500,000 to 1 mill.
> About 10 from the $100,000 - $500,000 range
> and the rest (about 5) under $100,000. He
> does have sales experience. BUT like you
> stated it takes a while to get your feet wet
> and I'm not sure if he can go 6 months to a
> year without income from this job. I use to
> sell real estate and you would see people
> coming in thinking they were going to make a
> killing in a couple of months. You need at
> least 6 months (preferably a year) worth of
> cash reserve to make it in the real estate
> business. I suspect its about the same in
> the business brokerage biz. The only thing I
> can do now is pray the he makes the right
> decision and give him what guidance I can.
> Anyway I appreciate and value your input.
> Thanks... Ron