Most people have never heard of a broker company, which is a blessing to you. It is not a big industry, so there is little competition (at the moment). But you will have to have the creativity to educate potential clients. As a broker business, you help people buy and sell businesses.
If you are contemplating going into the business brokerage profession, the outlined information would greatly aid you in making the right decision. If you have made your decision already about getting into business brokerage, welcome! This guide will provide you with all the necessary knowledge, education, and information you’d require to begin your journey to a successful career in business.
Fundamentals of business brokerage
If you feel uneasy about any of the information given in this guide, you’d need to rethink your choice of entering the business or speak with an experienced business broker about your unease. As with most sports, activities, and business endeavors, you’d need to first master the basics before you modify them. We advise new entrants to the field to learn the basics and follow them for the first few years before attempting to modify anything. What you will be studying was put together from experience, the experiences of lots of successful business brokers.
So, Until you have successfully mastered the basics and have successfully carried out a few deals, don’t tamper with what has been working for decades. After attaining success, then certainly, tamper with them all you want. However, when everything else fails, always return to the basics.
How Large is the Business Brokerage Industry
Let’s start off with this frequently asked question. There is a regular misconception that today there are more business brokers than they’ve ever been or that the country is flooded with them. Neither is true. Factually, the number of business brokers has remained arguably static over the years. In 1992, there was a high of 3,712 firms, with 1996 being a low of 2,970 firms. While in 2006, there were 3,399. All data was collected from InfoUSA (American Business Lists) for the number of business brokerage offices.
During the recession spanning from 2008 to 2011, the number of firms and people practicing business brokerage decreased visibly. Then again things sluggishly began to pick up during the same year.
And as at today, our estimate for the number of brokerage businesses is less than 3000.
The only major difference between the early years and today is the rise of sole practitioner business brokerage firms. Many of them only have assistants and are most probably much more efficient than if they had an office with agents. A recent survey indicated that even in offices with agents, the owner is usually the most productive person in the office.
A General Overview of the Number of Businesses in the U.S
There are about 335 million people in the U.S. at the moment and approximately 3,000 business brokerage firms in the country, this equals about one business brokerage firm for every 111,666 people. If we also presume that there are about 5.6 million businesses (perhaps a bit exaggerated) with a sole employee or more, that is a business for every 59.9 people and a business brokerage firm for about every 1,866 businesses. If you ask us, we’d say those are pretty great odds.
- A business for every 59.9 people
- A business brokerage firm for every 111,666 people
- A business brokerage firm for every 1,866 businesses
Since the numbers above really didn’t significantly change over the years, the above ratios won’t really change except one is into the subject. The above numbers are an approximation of the general picture of the business brokerage profession.
What does A Business Broker Do?
People who buy businesses are buying an income stream. Many people are replacing a lost or unhappy job situation. It is a significant acquisition, probably the most crucial one most people make. Bear in mind that real estate always almost retains some intrinsic value, while the value of businesses are based on the cash flow, or success of the business. No cash flow, equals very little value in nearly all cases.
The selling of a business involves multiple emotional issues. The seller most probably has put in lots of hours and effort into the business. Therefore, the decision to sell has to be an emotional one.
Business owners sell businesses for various reasons like:
- Poor health
- Partnership or marital difficulties
- Lack of business success.
In addition to the emotional troubles, the sale of businesses often involves outside professionals and advisors. Many of which are hesitant to put their “seal of approval” on any business transaction.
No matter how great the deal is, it is always safer to say “no.” The seller might also have family members to consider since lots of privately held businesses are family-owned.
The potential buyer also have lots of hurdles to overcome. Like having the necessary funds to buy the business? Do they feel confident in their capacity to handle the business? Can they persuade their family that this is a great move? And lots more.
A business broker is usually involved in all these processes. The actual process of selling is filled with what business brokers calls “landmines,” which are quietly waiting to “crater the sale.”
It can be strenuous being in the center of all this, and, yet, if the business broker does not act as the catalyst, the sale would probably never close. It is a thrilling profession. The excitement of successfully putting the deal together is just as rewarding as the fee earned at the closing of the sale.
What kinds of Businesses Do Business Brokers Sell
Here is a breakdown from a recent survey conducted by Business Brokerage Press on the types of businesses that are sold by business brokers.
- Retail 15%
- Food and Drink related 15%
- Auto related 07%
- Manufacturing 17%
- Other (coin laundry, routes, etc.) 07%
- Service (dry cleaning, quick print, video, etc.) 19%
- Distribution 11%
- Professional Practices 09%
What is the Average Price of the Businesses Sold?
Statistics show that the sale of Main Street kind businesses makes up approximately 80% of all businesses sold. This percentage wouldn’t definitely be the same for the dollar value, only for the number sold. The average price for the sale of a Main Street kind business is approximately $300,000 excluding inventory or real estate.
On the West Coast, businesses sell for about 5% more than on the East Coast with those Central States selling for approximately 5% less than the East Coast.
How Do you Get Started?
Now that you have an idea of what business brokers do and approximately how many there are, the next question should be “How can I get started in the profession?” The advancement in technology has made getting into the business seamless and has granted business brokerage practitioners a “virtual office.” There are a few options. But below are the key ones:
- You could work in an already existing business brokerage office.
- You could open your own office and work as a sole practitioner.
- You could work in a “100 percent commission” office.
- You could work alone in a “shared office” complex.
- You could work alone in a home office.
- You could open your own office then recruit and train your own agents.
Get licensed in your state
After choosing your options of how to get in, you need to get licensed as in the US 17 states require business brokers to be licensed as real estate brokers. You would also require a real estate sales license if you are coordinating the sale of any real estate as an aspect of your business brokering (in all states). Obtaining the sales license is simply going through the required classes and passing the licensing examination. From there, you can acquire more experience and then repeat the same process to move up to a broker’s license.
- The specific requirements for each level and the relevant coursework depend on your state, so check in with your state’s department of real estate to see the present prerequisite .
- You would also be required to pass a background check before getting either license.
Whats to Become a certified broker
Educated and experienced business brokers increase their reputation by obtaining certifications in the field. Especially, the American Business Brokers Association (ABBA) always bestow the Accredited Business Intermediary (ABI) certification to qualified brokers.
Also, the International Business Brokers Association (IBBA) gives the Certified Business Intermediary (CBI) appointment. Obtaining either of these means applying to the necessary organization and paying the fee.
- California and Texas have state specific organizations that provides credential to their members.
There you’ve it, folks, we’ve come to the end of this journey, we hope this guide was helpful. Good luck!