Why You Need a Dedicated Business Broker

Why You Need a Dedicated Business Broker


Working with a dedicated business broker versus a generalist delivers better outcomes for both buyers and sellers while also bringing more value in many ways, including: 

  • An in-depth knowledge of their market, allowing dedicated brokers to accurately value your business and provide buyers with critical information about the business model. 

  • A built-in customer base and knowing who your ideal buyer is and how to find them. 

  • Specialized vendor networks and connections with the right attorneys, contractors, and lenders in your industry. 

So you’ve decided to sell your business. You’re not alone. According to BizBuySell’s annual insight report, 9,746 closed sales were reported by business brokers operating through their platform in 2019. While the online marketplace for available businesses says this number represents a 5.5% decrease from closings reported in 2018, these are still impressive numbers because closings for 2018 topped BizBuySell’s historical records — indicating that more and more business owners are electing to change course. You might be considering doing the same.

Maybe it’s time to retire. Or, perhaps you want to move on to other ventures. Either way, you need to turn all those years of blood, sweat, and tears into some cash you can put in your pocket. Unfortunately, selling a business isn’t like selling your car. You can’t post your business on Craigslist, take a few calls, and then haggle with someone in your driveway over the final sale price. It’s much more complicated than that. 

Unlike cars or houses, which are priced by the broader consumer market, there are many different ways to value a business. Not to mention factors like cash-flow, profit margins, depreciation, debt, and a dozen other considerations that could transform a seemingly profitable business into a money pit. This is why many business owners turn to business brokers for help. Not only can they help expedite a sale for possibly more profit, but they also allow the business owner time to focus on their own businesses while they handle the nitty-gritty details of the transaction or what comes before that during the marketing process. 

However, with 11,411 business brokers to choose from in the U.S., simply knowing where to go can be overwhelming. And, the options will only continue to broaden since this statistic from IBISWorld was paired with the statement that the business brokerage industry saw an average growth of 2.4% from 2014 to 2019. 

A key way to narrow down the widening pool of options is to seek out brokers who specialize in your specific industry. Before examining the key differentiators of specialized brokers, let’s first examine the generalist’s role to better understand the business brokerage industry overall. 

For years I worked as a general business broker, helping people buy and sell dozens of different types of businesses. One month I might be selling a software company, the next month a restaurant chain and the month after that a manufacturing company. As a result, my business was very wide, but not very deep. Every time a new client walked in my door, I made another dive into a new industry as I attempted to learn as much as possible. 

This learning curve had a significant impact as I worked to determine a business’s profitability. Sales often get held up in due-diligence as the two sides work towards an agreed-upon set of financials. Whenever I worked within a new industry, I’d have to rediscover what is normal, abnormal, and exceptional to set an accurate value on a business. This slowed the process down tremendously and limited my ability to increase my own transaction volume. 

These factors all combine to make general business brokering a complicated, time-consuming process. However, this all changed for me in 2012 when a new opportunity prompted me to specialize exclusively in brokering FedEx routes.  
 

Now that I’ve had the opportunity to work as both a general and dedicated business broker, I see the value that comes with specialization.  

Deeper knowledge

Dedicated business brokers are specialists who develop an in-depth knowledge of their market. That makes it easier for dedicated brokers to value a business accurately — which speeds transactions — and allows them to provide buyers with critical information about the business model they’d like to buy into. Using a dedicated business broker in your industry will give you a level of expertise that generalist brokers simply don’t have — and can’t obtain — without specialization. 

A built-in customer base

There’s a perfect buyer for every business. However, finding them is sometimes challenging. When you’re a general business broker, you’re continually looking for a new group of buyers to fit whatever business you’re selling at the time. Dedicated brokers work differently. They know the ideal buyer and how to find them. As a result, they can navigate the sales cycle much quicker — allowing both the buyer and the seller to get back to their lives sooner. 

Specialized vendor networks

Every industry has its unique quirks. For instance, when buyers are interested in purchasing a FedEx route, there aren’t many tangible assets banks can look at to justify the loan amount. This situation, which doesn’t exist in other industries, requires a lot of lender goodwill. Fortunately, I’ve developed relationships with lenders who understand the business and are comfortable working with qualified buyers. General brokers won’t always understand industry-specific nuances and lack connections with the right vendors like attorneys, contractors, lenders, or other professionals that can help close a sale.

Dedicated brokers are also able to deliver added value in ways that aren’t easily quantifiable. As one example, I’ve invested tens of thousands of dollars to rank near the top of Google’s first page for search terms that will only benefit a specific group of buyers and sellers. Only specialized business brokers are able to invest the money and time necessary to better serve their clients within any given industry. Due to the nature of generalists, going the extra mile and building out systems is just not possible. So, in many cases, would-be buyers and sellers are on their own to secure financing and navigate each industry’s challenges. 

While I was an excellent general business broker, my results exploded when I decided to specialize. This experience convinced me that specialization delivers better outcomes for both buyers and sellers, while also fueling improved results for brokers. So if you’re selling a business, my advice is to seek out brokers with in-depth knowledge of your industry. They’ll provide more accurate valuations and possess knowledge and skills you might not know you need. 

If you’re wondering where to find these experts, the first place to start looking might be the easiest place to begin — among the industry connections you’ve undoubtedly worked hard to maintain as you’ve built your business. Ask your peers for referrals. Seek out those who’ve sold similar businesses to yours and ask if they were happy with the sale process and inquire about who they used to broker it. You might be surprised by the extra nuggets of advice you glean along this discovery process. If your referral network doesn’t turn anything up, a quick search on BizBuySell under your industry might bring you some direction. And don’t forget about the powers of our handy friends — Google and LinkedIn. Active brokers in your industry should be utilizing those platforms to show up for search terms related to your industry. 

And, if you are on the other side of the transaction working as a business broker, I strongly recommend looking for industries in which you can build your expertise. By leveraging the right opportunity, you could transform your career in the same way I did.

 



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Paul Taka

Paul Taka