Business Broker
Business brokers bring together a client who
wants to sell a business with someone who wants to buy a business. They
generally focus on businesses with a price of under $1,000,000,
exclusive of any real estate the business owns. Business brokers
function much like real estate brokers; in fact, in over twenty states,
business brokers are required to have a real estate license; some
states require a business broker's license as well.
Business brokerage is a growing home-based business. According to the
International Business Brokers' Association, 40 percent of its 700
members in the U.S. are one-person businesses and 200 out of the 700
are specializing in merger and acquisition work. The U.S. Department of
Commerce estimates that there are sixteen to eighteen million
businesses in this country and that 20 percent change hands every year.
Fortunately, 70 percent of these are priced under $500,000, so there
are plenty of opportunities for business brokers. One reason for the
high turnover of businesses, according to Inc. magazine, is that more
people prefer to buy an ongoing business because failure rates for
businesses that are bought are lower than those for businesses started
from scratch or even franchises.
Because they often operate under real estate laws, brokers must
represent one side or the other. Ninety-nine percent of business
brokers choose to represent those who are selling a business. The most
successful home-based brokers specialize in selling a particular size
or type of business, such as restaurants, bowling centers, medical
practices, or businesses in a particular geographic area.
Home-based business brokers can make a profit with a relatively small
number of sales per year. Whereas a small two-to-three-person brokerage
might need to make twenty sales annually in order to stay afloat, a
home-based solo broker probably can manage quite well with between ten
and twenty sales per year because of lower operating expenses. However,
Julie Johnson, Vice President of Venture Resource, Business Brokers,
states, "Making good money as a general business brokerage is a matter
of numbers, meaning lots of listings. This is because only 25 to 30
percent of listings will actually sell."
Finding people who want to buy a business is not difficult. Brokers
tell us that advertising in the business-opportunities sections of
newspapers draws six to twelve inquiries per ad. Nine out of ten people
who buy businesses are first-time buyers. Tom West, owner of the
Business Brokerage Press, says business brokers spend about 40 percent
of their business time out of the office calling on sellers to get
listings; 40 percent dealing with buyers; 10 percent working with
outside professionals such as attorneys and bankers; and 10 percent
doing analysis.
A growing niche in business brokering comprises those specializing in
mergers and acquisitions (M&A). In fact, Julie Johnson states,
"Someone doing mergers and acquisitions can more easily make it as a
sole practitioner than general business brokers because of the volume
of listings needed."
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