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What Do Business Brokers Do? (excerpted from Volume 8, Issue 13, IBBA Weekly Communication for April 8, 2008)

Shari Bayne, CBB, CBI
Vanguard Resource Group, San Diego CA
Over the years, I’ve run into many women who are intimidated by the fact that the majority of business brokers are male. They seem to think that just because they are female, they are at a disadvantage in business brokerage. As a result of this widespread point of view, “Women’s Forums” have been formed in both IBBA and CABB; forums created, I guess, to help us poor, disadvantaged female brokers compete with the vast army of bullying male business brokers.

Enough of this nonsense. Is business brokerage really different for women than for men? I’ve given this much thought, and after looking back at my experiences in this industry, I’ve come to the conclusion that women actually possess more innate skills for successful business brokerage than men do.

I’ve been asked by many people, what it takes to be a successful business broker. We all know there’s no college degree that you can obtain for this career, so what does it take to be successful? By looking at what we do every day, we can get insight into what it takes to be successful. Here’s my list of what a business broker does:

Prospects for listings

Presents brokerage services to business owners

Assists the business owner with appropriate pricing

Lists the business for sale

Prepares a professional offering package to marketplace

Interviews and qualifyies potential buyers

Presents the business to potential buyers

Assists with an offer to purchase

Helps the business owner to evaluate offers

Organizes the due diligence process

Follows through to a success closing and transfer

To sell a business, the broker must first find a business owner who wants to sell; convince the owner that they have the ability to assist them; help the owner price the business; prepare the marketing package; and, then market the business to prospective buyers. When a buyer has been identified, the broker should be able to assist the buyer and seller in the negotiation of a purchase contract and assist both parties in the due diligence and closing procedures. All of this can be done successfully if the broker has the ability to listen to and understand the motivation of both the seller and the buyer. And ladies, let’s face it, we are the communication experts. While our male counterparts may be able to grunt and groan out the latest scores in the NFL better than we can, we are the masters of person-to-person talk.

So, since we know we’re the best communicators out there, let’s look at the entire skill set needed for business brokerage to see if we lack anything in other areas. Here’s my list of needed skills:

Sales and marketing skills

Persistence

People skills (communication, empathy and listening)

Problem solving

Honesty and trustworthiness

Organization skills and attention to details

Life experiences and a willingness to learn

Every broker should implement a marketing plan to target potential business sellers, and persistence in required; the phone won’t ring simply because you have made the choice to become a business broker. If there are problems with the business, the broker should be able to understand them fully to ascertain whether or not these problems can be overcome. The broker should possess the quality of honesty, and use it to confront issues and resolve them. And, finally, all successful business brokers must have organizational skills and be able to pay close attention to the details of any deal.

No offense, men, but I think that the typical woman in business excels in persistence, honesty and organizational skills.

It’s also certainly true that a successful business broker should have a background in business ownership, business management, business financial management and/or business sales and marketing. Fortunately, our society has given us women many opportunities to gain these business skills over the years. And, in addition, there numerous opportunities for anyone – male or female – to get training in key areas of business brokerage through CABB and IBBA. So, if you are a woman who might has excellent sales and marketing skills, but don’t know much about business financials or business management, the doors are open for you to get training.

So in closing, I have just this to say: Ladies, start your engines! Let’s go out and show the industry how good we are at being successful business brokers.

This article was excerpted from the blog ran by Richard Parker of Diomo Corporation. It makes a great deal of sense.

You can send Richard your questions or otherwise contact him by visiting the Diomo Corporation website and clicking on “Contact”.

Using – The B.O.S.S. Theory – to Quickly Evaluate a Business
It is often difficult in the early stages of reviewing a potential opportunity (especially for first-timer business buyers) to really determine if it is a good business. There may so much information to digest in some cases that it becomes overwhelming, while with other listings, the complete lack of any comprehensive detail makes the task almost impossible.

Having purchased ten businesses, I have developed a regimented set of guidelines (‘The B.O.S.S. Theory’) that I follow that allows me to quickly access any opportunity. While my rules may not be completely applicable to you, they will, nevertheless, provide you with an excellent idea of how to go about the review process.

Before going into the specifics, it is important that any buyer understands that you must divide your evaluation in two distinct compartments. The first is the undeniable data, or what I like to call the ‘deal facts’. These are all of the parts that are black and white.

For example, the financials of a business fall into this category. Although there may be some discussion or debate regarding add-backs, numbers don’t lie. It is plain old mathematics. There’s no gray area, or shouldn’t be. Another example would be licensing: if the business requires a specific skill-related license that you must hold (i.e. engineering degree, general contractor license, etc.), or having a government license of sorts, then these are again black and white issues that are simple to evaluate.

The second compartment is actually the bigger issues that come into play in all of the gray areas where ‘The B.O.S.S. Theory’ can helpful. When I look for a business, here’s what I want in place amongst the less than obvious attributes:

Bland – Means it ‘flies under the radar’ and is less vulnerable to mass competition
Operationally Sound – Fundamentals in place (not a turnaround)
Sustainable – No looming threats that could impact the historical financials
Scalable – Identifiable growth opportunities.

Here are the more descriptive points of each:

Bland

I am not a fancy guy. I like plain vanilla businesses. The more bland, boring and un-sexy it is, the happier I am. These businesses generally attract less attention (competition and otherwise) and you can plod along with great results and effectively build them while nobody is looking. Further, they generally slip by the average business-buyer who tends to look for ‘hot’ industries or glamorous businesses. I have always subscribed to the notion that I don’t need the fame; I need the money.

Operationally Sound

One of the greatest aspects to buying a good existing business is that you will immediately benefit from having all of the necessary fundamentals in place. Ideally, you should get the keys on Monday and take a paycheck on Friday. With a good existing business, the infrastructure is in place. There are trained employees, functioning systems, reliable suppliers and a stable of customers. The phone will ring as soon you open the doors and the business is already humming. In other words, it is the complete opposite of a start-up and that is precisely what you want.

Sustainable

When you buy a good existing business, a great part of the allure is being able to count on the continuation of the past historical financial activity and profitability. That is exactly why the purchase price will be a multiple of that figure. You want to be certain that there are no known looming threats that can adversely impact the numbers. You want them to continue at least at the recent levels and definitely not decline.

Common examples that can influence the past financials can be customer concentration issues where a disproportionate amount of volume rests in the hands a few clients or a business that relies heavily on location to drive its revenues yet there is a short lease that cannot be extended.

In the former example, if one or two of the customers stop buying, the business can face a massive and potentially unrecoverable situation. Likewise with the premises, if you can’t continue to occupy a location long-term that drives customers through the door, you may be out of business very quickly after getting into it.

Scalable

While it is crucial to have a sustainable business model to build upon, you want to identify and exploit realistic growth opportunities. These are not the ‘pie-in-the sky’ ideas that many delusional business buyers imagine. You want to be satisfied that there are concrete initiatives you can take to grow. For example, opening up a second location, expanding the product line, or acquiring other complimentary businesses. These are real objectives.

Do not get lulled into believing all of the wonderful recommendations the seller presents that may make it seem easy to grow. They may suggest you hire more salespeople, attend trade shows, advertise more or other ‘brilliant’ ideas. While some may be good, the truth is they have likely attempted most of these things or if they are so easy why haven’t they done it? It may very well be that growing the business is not as simple as they may articulate.

On the other hand, if you subscribe to ‘The BOSS Theory’, then identifying and acquiring a good business that can become great with you as the owner, is a lot less difficult that you may imagine. You can send Richard your questions or otherwise contact him by visiting the Diomo Corporation website and clicking on “Contact”.

Help Wanted:

Internship: Junior Associate

DESCRIPTION:

King & King Business Advisors is seeking a home-based intern to support experienced deal-makers with client marketing, research, and documentation tasks. To accomodate initial orientation and training intern candidates should reside in the Washington-Baltimore area.

Interns will assist the firm’s professionals involved with evaluation, marketing, and negotiation of seller client
engagements and buyer representation projects. This position would be excellent experience for a qualified student seeking a career in investment banking, financial business management, or business valuation analysis. The intern’s primary career focus should be business finance, not accounting or administration.
Other tasks will include maintaining client and prospect database records and file content, and supporting various levels of Seller and Buyer research projects.

Tasks involve critical activities which can have an impact on the success of a business buy/sell
(merger or acquisition) transactions. The intern will gain exposure to a very wide variety of business and industry environments and to the mid-market merger and acquisition industry.

QUALIFICATIONS:
• Minimum of three years’ college completion
• Currently enrolled in business, finance, entrepreneurship and/or law curriculum
• Understanding of business finance; financial statements and analysis and enterprise valuation concepts
• Excellent business English communication skills: verbal and written
• Strong telephone personality and usage skills
• Intermediate to advanced computer skills requiring MS Word, MS Outlook and MS Excel.
• Strong internet research skills
• Maintenance of strict confidentiality and ethics standards
• Previous work in a professional environment conforming to professional conduct standards.
• Use of written & electronic communications media to communicate with clients and customers effectively

Length of internship: Six (6) weeks
This is a part-time non-paid intern position.

Contact:
James M. King, President
King & King Business Advisors
(410) 303-6378
jking@KingandKingLLC.com
Application Method: Telephone or ? via Email to:

I encourage all of you who are interested in buying a business to check out the information on SBA loans that can be found on the Small Business Development Center Network website http://www.sbdc-wmd.com

Below you will find some information on the Low-Doc SBA loan program.

King & King can help you find the right business and get it financed.

SBA’s LOW-DOC PROGRAM

Deals Under $150K
Principals can not have any Police Record
Guaranty Fee – 2-3% of Guaranty Amt – paid by Customer (can be financed)
No Set Equity %
Can’t use for refinancing old debt
2 Page Application
SBA agrees to notify the bank of approval/denial within 3 days of submission
Documentary Requirements still require Proformas, Personal Financial Statements, and Tax Returns
Bank Initiates Request to SBA – Bank Must Be “On-Board”
Interest Rate Charged – Bank’s Market Rate with the following caps:
7 yrs & up – NY Prime plus 2.75%
Less than 7 yrs – NY Prime plus 2.25%
Loans under $50K may carry a higher Interest Rate

For more information please call us or send an email to jking@kingandkingllc.com.

We have openings for business brokers. We will train you for your new career in business brokerage.

King & King can help you to use the Patriot Express program to achieve your entrepreneurial goal to purchase a business. If we don’t have your business in inventory we will coop with other brokers to find you a business or we will launch a direct mail/telephone campaign to find you a business to buy. If you have a business for sale we will market your business to Patriot Express candidates. Read this article below from the Office of Small Business Administration:

SBA’s Patriot Express Loan Initiative Over $100 Million and Counting

More Than One Thousand Loans Go To
Military Service Members, Veterans, and Spouses

WASHINGTON, D.C. – In the eight months since its launch, the U.S. Small Business Administration’s Patriot Express Loan Initiative has produced 1,007 SBA guaranteed loans amounting to more than $100 million, with an average loan amount of nearly $101,000, the SBA announced today.

“Each day sees the number of Patriot Express loans rise and the number of participating lenders, currently more than 773 nationwide, rise as well,” said
SBA Administrator Steve Preston. “We thank these lenders, and those coming
aboard, for their special efforts on behalf of entrepreneurial veterans and others in our military community.”

The Patriot Express initiative builds on the more than $1 billion in loans SBA guarantees annually for veteran-owned businesses, and the counseling assistance and procurement support it provides each year to more than 100,000 veterans, service-disabled veterans and Reserve members.

“We have received a remarkable amount of support for Patriot Express from the lending and military communities since we launched the program,” said Preston. “It is important for us to continue to support our servicemen and women. I am particularly appreciative of the news media’s efforts in big cities and small towns alike, to get the word out on this vital program that helps vets and our military community as it grows day by day.”

Patriot Express is a streamlined loan product based on the agency’s highly successful SBA Express Program, but with enhanced guaranty and interest rate characteristics.

Loans are available up to $500,000 and qualify for SBA’s maximum guaranty of up to 85 percent for loans of $150,000 or less and up to 75 percent for loans over $150,000 up to $500,000. For loans above $350,000, lenders are required to secure all available collateral to back the loan and may obtain collateral for smaller loans depending upon individual bank requirements.

Interest rate maximums for Patriot Express loans are the same as those for regular 7(a) loans: a maximum of Prime + 2.25 percent for maturities under seven years; Prime + 2.75 percent for seven years or more. Interest rates can be higher by two percent for loans of $25,000 or less; and one percent for loans between $25,000 and $50,000.

Patriot Express is available to military community members including veterans, service-disabled veterans, service members leaving active duty, Reservists and National Guard members, current spouses of any of the above, spouses of active duty members, and the widowed spouse of a service member who died during service, or of a service-connected disability.

The Patriot Express Pilot Loan Initiative can be used for most business purposes. Details on the initiative can be found at www.sba.gov/patriotexpress.

Patriot Express loans have been approved in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and Guam and currently range from $5,000 to $375,000 in individual loan amounts. After loan applications are approved by the bank, they are submitted to SBA for approval. Most applications are approved by SBA within 24 hours.

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Editor’s Note:
1. Web-based press kit:

2. List of Approved Patriot Express Lenders: