Business brokers offer a number of services to potential buyers and sellers of small companies:
* They analyze the business, including sales, debts and profits, to determine the company’s fair market value. Often they develop a marketing program geared to the specific business.
* They verify the buyer’s fiscal status, including screening financial capability.
* They try to determine the buyer’s specific needs, even tiny details like what the person likes to wear to work.
“Some are buying cash flow, others are buying a lifestyle, some are buying a location,” said Don Taylor, owner of VR Business Brokers in Newport Beach.
“At least 90% of the buyers don’t know what they want, they call in for a dry cleaners and end up with a doughnut shop,” Taylor said. “Kids don’t grow up saying, ‘I want to own a doughnut shop.’ A broker brings people to the seller that the seller would never get on his own.”
Business brokers typically collect a commission of 10% to 12% of the value of the sale, or charge a minimum fee of $8,500 to $10,000 for each transaction.
Transactions handled by business brokers average $240,000, according to the International Business Brokers Assn., and sometimes go as high as $20 million.
Several states, including California, require business brokers to have real estate licenses--a provision many brokers feel is unnecessary.
“This allows anyone with a real estate license to sell a business,” said Terry Hogan, president of the 300-member Society of Business Brokers and Intermediaries, a statewide group based in Glendale. “And selling a business is not like selling a house, which can be described by location and the amount of bedrooms. A business is more complicated.”
Hogan’s group hopes to create a California accreditation program for business brokers so that potential buyers and sellers can distinguish between people who sell businesses full time and those who simply hold real estate licenses.
“This is an embryonic profession,” Hogan said. “We have to do our best from the inside to weed out the unprofessionals.”