Become a Business Broker Outlook

Published: 11th December 2009
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Become a Business Broker Outlook

There are in excess of 20 million small businesses in the USA; this is a testament to the American Dream of owning a small business being alive and well. However, what happens once the business owner decides to retire, or work on another direction?

This is where a Business Broker would be contacted, just like when selling your home you call a Real Estate Broker, when you are considering selling your business you should call a Business Broker. While a Real Estate Broker is educated in valuing and selling real estate, a Business Broker is trained in valuing and selling a business, and there is a great difference.

While many businesses are listed for sale by Real Estate Agents, I believe this is because of the massive number of Real Estate Agents (over 2 million) versus the low number of business brokers (about 10,000). Many business owners do not even know that there are business brokers who specialize in selling small businesses!

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Most Real Estate Agents price the business based on the real estate value that the business occupies. Here is the predicament with that, imagine a business that makes $50,000 annually is in a $3 million building. Now lets say a buyer can receive a loan at 6% interest only for five years, debt service on $3 million at 6% comes to $180,000 annually. So, you have $50,000 available annually to make payments on $180,000 annually in debt. Obviously, a business only bringing in $50,000 can not make payments on a $3 million loan.

Now, let's try it the other way, a business brings in $3 Million annually, in a building that is valued at $50,000. Supposing the same 6% interest only loan, annual payments would be $3000, leaving $2,997,000 in profit after subtracting the $3000 in yearly payments. Should you sell it for Real Estate Value, of course not!

While the 2 situations above can look obvious, I come across the first situation all the time. I am not suggesting the 'Building' is not worth $3 million in scenario one. What I am saying is that the Seller and Realtor have a glitch since the business can not support the real estate it is in.

There are actually a few somewhat simple solutions to scenario one. They could just shut down the business and sell the real estate for $3 million, or they could move the business to a less expensive building, then sell the original real estate for $3 million, and then sell the business based on cash flow in the new building and actually make more than the original $3 million building value!

A clever Business Broker can help you asses the value of your business, they can help you assemble all the financial information a buyer, and most importantly a buyers bank will need. They can package information about your business to show it in its best light as the business opportunity it is. They can make suggestions on how to put together the sale so it works for both the buyer and seller, and they market your business and allow you to continue business as usual until the sale happens.

Become a Business Broker at

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