The Merit of Small Business Sales
The Merit of Small Business Sales
Selling small businesses of around $150,000 or less, is an area that in my opinion is misunderstood and even derisively maligned amongst brokers. I acknowledge that it makes sense to pursue businesses that are more consequential being positioned as the “paydirt” or “low fruit” of the broking world. Such businesses have status in the business broking fraternity. They have resources and systems with accountable personnel as a backdrop to negotiations. Albeit that most of the deals are grandstanded by the parties using their straight-jacketed respective legal and financial teams. The responsibilities, duty of care and workload are more clearly defined, understood and equitable. I concur: Great work when you can get it!
As a generalist, I tend to list businesses up to $3 Million. However, a large percentage of these listings are small business. These businesses introduce many quirks and peculiarities that require a totally different skill set than that of the “big boys”. This is where, a broker “earns their keep”. There is a need for hand-to-hand combat. The sale in this environment is truly a thrill as brokers are compelled to bring difference approaches to the table. This is where innovative thinking is demanded and true grit is called for.
Selling small businesses enables me to get close to the buyers and the sellers in a more relational way. You have a better control of the sale process and are essentially in low
competition with other professionals. Most of the small business settlements have a short cycle and the handovers are mostly uncomplicated. You are taking a tremendous pressure off the seller and giving a chance of independence for a buyer. (Even if it is just buying a job). It is my experience that helping a person out of a business that has become onerous and carnivorous to the seller, is a vital part of my service.
The sale of a business that has experienced challenges is an opportunity for the business to be reset. The buyer will be aware of these challenges but will have solutions that will bring the profitability of the business up and decrease the current risk profile. Often, the outstanding lease period becomes a major reason for selling the business. Here, the seller wants to quit the business but must address the outstanding lease liability. One example of this is that I sold a supermarket run by an inexperienced vendor for $1 including stock so that an experienced and proven buyer would assume the lease liability. The business was viable and is still operating 10 years later.
When selling a small business, the seller is most appreciative and relieved. This means that they tend to stay in contact with me for years after the sale and will gladly send referrals. The commission percentage is in the majority of cases, higher than big sale’s inevitable discounted reality.
Small business is an important part of the economy. It is a training ground or starting point for the aspirant business owner. Such business has a relatively easy entry level and if things go wrong can be recovered from. They can be a source of self-actualisation and be a great wealth builder. These businesses contribute to the needs of the community such as independence, the supply of services, making merchandise for consumption and providing a viable alternative to the welfare state.
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