‘You Make This Look Easy’ - A Look into What it Really Takes to Be a Business Broker
‘You Make This Look Easy’ - A Look into What it Really Takes to Be a Business Broker.
For better or worse (Yes, it is a type of marriage), I can call myself a business broker. I have been a business broker for over 15 years and without being too nostalgic, I periodically think about my broking journey.
One story that springs to mind is when I remember a situation where I was a much less experienced broker.
It was a Friday evening at around 8pm and I had just put the final touches of a deal together. The deal was complicated by the fact that the buyer was crossing the border between Lesotho and South Africa during the negotiations.
He was relocating to South Africa but was needing to finalise business interests before making the move permanent. It involved a payment of the purchase price in cash. (South African banks and money transfers were heavily regulated and primitive in comparison with modern-day banking systems).
This cash payment was even more complicated as there was a huge risk factor of being murdered and robbed at any stage of the transit. Furthermore, the payment was made in Pula, the currency of Lesotho and I was responsible for the money until Monday when I could with considerable risk, take it to the bank and exchange it for Rand, the South African currency.
Cash payments for a business purchase were legal but for some of the reasons already outlined: Not very common. (Furthermore, the banks charged a high levy on cash placed in the bank since they then carried the risk against bank robberies).
Another complication was that the cash transaction created suspicion and unease between the buyer and seller. Any negotiation has an element of unease as each of the parties postures to maximise their advantage, however, cash is definitely a catalyst as you will likely agree.
This was the final payment required to settle the business and pass ownership on to the buyer, the new owner.
As it was after office hours, I was sitting in the office surrounded by empty chairs and desks with my buyer. The silence was palpable but not unpleasant as we went through the finalisation of the documents and we hand-counted the cash.
When completed, I locked the money into the office safe, within another safe and I immediately extended my hand to him as an act of congratulations. He was now the new owner of his retirement business: A small but popular and dynamic bar.
We both fell silent for a period as the rigours of the previous negotiations that had exacted their toll over several months caused us to pause and reflect.
What happened next was to me, very, very interesting.
We were both high on the wonder “drug” adrenalin and he punctuated the sensory peace and reflection with the following comment.
“Ray you make this look very easy”.
This was a massive compliment to me.
He had recognised and witnessed my expertise, professionalism and duty of care but it was also a message to me, that I had achieved exactly what I had attempted to do and that was to manage all eventualities and expectations and making it much easier for the buyer and the seller and all of the other parties involved, to get the deal together.
It is important to understand that a business broker is about selling a business.
You have two primary parties, a buyer and a seller but the reach is much bigger than this as there are a lot of other parties that are involved.
If you ask me what my job as a business broker is; I would say to you that effectively, I am about managing conflicting agendas and responsibilities from different professionals such as landlords, solicitors, accountants and business advisors.
Each of these parties have their own agenda, risk management criteria and methodologies. They have their own outlook, paradigms and they have their own responsibilities that are required on their compliance spectrum.
When a broker comes along to do his/her job, the challenge is to find strategies that enable him/her to manage these personalities, issues and work within the privacy framework in such a way that they can progress the deal.
Unfortunately, in so many ways, people think of the job as a business broker, to be merely a transactional negotiation. This means that you have a buyer and you have a seller. The idea is that you should get the job done in a manner not unlike a supermarket transaction.
However, it soon becomes apparent that the nature of business, the various personalities of business owners and buyers placed in juxtaposition with other stake holders will enforce the need for a more comprehensive and involved solution.
Put plainly; to expect a straight transactional process is over-simplistic. It does not address a myriad of other elements, requirements and constraints that must be addressed in the sale of a business.
The complication is compounded as a business broker also operates in his/her professional compliance constraints. S/He by definition is the glue or fulcrum and leverage of the sale positioning.
It is also necessary that all the involved parties recognise that there are a whole lot of other requirements that are encountered in a deal to affect it. For example, a business broker although working for the Seller, must be reasonably neutral between the parties and focus on the desired outcome or sale.
The broker too must be driven by processes due to legal requirements and the interactions between people with different levels of expertise and the business as an entity.
The broker must avoid at all costs, the handicap of compulsion, bullying and fear as a methodology.
The aim is a Win-Win environment or as it is traditionally stated a “Willing Buyer and a Willing Seller”.
About the author
As a previous multiple business owner in South Africa, Canada and Australia, Ray has an exceptionally high level of expertise when it comes to knowing ...