Recently I was speaking to a person thinking about selling his business and wondering what he would do after selling it. He asked me, "How does someone become a business broker?" After talking it over, I said I would send him my thoughts, because our firm is growing and we are always looking for qualified experienced business professionals to become business brokers.
I define business brokering as the representation of business owners (and prospective owners) in the sale and purchase of private businesses in the small business arena, typically selling for under $2 million, and in the lower-middle-market, typically selling at $2-$20 million.
Here's what I think are the most important elements to becoming a successful business broker. Not all are necessary, but having most of them helps a lot.
Education. While a basic college education is the norm, preferably but not necessarily with business and/or accounting courses, years of actual business experience can be just as valuable. An MBA is always a plus; but, surprisingly, not all that critical. One should know (or be willing to learn) how to read and interpret profit and loss statements, balance sheets, and tax returns.
Training. Recognizing that being a business broker is really a unique profession with its own particular policies and procedures, a prospective business intermediary should obtain the most comprehensive training possible. There are courses available through the various business broker organizations and groups.
Mentoring. Having an experienced supervising broker who is generous with time, attention, and support is critical to “learning the ropes” in the real world.
Patience. Business deals take time, and commissions are earned when the deal closes; sometimes it can take up to a year. (On average, it's probably seven to nine months.) A new business broker associate needs to be willing to commit time and effort in return for substantial rewards in the long-term.
Business Ownership Experience. While definitely not essential, this can be very helpful in empathizing with the seller, and understanding the financial, operational, and emotional aspects of business ownership and business ownership succession.
Communication Skills. The broker associate must be able to speak, write, and comprehend clearly and effectively in communicating with business owners, prospective buyers, accountants, lawyers, landlords, and lenders.
Multi-Tasking Ability. Analyzing a business one minute, negotiating a transaction the next; networking today, showing a business tomorrow.
Self-Discipline. An associate business broker is an independent contractor sales agent who must be a self-starter with excellent time management skills.
Integrity and Fairness. Business brokers are entrusted with often the single most significant investment of the business buyer’s or seller’s life; with that trust comes the fiduciary and ethical obligations of honesty and fair dealing, without reservation.
Empathy and Effective Listening. Business transactions are not just about the finances. They involve real people and multiple stake holders. A business broker needs to be attentive to both the rational and the emotional, and be able to work as an effective deal maker, with sensitivity to the legitimate interests of all the parties involved.
"Fire in the Belly." This speaks for itself – passion, ambition, drive, energy, enthusiasm, dedication, perseverance. Also known as “grit” and “chutzpah.” (And, a good sense of humor doesn't hurt.)
Business brokers operate similar to real estate brokers. In fact, in California, anyone who engages in the sale of a small business must obtain a real estate agent license and work under the supervision of a real estate broker, even for transactions with no real estate involved, as is usually the case. Prospective sales agents need to go through an online real estate training program and become licensed by the Bureau of Real Estate before representing a buyer or seller.
The various business brokerage firms have different approaches to the "division of labor" between the broker and the agent. In our organization, we typically handle the marketing and the "back office” details, with the agent"’ emphasis being on client contact, listing, selling, and closing.
Some may try to start out on their own; but, there are many hurdles to be overcome which are best handled by working with an experienced broker and an established office. The harsh reality is that over half the businesses that list end up not selling. The business broker who is inexperienced or desperate may take listings that are from businesses that are not ready to be sold, or have fundamental flaws, or are over-priced; and, then the broker squanders precious time and resources trying to sell the "unsellable."
For the right person, a career in business brokering can be exciting, challenging, and stimulating. It offers in-depth exposure to diverse business enterprises and myriad personalities. And, done correctly, it can be financially rewarding.