Business Brokers Generally Do Not Specialize
Hiring the right business broker to sell one’s business is a very serious task. The seller of a business has often devoted the majority of their working life to the business, and rightfully expects the broker entrusted with the sale to be well informed and knowledgeable about the industry in which the business operates. While a professional business broker should have specialized knowledge about the industry and business sales practices within the industry, business brokers almost never exclusively sell only businesses from one specific industry.
Why Business Brokers Do Not Specialize
A business broker specialist that exclusively sells businesses in only one particular industry can not function or derive enough income from only selling local businesses. There are simply not enough local businesses in one industry to make it worthwhile for a business broker to limit themselves by only selling (for example) restaurants. Such business brokers are almost always part of a national or regional brokerage company which provides no meaningful benefit to a local business owner in Palm Beach County, Florida. Moreover, the advertising means by which business brokers find the vast majority of buyers (see bizbuysell.com) is available to any and all business brokers.
Specialized Knowledge is Critically Important for Business Brokers
While business brokers do not generally limit themselves to selling businesses only from one particular industry, business brokers should possess specific knowledge for each industry in which they sell businesses. Such industry-specific knowledge includes the typical challenges faced by business owners within specific industries, how formal due diligence is typically conducted within specific industries, and the relative business valuation multiples that specific industries have in comparison with one another.
Specialized Knowledge of Restaurant Sales
Restaurant sales are quite common in the business brokerage field, but it does require a business broker with specialized knowledge about the restaurant industry to effectuate a smooth sale. For example, it helps to know what the COGS (Costs of Goods Sold) percentage is for the restaurant (typically 30% of sales), whether the lease allows the buyer of the restaurant to change its concept or menu, and how the monthly rent compares with the monthly sales (typically should be ten percent or less). Moreover, restaurant sales often involve the buyer conducting formal due diligence (at least in part) by personally observing customer traffic and sales.
Specialized Knowledge of Hair or Nail Salon Sales
- In the salon industry, the most critical factor as far as the valuation of a salon is the volume of sales from stylists who are not the owner and who will stay after the sale occurs.
- Therefore, it is essential for a business broker selling a salon to properly gather and analyze the salon’s financials, determine the actual owner benefit derived from non-owner stylists’ sales, and then assigning a multiple (typically 2-4 x) to the owner benefit.
- The key to pricing a salon is keeping mindful of the fact that buyers will be most concerned with whether or not the stylists (and clients) will stay after the sale, and whether the owner benefit will be the same for the buyer as it was for the seller.
- The more likely the stylists are to stay and the stronger the location and physical assets of the salon, the higher the multiple the salon will receive.
Specialized Knowledge of Laundromat Sales
Laundromats are viewed as stable and easy to operate ‘cash-cow’ businesses for many business buyers, and as a result laundromats are highly sought after and receive premium valuation multiples in South Florida. When it comes time to sell laundromats, the main issue to confront is determining the actual sales and profits of the laundromat. This is because the cash nature of the business usually means that there are often unrecorded sales. The best way to verify the laundromat’s sales is often by reviewing the utility records of the laundromat. The laundromat’s monthly water or gas usage often will allow a knowledgeable buyer to approximate the usage of the machines and therefore the sales. Therefore, a business broker with specialized knowledge about the laundromat industry will be able to provide the buyer the utility bills and enable them to successfully complete due diligence.
Specialized Knowledge of Healthcare Company Sales
- The demand in South Florida among business buyers has consistently been very strong for healthcare companies.
- Physical therapy centers, physician offices, home healthcare companies, Durable Medical Equipment companies (DMEs) and nurse registries all see strong customer demand due to the favorable demographics for seniors in South Florida.
- This steady and recession-resistant nature of the healthcare industry is quite attractive for many business buyers.
- Business brokers must be aware of the licensing and regulatory aspects of the healthcare company’s industry.
- Most healthcare-related companies require approval from AHCA (Agency of Health Care Administration) in order to transfer the license from the seller to the buyer.
- As a result, many buyers prefer to implement a stock purchase deal rather than the more typical asset purchase deal.
- Most business buyers shy away from this as it gives them the liability from inheriting the seller’s corporate entity.
- In the healthcare industry, however, stock purchase deals frequently occur as it is the only way for the buyer to more quickly and easily comply with the licensing transfer process.
- It also enables a buyer to inherit the seller’s corporate insurance contracts.
- Having experience in the healthcare industry is of paramount importance for the business broker.
One can see how having specialized knowledge and experience in various industries is of tremendous importance for a business broker to properly serve their role in a successful transaction. Finding a business broker who specializes by only selling business from a particular industry, however, is usually not realistic or worthwhile.
Give Martin at Five Star Business Brokers of Palm Beach County a call today for a FREE evaluation of your business.