The Best Business Brokers Are Free Because They Save,
or Make You More Than They Cost
It’s a simple thing really. The best are free because they save or make you more money than they cost.
It seems like everyone these days is taking advantage of poor helpless victims. Taking away their ‘free’ and charging ridiculous rates for something you could have done on your own! I’d like to show you an example of why the best are free.
Lets Take a Look At This As A Business Broker:
EXAMPLE: You have a business you want to sell. The business is in the “Basic” Industry. Not the “Service” Industry – because they sell for a lower multiple.
Gross sales are $1,000,000. Net profit (EBITDA) is $150,000.
A reasonable ‘For Sale’ asking price is normally 2.5 times Owner Benefit (EBITDA) or in this case about $375,000.
- Business Broker A charges only 8% commission on the sale, or $30,000.
- Business Broker B charges 15% commission on the sale. That equals $56,250.
Business Broker A takes the information provided and plunks the business in the MLS system and waits for a buyer to come along. (Statistically, this type of business listing has a 24% chance of selling within a year, and will sell for approximately 75% of your asking price).
8 months go by, no action and the broker talks you into lowering the price to $350,000.
Three more months go by and finally – you have an offer for 75% of the asking price. You counter the offer and settle at a 20% discount, or a final sales price of $ $280,000.
(Total Time to Closing: 12 months).
Now you pay the Broker 8% commission, ($22,400) and end up walking with $257.600.
A bit disappointing, but your out of the business after 12 months, and you can move on to other things.
Now Let’s just jump onto Broker B:
About a week later, you go to his office for a private and confidential meeting (Confidentiality is of utmost importance so you go to his office because the “the walls might have ears” at your place, and you can’t risk the confidentiality).
At the office, you go over the Business Score and he points out a few things you can do immediately to begin increasing your score. By the end of the meeting, you decide to take his advice and hire his firm for $1,200 per month.
He assures you he and his team can help you increase your Sellability Score and increase the sales price of your business significantly.
You and his team are going to work on “Staging” the business before put it on the market.
You find is a bit hard to swallow, but everything he says makes perfect sense, and he has the statistics to back it up. So you bite the bullet and go along.
At this point, no other Business Broker you have ever talked to has given you this much information. All they wanted to do was get you to sign a listing agreement!
FAST FORWARD 4 MONTHS:
- Your books are clean as a whistle and you are showing higher profits on paper because you did the “line-item-veto” of non-revenue creating expenses.
- You’ve developed operating procedures and the employees are doing more work without you actually being there.
- Because you have more time on your hands, you’ve had time to negotiate with your suppliers and got better prices and terms, which will mean better profit margins.
- You fired a few bad customers and this made it possible for you to add a few new ones.
All in all, the business now has a positive story and bright future because of the work you did together, and it is on track to be running itself within the next couple months.
You have increased your Sellability Score to a respectable 81 and have a documented and believable future with provable forward looking financials.
Now, you’ve built up the value of the business and have increased the EBITDA to $175,000. You have also increased projected profits of $25,000, so you have now have a “Realistic” asking price of $600,000. ($200,000 X 3 = $600,000).
Remember- during these past four months you’ve been paying Broker B monthly, resulting in $4,800 in ‘staging’ fees, but at the same time, profits have increased by $9,000 over the same timeframe, leaving you with an additional profit of $5,200 or about $1,300 per month.
Now you list the business at $600,000 and a buyer comes along within the next four months offering you 90% of your asking price, or $540,000 Cash, Close in 30 days. You accept the offer. (which is $225,000 HIGHER Than Broker A).
Broker B’s breakdown goes a little something like this:
- $540,000 sale price minus 15% commission (of $81,000) = $459,000.
- $1,300 additional profit per month, over 8 months = $10,400.
- Your ‘Net” after 8 months proceeds = $469,400.
Comparing apples to apples;
- With Broker A, you walk with only $257,600.
- With Broker B you walk with $469,400…and that’s pretty dang good!
- The difference is a whopping $211,800!
Moral of the Story:
The Best Are Free Because The Save,
or Make You More Than They Cost.
Get Your Business Sellability Score Today – FOR FREE and Without Obligation
It is a Statistically Proven Method to Increase The Sellability Score of your business and increases the value of your business before you place it on the market.
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