Most business brokers are Main-street business brokers that primarily sell restaurants, retail businesses, salons, etc. valued at less than $1 million.
Lower Middle Market Business Brokers sell businesses valued over $1 million and usually do not focus on main-street businesses.
Pacific Business Sales is a lower middle market business broker focusing exclusively on industrial businesses, including manufacturing, construction, contractors, distribution, and B2B service businesses valued at over $1 million. Our firm does not sell main-street businesses and refers these businesses to Main-Street Brokers we have long standing relationships with.
When considering a business broker to sell your business, first look at the firm’s website to see what types of businesses they are selling and have sold.
Does the firm primarily sell main-street businesses? If you are a main-street business owner then this firm may be one to consider. If your firm is a larger industrial business such as manufacturing or construction, then this firm may not have the right experience to sell your company. Main-street business sales are simple small transactions and very different from manufacturing or construction transactions.
Does the firm sell mid-size industrial businesses? Lower-middle-market (LMM) business brokers sell businesses valued over $1 million and generally less than $50 million in revenue. These businesses are typically industrial businesses including manufacturing, construction-contractors, distribution, etc. These firms generally do not sell restaurants and retail businesses.
Does the firm sell large businesses, over $50 million in revenue? Firms selling businesses with over $50 million in revenue are M&A firms or smaller Investment Banking firms. These firms are generally licensed with the SEC and focus on very large transactions. They typically charge a substantial upfront fee coupled with a monthly retainer.
Most business brokers do not charge upfront fees in advance of the sale of your business and do not charge monthly retainers.
Pacific Business Sales does not charge any upfront fees or monthly retainer fees.
Our commission is paid at the close of escrow.
Many business brokers offer a free broker opinion of value for your business.
Pacific Business Sales offers a free comprehensive market value analysis (broker opinion of value)prepared with professional business valuation software for prospective clients.
Your broker should prepare your broker opinion of value (market value) with professional business valuation software using actual sold comparable sales data and not with a simple spreadsheet and estimates of earnings multiples.
Pacific Business Sales uses Peercomps business valuation software and its comparable sales database which uses SBA data from closed transactions and the appraisals from those transactions.
Ask your prospective broker how they determine the business value, what software they use, and where they obtain their comparable sales data from.
Carefully consider the experience of the prospective business broker including how many years of experience the broker has, what types of businesses they have sold, and do they understand your business.
While the broker does not necessarily need to be an expert in construction or manufacturing, they should understand and be cognizant of how a business like your operates and key financial metrics.
For example, if your company is a manufacturing or construction business, do they understand WIP reports, the A/R for your business, inventory, retention (for construction), ISO 9001 and AS 9100 (for manufacturing)? Do they understand how to value a business like yours?
Likewise, if your business is a restaurant, does the broker sell restaurants and food businesses?
Pacific Business Sales specializes in construction, manufacturing, contractors, and B2B service businesses and our firm has sold hundreds of these business.
Within the business broker industry, there are two types of broker offices, independently owned broker offices and and franchise offices.
Independent business broker firms are typically small offices owned by experienced business brokers and most are small offices. Independent offices usually focus on specific industries and a geographical area. Most independent offices are members of the IBBA (International Business Broker Association) and regional associations like CABB (California Association of Business Brokers).
Pacific Business Sales is an independently owned family operated business broker office and with over 25 years of experience.
There are several business broker franchises with offices nation wide. These offices are typically sold to individuals with corporate or business backgrounds that want to become business brokers and open their own office.
The franchise model offers those new to the industry, and without experience, training on how to be a business broker, procedures for running a business broker office, and the appeal of an established brand. Franchised business broker offices are trained in main-street transactions for restaurants and retail businesses because these represent the majority of businesses sold and are simple transactions.
When considering a business broker firm ask about the experience of the broker and agent you will be working with, how long that office has been open, and the experience of that office. Franchises often boast about hundreds of offices nationwide, thousands of transactions closed, etc but this has nothing to do with the experience of the broker or agent you are working with.
The CIM (Confidential Information Memorandum) is critical in the successful sale of a business. The CIM is the prospectus and confidential marketing brochure for your business that is sent to buyers after they have signed an NDA with the broker.
The CIM is the buyer’s first detailed look your business and many buyers make their decision on whether to proceed or pass based on the initial look at the CIM.
A comprehensive CIM is typically 30 to 40 pages of detailed information about your business, including recast financial statements, equipment list, an overview of the company and it’s history, SBA financing terms, SBA lender pre qualification letters , etc.
Pacific Business Sales CIMs are comprehensive and detailed. Our SBA lenders use them for their pre qualification of the businesses we represent.
Main-street business brokers use very brief CIMs, sometimes as short as a page or two. These brief CIMs may suffice for small main-street businesses but are inadequate for larger and more complex businesses like manufacturing and construction businesses.