July 23

Business Brokers Dirty Little Secret:Your broker may not bring you people who want to buy your business!
I have hesitated to write this article, because I have many good relationships with other business brokers. However for every one I have, there is another that will not allow me to bring buyers for their listing clients. That being said, in this difficult market it is every professionals responsibility to do their utmost to fulfill their fiduciary responsibility to their clients.

We are business brokers in Phoenix. However, additionally my wife / partner wants to buys a light manufacturing business and was intrigued whne we saw for a Hoist Company in South AZ. So we went through the exercise of contacting the listing broker. My wife wanted to be represented by me, make offers on our forms, use our due diligence process, and have the benefits of being represented by her own broker in the purchase process. Yes, we also wanted to take advantage the commission split which would reduce our investment. Truth be known we may have settled for a referral fee, but the listing broker said “I will not co-broke on a deal this size.” Which was $85K. So we looked elsewhere and that seller lost a possible buyer for his business because the broker wanted ‘both sides’. Who wins in this scenario?

So what’s meant by “does your Business Broker Co-Broke”? This mean the Listing Broker of your business will split his commission with a broker who has a buyer for your business. This is an important consideration in choosing a Broker. Will they allow another broker to bring a buyer he may have for your business. Not may brokers who want to feed their family will go through the considerable amount of work involved in assisting an investor in finding, negotiating and closing on a business without getting paid Additionally, many buyers just feel more comfortable acquiring a business when they have their own broker representing them.

This market is tough, money is tight, and all qualified buyers should be introduced to your business. This should be the fiduciary responsibility of your business broker. I have heard many excuses from non-participating brokers, from the most honest. “No, we don’t co-broke”, to the more mystical “We are protecting the confidentiality of our client.”  Really they are really saying is. “We won’t give up both sides of the deal, no matter how long it takes to sell this business.” Remember, all potential buyers sign NDA (Non-Disclosure Agreements) from the listing broker and brokers are very attentive to assuring that their buyers understand the seriousness of revealing information about the company they examine.

So if you are considering listing your business for sale.

1.  Assure yourself that your broker will “co-broke” and ask to see the co-broke agreement. Several we have spoken to say they don’t have one at all, yet they tell their clients they co-broke.

2.  Some brokers will only bring you a buyer from another broker when your               listing gets “old” and they haven’t been able to find a buyer themselves. How    many potential buyers did they turn away before then?

3.  Some brokerage houses say they co-broke, but if you have ever inquired about a business with that firm they keep your name in a database, and consider you “their buyer” forever. Then if you have another broker representing you they will not co-broke. Clarify this if you are listing with a brokerage.

4.  If your broker does not bring potential buyers, get rid of him. Their are brokers out there who want to bring a buyer for your business, and your own broker maybe preventing them!

5.  It is a great day for a broker when they find a buyer for their own listing, and most do their best to make certain that all facts are disclosed about the business and the buyer makes an informed decision. However, he should like it when the buyer is represented by another broker. The broker can then act in the best interest of the buyer and many times the negotiation, and acquisition process moves along very smoothly.

Years ago, my wife came home after a long day as financial consultant and said ”we could have made a lot of money today, but we didn’t.” “Why?” I asked. “Because I did what was right for my client.” She said. Is your broker?








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July 14

To be, or not to be an Entrepreneur? That is the question.
Recently we’ve had a couple of ‘would be’ first time entrepreneurs call to say they had decided that it was the time to keep their money in the bank, instead of buying the business they had been interested in. They explained they were unsure if it was the right time to invest in a business, and it was safer to hold onto their cash. The businesses they had considered all had solid consistent cash flow, so the decision boiled down to what was safer, cash in the bank or cash flow from a business venture?

How do you determine the safest path in life? When I graduated it seemed like a much safer bet to go to work for a corporation instead of the risky road of starting a business. Keep your nose to the grindstone, be loyal, and work your way up to a comfortable benefits package. This seemed like the correct path for many until the economy hiccupped as it always did it seemed, every several years.  People were laid off, and many saw company stock and pensions take a serious dive. Some were let go just shy of collecting full retirement, and at middle age, where was the next opportunity? When things in Corporate America turned sour, then it seemed that the friend who had a small AC business that was still churning out profits day after day, looked much safer. After all, who laid off the owner?  Granted it takes a special person to accept the challenges involved with starting a business from scratch, possibly from an idea written on a bar napkin, after the fifth Margarita, and then take that basic idea and build a thriving business. There could be a variety of pitfalls and risks. However, there are other ways of going about becoming a successful business owner, that does not require the painful birth, and rearing of a brand new idea. One method is to…well, buy an already successful business. A business that has been in business for 5 years has a 95 percent chance of continued success. In fact in this marketplace it’s tough to get business owners with nice cash flow to decide to sell. After all, where will these owners find continued cash flow after they sell? In the stock market? Maybe Real Estate will give you some cash flow. But will the upside appreciation be there? As much as continuing to grow an already profitable enterprise? Most believe they have a better chance of making it through this difficult economic time even though business may be stagnant, by doing what they’ve always done, which is counting on their own talents to go out and bring profits into their company and give themselves a paycheck.

Method two for bringing a business idea to the marketplace, and also significantly increase your chances of success, is to use a business system that has been proven to be reproducible many times over. Can you say McDonalds? There are many, many franchises to choose from in a wide variety of industries that provide effective training, plus turnkey systems and processes that take much of the uncertainty out of  becoming a first time entrepreneur. There are franchise opportunities for every interest and budget.

Many successful companies have incubated in the worst economic conditions. They grow up lean and mean which allows them to knock off business from their larger, fatter more unwieldy competitors. During tough economies small businesses have been able to take advantage of very attractive lease terms and a wealth of talent that would not be available to them during times of high employment. This talent pool can drive their marketing programs, and product development to new levels which can pay off big as the economy recovers.

So next time you think it’s safer to keep your money in the bank. Think again. There is a saying great. “the best time to plant a tree was 20 years ago, the next best time is today.” Now may be the best time to choose a business to build into solid security for yourself and your family. 



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July 08

Entrepreneurs Win Tax Case Versus IRS - WSJ.com

This great news for Entrepreneurs who are Bootstrapping their new venture, while keeping their day job. Wins with the IRS don't happen often!

Entrepreneurs Win Tax Case Versus IRS - WSJ.com

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