Sunday, March 20, 2016

My life as a business broker.. and why I left the industry- David C Barnett

I tell the story of what it was like to be a business broker and why I ended up leaving the business. Watch here: https://youtu.be/LsieCGOiS9I


Transcript:

Hey guys it’s David Barnett for www.InvestLocalBook.com. I was just on the phone earlier today with a gentleman who is exploring the idea of becoming a business broker. He found my blog site online and some my videos about buying and selling business and he wanted to call me up and get some feedback about my experience when I was a business broker from 2008 until 2011.

A lot of memories. I thought, you know, it’s time for another autobiographical installment for my blog site. Basically after the financial crisis of 2008 to 2009, it become very difficult in my finance brokerage business, I had to give that up. Over half the companies that I was using to source capital from went out of business during the crisis. Because they were packaging finance deals together in selling them on your wall street and nobody wanted by that asset backed commercial paper as it was known at the time. So I had met several different people who were trying to buy businesses over that time. And I had run across a whole bunch of people trying to buy and sell businesses as brokers who had absolutely no idea what they were doing. And I was getting a lot calls from these very people who are trying to help their clients. Obtain financing again, not having any idea what they were doing. Not that I was an expert at the time, about buying and selling businesses. But I knew the money side of things and the financing part so I meant a gentleman named Richard who owned a Sunbelt Business Brokers franchise. I talked with him at length and I basically decided that I was a smart guy, I knew the financial side of things and knew financial statements. I know about small business and that I could probably make a go of it as a business broker and the reason why I chose to join up with Sunbelt, was because they were large international franchise chain and they had the resources to provide me with training. So I would actually have a training program, manuals with workbooks. And there was an online program and their training led into the IBBA program and eventually I got my certified business intermediary designation.

So I decided to start with them. And basically in the fall of 2008, started to work with some clients. One of my first client was a guy, a husband and wife team, that had a building materials business. I went through the process as it was taught to me and managed to sell their business in the closing date came in February. So it was like literally a five or six months’ deal and I brought home a nice big fat five-figure paycheck and it was you know seemed like great idea, seemed like great money. So I started to do devote myself fully to the business brokerage career and do reading and further training and then start on the path to my designation. In 2009, I decided that would buy the Moncton, New Brunswick office of Sunbelt business brokers and by that time there were a few associates that had joined the team. So I moved the business to a new office and we had there was myself, three other associates as well as a front office administration person and all things were humming. The problem with business brokerage is that there are two distinct sales cycles. The first sales cycle is convincing business sellers to list their business for sale with the brokerage cycle and there were some people over the course of the years that I was doing this. That I spoke to over the course of two years before they finally signed on with me and list their business for sale. So it was quite frustrating and then the second sales cycle of course was selling the business. So one of the very first people that signed on with me, was actually a friend chicken franchise restaurant and that restaurant Would be the last business I sold in December of 2011. So I think I had listing file for almost three and a half years. Where I worked on the file and didn’t make any money. Now the big problem with business brokerage as a business model as far as I am concerned in this day and age is the fact that it is largely a contingency revenue model. So when people listed their business for sale with me. I would charge them an engagement fee. Which was money up front that demonstrated number one that they were serious about selling the business and number two inputs of general in my pocket. It was a little bit of cash for me to have to pay the bills. There were several stretches when I owned the business brokerage where I went nine or ten months without doing a single closing. So even thought I sold over 35 companies’ while I owned on the brokerage there were times, where I would have like eight or nine months with no income coming through the door. Except an occasional engagement free and what that did for me personally it was awful. It meant that I couldn’t really create a budget at home. It meant that I couldn’t plan financially for things that were to happen when a deal did close and I brought in one of those paychecks and could have been 30, 40, 50, $80,000 and all we do is pay off the credit cards and lines of credit and then I would be afraid to spend money because I wasn’t sure when the next paycheck was going to come through the door.

So by 2011, I arrived at a point where that summer I had six different deals that were set to close for the winter and I was confident enough in the deals that were closing that I decided to take my family on a two-week vacation to Florida. So I went on to Florida, we went to Disney World, visited all those attractions and when I got back basically over the course of the next eight weeks. Three of those deals fell apart. So one of them failed to go through because it was a regulated industry and the government bureaucrat that was in charge of licensing, wouldn’t issue a license to the buyer for whatever reason they had. So there was one deal fell apart again buyer wanted to buy the seller wanted to sell deal was in place but a third party tipped over my apple cart. Basically the second deal fell apart because a bank that an issue to finance later rescinded it. So they changed their mind, they basically said yeah, we told you we’re giving you the money. Now we’re not. And so again, buyer and seller wanted to do a deal. The deal was in place. The deal fell apart because of a third party upsetting the applecart, the third deal fell apart because of a franchisor. The buyer and seller, made the deal they’re both very happy with the deal and then when the buyer started to have meetings with the franchisor. The franchisor was a jerk to the buyer. And the buyer told the seller said look man I love your business. I love what you done with it, I love the earnings. I would love to be in this business but I will not get into business with those guys. And so it was because the franchisor, the third deal fell apart deals four, five and six went through as per the plan but instead of me ending up in December of 2011 with $100,000 of surplus funds in the bank and basically ended up at the end of 2011 with my debts paid and a little bit of money in the bank.

And it was around that time that my wife informed me that our marriage will be ending. So there was all this personal stress at home. There was the business stress of not being able to have regular, manageable, cash flow. And I decided that was the time to pull the plug. I basically made to deal with one of my associates that they would take over the franchise and you know it wasn’t like I sold the business and got a big lump of cash or anything. Basically made a deal with him to sell the business and get a cut off all the files that I had essentially opened in the years that I owned the business and that was when I walked away from being a business broker and needed and I knew that with the changes come in my personal life. I was going to have to get a regular job and have some sort of stability to plan my budget things because you know two kids to feed and wife that wanted out the deal. So that is my story that’s my life as a business broker and I’ll tell you it was one of the most exciting period of my life because there’s nothing more that I enjoy than trying to solve problems. Figure out a way to make things happen and in that role, you’re basically constantly moving mountains and trying to work things out between the buyer and the seller and I loved it. But at the end of the day it’s just not an industry that I could make work for me. In the way that I needed to.


Anyway hope you enjoyed the story and we’ll talk later. You made it into the video that’s great. Why not come over to my blog site: www.InvestLocalBook.com. Where you can see all my latest posts and videos. You can also take the time to watch my welcome video, see what I’m all about and if you wish sign up for my email list. I only send one email each week. You get to choose which topics you’re interested in so that you only get information that you want to learn about as easy to unsubscribe anytime. Click my free resources link and have access to all of my free eBooks, audiobooks and other PDF downloads. Thanks and we’ll see you next time.


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