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
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
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