There are thousands of business brokers for small businesses across Australia that all claim to do the same thing better than the others.
That is; to sell your small business.
The good ones will tell you what it’s worth, the other ones will tell you what you want to hear in order to sign you up.
So, as a small business owner, how do you find the right business broker for your small business? If you have a small business and are thinking it’s time to sell, then this article is for you.
In this article, I discuss the different categories that business brokers can specialise in, and how to be confident when assigning a business broker to sell your small business.
My name is Mick Godwin and I am a professional business broker that specialises in small to medium-sized businesses that have a market cap value, ranging from $500,000 – $5,000,000.
I’ll tell you why specialising in a market bracket is important a little further on in this article, but for now, it’s important to realise there are two types of business brokers.
Those that specialise and those that don’t.
The Best Business Brokers for Small Business
The term small business can mean many things to many people and is also defined differently by different regulatory bodies in Australia.
However, the Australian Securities and Investment Commission (ASIC) defines a small business if it satisfies at least 2 of the following:
- the consolidated revenue for the financial year of the company and the entities it controls (if any) is less than $50 million;
- the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) is less than $25 million; and/or
- the company and the entities it controls (if any) have fewer than 100 employees at the end of the financial year.
Now, when I come across a ‘small business’ that has 80 employees and is doing $45 million dollars in revenue annually, I pass that straight to the mergers and acquisition team as it simply is not a small business in my industry.
But it gives you an idea of how broad the term ‘small business’ is.
To help me help my clients, I have my own definition of business categories.
Regardless of entity structure, for example, company, trust, partnership or sole trader, a micro business has less than 3 employees including the owner, less than $250,000 in annual revenue and a market valuation of less than $250,000.
If this is you, then don’t fret, you probably have a very sellable asset.
Whereas I define a small business as a business that has four or more employees (non-family), has revenue between $500,000 and $10,000,000 and a market value cap between $250,000 and $5,000,000.
Why a Business Broker Should Specialise
Think of someone who’s interviewing for 4 roles at the same company; one role is in marketing, another is in finance, the third is for human resources and the fourth interview is for operations.
Assuming the company has the slightest bit of competence, they would reject this generalist applicant for all four roles as there would be better applicants who specialise in each role.
Our keen job hunter could probably do all four roles, but he or she wouldn’t know the role innately enough to be anyone’s trusted advisor and would likely lack the strategic agility that comes with years of learning a specific niche role of industry.
Now, take that mindset and apply it to the sale of your small business. This analogy should help you identify the best business brokers for small businesses.
Remember, business brokers don’t have an all telling platform that we can log into and enter an address that will advise on an acceptable selling price like real estate agents do.
Along with learning the art of deal making which usually involves keeping a sale on track for at least six months, we need to read financial statements, understand cashflow challenges and how the debtors and creditors affect the business.
We need to talk the language of accounting, finance, strategy and be humble advisors to both the buyer and seller for sustained periods of time.
On top of all this, each industry has different important factors to discuss that are specific to the industry, with those elements changing again as the size of the business increases.
The buyer looking to buy a job for $100,000 speaks a different language from an individual or group that is investing $5,000,000.
Those guys aren’t buying a job, they’re focusing on strategy and opportunity so to maximise the purchase of your business. A good business broker needs to be able to have that discussion.
Finding the Right Business Broker for Your Small Business
Despite the importance of specialisation, it’s not the be all end all when it comes to choosing a broker. Some brokers will do exceptionally well when faced with a new industry that is in the same market cap value range they’re used to.
For businesses that are under $1,000,000, you should look to other qualities as well as specialisation.
In this article, I discuss other ways to know if the business broker is right for you. I believe an important attribute when identifying if the business broker is right for you is if they are advising you on the information you need to hear, instead of what you want to hear.
If your business is a two man operation, affords you a comfortable lifestyle and makes you $150,000, then it’s good in many ways, but it simply isn’t worth $700,000. Regardless of what the other guy said.
If you want to know more about what’s involved with selling your business, book an appointment here or email me directly at the details below.
In this call, I’ll tell you exactly what information you need to understand where your business sits in the market so you can make better business decisions when it comes to selling your business.
I’ll be happy to help you become clear on your next step to exit your business successfully.