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During the 1960s, brokers mostly dealt with “blue-collar” workers who were leaving a factory position and were willing to take a chance on owning a small business. They purchased bars, small fast food operations, coffee shops and retail stores. In 1962, the average price of a small business was $16,000. Rarely did these businesses have accurate records or detailed financial statements.
During the 1960s, 1970s and 1980s business brokers obtained most of their listings by cold calling, knocking on doors, telephone solicitation and through personal contacts. Such methods did not create a professional image of the business brokerage industry. Brokers often listed every business they could regardless of price and terms or adequate substantiation of the owner’s claims. The typical broker who utilized these approaches usually sold only ten to twenty percent of the businesses he listed. The same methods still exist in the marketplace today however, most of the brokers who use these approaches are still working in the low-end arena.
During the 1970s the foreign buyer entered the market. Because of their language barriers and strong work ethic, small business was very appealing. During the 1970s franchising entered the market. In many types of businesses, franchises replaced the traditional “mom and pop” operations. McDonalds and Burger King replaced the small town fast food operations and coffee shops. The large restaurant chains replaced the family owned restaurants. This trend continues today.
However, franchising created new opportunities for business brokers. It made available new types of operations to the first-time buyer going into business. Many businesses were difficult, if not impossible, to sell if the buyer did not have direct hands-on working experience, thus reducing the market substantially. The printing industry is an excellent example of such a business. Without a better possessing first-hand working knowledge of the operations of a printing business, brokers were unable to sell the business. Then, came instant or quick printing. These franchises wanted business people not printers. The result is that there is new industry for business brokers to handle. The same is true for many other industries.
In the 1980s and 1990s business brokerage encountered a new entry to its industry, the franchising of business brokerage. Prior to franchising, new business brokerage offices were started by those who left their existing offices and ventured out on their own.
These people had experience in the business and, for the most part, knew it well. Franchising brought in a lot of people who had no experience with the profession and in most cases little experience in business ownership. Most of these new business brokers were professionals coming from the corporate world. Some of the obstacles they faced was not understanding the mentality of the small business owner, working as an entrepreneur or without a support team. Additionally, there were no perks or benefits, paid vacations, sick days or paychecks.
Many of these people brought something valuable to the table. They understood business, numbers, financial statements and were comfortable dealing with outside professionals. Additionally, they brought a great interest in handling the sale of larger businesses. Successful mid-market brokers began to develop more professional programs to evaluate businesses. Realizing that non-saleable companies were a waste of time, brokers began to analyze businesses to determine their marketability.
It was also during this time that business brokers started to develop direct mail programs to obtain listings; the advent of the internet as a marketing tool and outside financing sources for business purchases began to evolve. During the 1990s co-brokering and business brokerage associations began to gain acceptance. This new approach provided the business broker with additional opportunities as well as a forum for additional training and education.
As the business brokerage industry changed, so did the buyers that the brokers had to deal with. Corporate people who lost their jobs through downsizing, mergers, acquisitions and a host of other reasons became a pool of potential business buyers. Many of these displaced corporate people wanted to control their own future and looked to business ownership to provide that opportunity.
The late 1990s were good years for the business brokerage profession. Recent surveys indicated that approximately forty percent of all business brokerage firms are sole practitioners. Offices averaged 4.4 agents per office.
The business brokerage office of the 2000s will provide support services for its members. Each member, associate or agent will essentially conduct their own business but under the umbrella of a firm. The firm will supply the infrastructure, the technological support, etc. for all its members. Except for dealing with customers, attending office meetings, etc., the members will be working out of their home offices. They will be out acquiring listings, talking to buyers and showing businesses. Members will join such a firm so that they can do what they do best, doing deals and leaving the support to the firm.
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