Tom’s Business Brokerage Rules of Thumb

Here are some rules of thumb on business brokerage covering a lot of different areas. Over the years I have found that there is a lot more truth in them than one might think. They are in no particular order. I can’t claim to be the originator of them all, so I must give credit to a lot of my colleagues over the years.

The following rules are tried and true.

“The first offer is almost always the best one!”

“The reason for sale a seller initially provides is very seldom the real one.”

“The real selling price is half-way between what the seller thinks it’s worth and what the buyer thinks it is.”

“When the seller’s attorney insists on holding the buyers deposit, the odds are almost 100 percent that your commission is in jeopardy and/or will be negotiated.”

“The figure the seller provides for annual sales is usually the best year the business had or even the figure the seller thinks the business is capable of doing.”

“The profit the business makes is what the seller dreamed up in his or her wildest dream.”

“It’s true that 90 percent of buyers will buy something other than what they first were interested in.”

“Co-brokering with all of the other local business brokers will increase your sales by 25 to 30 percent.”

“If the buyer’s wife is opposed to her husband buying a business, there will be no deal. The reverse is not true, but a wife will buy a business regardless of her husband’s opinion.”

“One out of 12 to 15 buyers (only personal contacts count) will result in a sale.”

“The majority of small business sales take place within a 30-minute drive from the brokerage office.”

“The average length of time it takes to sell a business is one month longer than the average listing period.”

“The seller who fights the amount of commission at the time of the listing will double his efforts to do so the when a buyer is found.”

“Every sale falls apart at least twice before it closes.”

“By talking with every broker in town, one will discover that that they will all say that every other broker is not professional.”

“It seems that no matter how careful one is in taking a listing, only one out of four will actually sell; so it would seem that the more listings one has, the more sales will happen.”

“If a seller tells you that he or she will not take a penny less than what the business is listed for, here’s what we know from experience: If you called the seller and told him that you refused an offer from a buyer who loved the business, but it was a bit less than the listed price, the seller’s response 95 percent of the time will be – ‘go get that buyer and write it up.’ This is the same seller who wasn’t going to take a penny less and don’t even bother him if it isn’t just as listed.”