06 Oct “Cap X” For Business Brokers
From my perspective, each of us sells businesses all the time (I hope), and with our sellers and buyers we frequently discuss the “Cap X” (annual capital expenditures), the monies our buyers need to invest in the business annually to keep the business running and growing. Each of us, as business brokers/intermediaries, have our own business, with about 50% of us working in multi-intermediary offices, and about 50% being sole practitioners. But in almost every case, each of us “are our business” since most of us are almost wholly commission based, so our success is created by ourselves, and directly effects our income. Just because our profession has a very small barrier to entry is no reason to think that each of us, as independent businesses, do not have an annual “Cap X.” However, in our professions case, most of our “cap x” is in intangible assets, not tangible assets. Nevertheless, those expenditures are necessary to keep our businesses growing. What are some of the key expenditures for us? I suggest that two primary items are Marketing (in multiple manners) and Education. And, in our case, most of the education comes from our associations, and obviously within our particular association, association membership is directly tied to education and vice versa.
Few things in my career as a business broker have had the financial impact that the membership in, and education from, the IBBA has had. Not only the direct education (courses), but the networking and associating with skilled and successful dealmakers have been a tremendous advantage. A $5,000-$6,000 annual investment, or Cap X, to attend two conferences and a number of education courses, is a small investment if it helps just to make a single extra deal, and from my experience, it has helped me make many extra deals, and especially much larger deals. Another way to think of the investment would be that 10 years would cost $50,000-$60,000 total for conferences and education courses. Just one “extra” $1 million deal in that 10-year period would more than cover the investment, and I know 10 years of conferences and educational courses will yield me much more than just one additional deal. But, with just one extra $1,000,000 deal in the ten year period, that would be a $100,000 commission yielded from a $60,000 investment, which is a $40,000 return on the $60,000. That’s an ROI of 66.7% – can you find a better investment?
I encourage everyone to keep investing in that Cap X for yourselves, and reap the rewards. Associations are where the winners meet!
Ron Johnson, M&AMI, CBI, CBB, Fellow of the IBBA, is Chairman of ABI Business Sales, Mergers & Acquisitions in San Ramon, CA. Ron is Past Chairman of the IBBA and Past President of the CABB, served 10 years on the Board of the CABB, and then 6 years on the Board of the IBBA.