What Do We Sell?

What Do We Sell?

All I hear lately concerning what brokers sell is “middle market” and the new catch-phrase: “lower middle market”. I assume that if there is a lower middle market, there must be a middle middle market and a middle upper market and so on.

I also assume that in today’s business brokerage market an instant print business is considered lower middle market. This would suggest that the term “main street” is not used anymore. Main street is a term that only the older generation of business brokers know about. I have written about this subject on several occasions, but would like to continue

Let’s face it: without main street many business brokers would be out of business or never even be in the business today. My career began with main street. At that time the term “anything” market was unknown. When I first got into the business brokerage business, the minimum fee was $1,000 – that was many years ago. I can remember when the old pro marched into the office one morning and told us (his salespeople including me) that effective immediately, he was raising the minimum commission from $1,000 to $1,500. We thought he was crazy.

I sold businesses, the more the better and size was irrelevant. In 1980, the minimum fee was $10,000. So, even really small businesses, when sold, still brought $10,000. Main street was alive and well and a very comfortable living. In addition, it was really fun – lots of war stories. On occasion, a sales person, usually a rookie, would tell us that he wanted to sell bigger businesses. We called it “Big Dealitis.” Those brokers typically lasted about 3 months and left.

A recent article on the BizBuySell.com web site stated that 55% of the closings that were a result of listings on their site sold for less than $500,000 and were within 20 miles of the broker’s office. Incidentally, BizBuySell is not the enemy. They publish a lot of information about what sells, and they seriously want to work with the business brokerage community. In 1975, we were spending approximately $2,000 in advertising per office. That’s the equivalent of $8,500 today taking into account the inflation rate. And, even then, you were only reaching your local market. Where else, for so little money, can you reach almost the entire world. My only complaint about BizBuySell.com is that (and I can’t blame them) they offer a lot of information to potential buyers about businesses when the business broker wants the potential buyer to call in or come in to the office for that information. Unfortunately, the days of the initial personal meeting are fading fast.

Also, according to BizBuySell, deals under $500,000 in selling price closed in 4 months. (That was the median time). For lower middle market (over $5 million) the median time to close was 10 months. It’s the old story, the bigger the deal, the longer it takes to close it and time is always the enemy.

The good news is that since all of the business brokers – or intermediaries for those in the middle market – are in the lower middle market and up, those selling main street businesses should have those businesses all to themselves.