Dan Bauer was in the car wash industry for 12 years. When he worked with a broker to sell his businesses, he found his passion. He made the shift to being a business broker 18 years ago, spending 14 years with a downtown brokerage before becoming Managing Partner of Murphy Business of Minnesota.
“As a business owner, how do you know what your business is worth? That’s a service we provide up front,” Bauer said. There might be “three or four different types of valuations depending on the industry and the cash flow. The biggest thing is educating the seller. They’ve been working hard their whole life. They don’t have that understanding: How do you find a buyer, keeping it confidential without letting vendors or employees know you’re selling? That’s a very important part—you want to keep it confidential until the new buyer walks in.”
The biggest challenge, Bauer said, is that “people just wake up one morning and say, ‘Okay, I’m done.’ Ninety-nine percent of business owners call the day they want to sell. They don’t think about calling me three years in advance. It doesn’t happen. It just doesn’t.”
Bauer said, “It’s fine if you have a seller who doesn’t have to sell today. The business broker can help them look at different parts of the company. I can say, ‘Let’s do a valuation. Let’s see where the business is at and where we can make it better.’ When it’s a nice company, tuned, we’re ready to go forward.”
What’s involved in “tuning” a company for sale depends on its size and the industry, Bauer said. The ultimate goal is improved cash flow, which has “a huge effect on valuation.
Too often, Bauer said, the owner starts with, “This is what I need out of it.” A business owner recently told Bauer, “I have to have $300,000.” The problem, Bauer said: “It values at about $205,000.” In this case, fortunately, the owner is not in a hurry. Bauer provided some options for building the business and suggested that they talk again in six months.
Bauer said the number one skill required of a business broker is listening. “They have to tell the story. I’ve been at showings with other brokers—they can’t keep their mouth shut. You never learn anything that way.” Bauer said he tells his agents, “Don’t worry about the money—if you do the job, it will be there. I want them working because they want to help another business owner. I travel the whole state—40,000 miles a year. Sometimes I drive back from a meeting, and I know nothing’s going to happen immediately, but I helped them, and when they are ready I hope they call me. You don’t get paid for everything you do. You have to accept that. It all averages out.”
After 14 years with a local business broker, Bauer opened the Murphy office four years ago because of “the outreach they have of finding buyers. We have 190 offices around the U.S. with 400 business brokers, 36 websites and publications. Smaller firms don’t have that access. I just sold an engineering firm—the buyer came from Wichita. Most of the buyers were not in Minnesota.”
The best route into business brokerage, Bauer said, is through being a business owner. The company that first hired him was “looking for somebody that had business ownership experience. They didn’t care after that.” Similarly, Bauer said, “My agents are ex-business owners. They’ve been there. They know what it’s like to deal with vendors or clients, know the financial part, tax returns, P&L. We do a lot of training, so if they’re not up on a lot of that, they will be.”
What he can’t teach, Bauer said, is “to want to help. If that’s not in your DNA, you shouldn’t be doing this.” He recalled a meeting three months ago with buyers who told him up front that they had already spoken to another broker. Bauer told them, “That’s fine. You should get two or three options.” He spent 45 minutes with the buyers. “They both said, ‘We decided to go with you after the first 5 minutes.’” When Bauer asked why, they said the other broker made it “all about him, his commission, how it was structured.”
Bauer said if a broker wants to charge for an initial meeting, that should be a red flag. “Unless you’re going in and need a valuation for legal purposes—that’s different. You have to pay for that up front. But for somebody to charge you to come talk about your business, don’t pay for that. Sit down and talk for a couple hours. Maybe you’ll find out you’re not ready. That’s okay—at least now you know,” Bauer said.
The bottom line for business owners: “Don’t wait for the day you get up in the morning and get mad at the world. Step back. If you talk to a broker that’s trying to help you, they’ll tell you, ‘Don’t sell.’ If they can get through this year and get another full year in, they can get things straightened out.”