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.
â€œAs a business owner, how do you know what your business is worth? Thatâ€™s a service we provide up front,â€ Bauer said. There might be â€œthree or four different types of valuations depending on the industry and the cash flow. The biggest thing is educating the seller. Theyâ€™ve been working hard their whole life. They donâ€™t have that understanding: How do you find a buyer, keeping it confidential without letting vendors or employees know youâ€™re selling? Thatâ€™s a very important partâ€”you want to keep it confidential until the new buyer walks in.â€
The biggest challenge, Bauer said, is that â€œpeople just wake up one morning and say, â€˜Okay, Iâ€™m done.â€™ Ninety-nine percent of business owners call the day they want to sell. They donâ€™t think about calling me three years in advance. It doesnâ€™t happen. It just doesnâ€™t.â€
Bauer said, â€œItâ€™s fine if you have a seller who doesnâ€™t have to sell today. The business broker can help them look at different parts of the company. I can say, â€˜Letâ€™s do a valuation. Letâ€™s see where the business is at and where we can make it better.â€™ When itâ€™s a nice company, tuned, weâ€™re ready to go forward.â€
Whatâ€™s involved in â€œtuningâ€ a company for sale depends on its size and the industry, Bauer said. The ultimate goal is improved cash flow, which has â€œa huge effect on valuation.
Too often, Bauer said, the owner starts with, â€œThis is what I need out of it.â€ A business owner recently told Bauer, â€œI have to have $300,000.â€ The problem, Bauer said: â€œIt values at about $205,000.â€ 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. â€œThey have to tell the story. Iâ€™ve been at showings with other brokersâ€”they canâ€™t keep their mouth shut. You never learn anything that way.â€ Bauer said he tells his agents, â€œDonâ€™t worry about the moneyâ€”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 stateâ€”40,000 miles a year. Sometimes I drive back from a meeting, and I know nothingâ€™s going to happen immediately, but I helped them, and when they are ready I hope they call me. You donâ€™t get paid for everything you do. You have to accept that. It all averages out.â€
After 14 years with a local business broker, Bauer opened the Murphy office four years ago because of â€œthe outreach they have of finding buyers. We have 190 offices around the U.S. with 400 business brokers, 36 websites and publications. Smaller firms donâ€™t have that access. I just sold an engineering firmâ€”the buyer came from Wichita. Most of the buyers were not in Minnesota.â€
The best route into business brokerage, Bauer said, is through being a business owner. The company that first hired him was â€œlooking for somebody that had business ownership experience. They didnâ€™t care after that.â€ Similarly, Bauer said, â€œMy agents are ex-business owners. Theyâ€™ve been there. They know what itâ€™s like to deal with vendors or clients, know the financial part, tax returns, P&L. We do a lot of training, so if theyâ€™re not up on a lot of that, they will be.â€
What he canâ€™t teach, Bauer said, is â€œto want to help. If thatâ€™s not in your DNA, you shouldnâ€™t be doing this.â€ 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, â€œThatâ€™s fine. You should get two or three options.â€ He spent 45 minutes with the buyers. â€œThey both said, â€˜We decided to go with you after the first 5 minutes.â€™â€ When Bauer asked why, they said the other broker made it â€œall about him, his commission, how it was structured.â€
Bauer said if a broker wants to charge for an initial meeting, that should be a red flag. â€œUnless youâ€™re going in and need a valuation for legal purposesâ€”thatâ€™s different. You have to pay for that up front. But for somebody to charge you to come talk about your business, donâ€™t pay for that. Sit down and talk for a couple hours. Maybe youâ€™ll find out youâ€™re not ready. Thatâ€™s okayâ€”at least now you know,â€ Bauer said.
The bottom line for business owners: â€œDonâ€™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 thatâ€™s trying to help you, theyâ€™ll tell you, â€˜Donâ€™t sell.â€™ If they can get through this year and get another full year in, they can get things straightened out.â€