A small hub of business owners discussing opportunites available to them. Business Broker Survey Results - An Opportunity For Buyers
A small hub of business owners discussing opportunites available to them.

A belated Happy Father's Day to all who celebrated last weekend. I had a brilliant day, and I just love it one when of my children asks "How come there in no Kid's Day'" to which every parent in the world naturally replies "Everyday is kid's day"...know the routine?

The folks at BizQuest and I put together a series of surveys for brokers, buyers and sellers. The first one (for brokers) has been completed, which I will discuss in a moment. For all you buyers, over the next two weeks you will be receiving an email to complete a brief survey, and your participation will be a huge help to everyone in the industry. Plus, it will give you an opportunity to collectively air your concerns and challenges so please take a moment to complete it.

First, on behalf of the staff at BizQuest, I truly want to thank every broker who participated - your input is not only greatly appreciated, but it is a tremendous help to the all stakeholders in the business for sale community.

There were 416 broker respondents, which is an excellent sample size. I am not sophisticated enough to say it is accurate within x percentage points like those fancy political polls. By the way, how do they ever determine those polls of 1,000 people to be accurate within a few points of what 300 million people believe? I guess it is another political mystery. Anyhow, I want to point out a few highlights from the business broker survey, and there will be a link at the end so you can review all the questions, answers and percentages.

Just under 60% of the respondents indicated being brokers for more than seven years, so we are dealing with an experienced group. This statistic alone heavily validates the results.

A question was asked whether business valuations are increasing, decreasing, or stable. I have seen the biggest recent change more in deal terms however, the results from the survey were staggering - 69.2% indicated that valuations are decreasing. While this is not surprising in a down economy, it represents a huge opportunity for buyers.

We asked for input on SBA loans. I have always felt strongly that

the impact of the SBA program is grossly exaggerated in small business sales and has nowhere near the impact that it could have, nor is it anywhere near what some in the industry claim it to be.

So this was one questions where I am glad I can now add an "I told you so". The brokers surveyed indicated that less than 10% of their past deals have involved SBA financing.

There are two clear conclusions from this data: First,

despite all the incredibly hard work the business brokerage community has done lobbying the government to amend the current loan criteria to prior terms, perhaps it is an effort that simply will not yield the results they want, even if the criteria is changed.

A better tactic I believe would be a complete overhaul of the SBA 7(a) loan terms in order to have a more meaningful impact on small business sales. Even if the government retreats to its prior conditions, so what? While it will help get some mid-range deals done, it seems to me to be a whole lot of activity for less than ten percent of the deals. Second point is that

buyers can be extremely firm in negotiating seller financing, because regardless of what the other side conveys, very few deals are going to get done with SBA lenders.

On the note of seller financing, the data is abundantly clear -

sellers have financed over 51% of the purchase price in more than 40% of the past deals of the broker respondents.
No surprise to me, but very much in contrast to the craziness I hear from the seller side at times when they claim "we don't do seller financing", or "we want an all cash-deal".

The final question I want to discuss was the answer to what percentage of the buyers do brokers feel are either "well prepared" or "poorly prepared". Based on some of the great debate and comments this blog has experienced between brokers and buyers, I guess it is no surprise that 76.8% felt buyers were "poorly prepared" and I categorically agree with this result. In fact, I would not have been surprised if it was over 90%. There is a very clear message here to any prospective business buyer - when you contact a broker, if you can demonstrate that you are well prepared and knowledgeable, you are going to go to the front of the line for the best listings. I have been saying this for two decades, and it is the entire philosophy behind my whole business. But of course, there are still going to be those folks who believe they're smart enough to guess their way ahead, and so the dismal statistic that only one in ten people who begins to look for a business ever completes a deal will likely continue until the collective buyer community wakes up and educates themselves before they start their search.

Buyers: Remember to respond to the survey you will be receiving - it shall make for a very interesting counter commentary to the findings in the broker survey. If you want to become a well-prepared buyer, start with reviewing the information on my website at www.diomo.com - read the articles, and ask-the-expert sections, and get a copy of my guide.

To review the complete business broker survey, please click here

Have a great week.

This article represents a fraction of what you’ll learn on this topic in the How To Buy A Good Business At A Great Price© series - the most widely used reference resource and strategy guide for buying a business. To learn more click here

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