It is a widely held belief that small businesses are the backbone of the American economy. As such, the time will come for each business to be bought and sold. Enter the business broker, who is licensed to bring together buyers and sellers much like a real estate broker.

John Serb is a Certified Business Intermediary who has worked for Transworld helping people buy and sell businesses for 10 years. He said he is a Main Street broker, meaning he represents smaller, “Mom and Pop” businesses rather than larger companies’ mergers and acquisitions.

He is one of about 1,200 members of the professional association known as Business Brokers of Florida. Serb said more than 20,000 businesses have been sold in the past approximately eight years through the association’s database, which resembles a Multiple Listing Service for real estate. Not all states have such an association and brokers in those states don’t always work with other agents. Florida is unique in this way and has the most competitive environment — which means greater exposure to your company’s listing and access to buyers if you are trying to sell.

The process is complicated and that is why business brokers, who earn a commission on sales and purchases of businesses much like real estate agents, can be helpful.

Serb, who said he gets the majority of his customers either from his website that contains businesses currently for sale or via referrals from past customers, outlined the general process of buying a business. First of all, listings are confidential as to name and location of a business for sale until such time as the prospective buyer has provided basic financial information and signed a non-disclosure confidentiality agreement.

“Owners who have their business for sale don’t want to lose employees or customers based on the prospect of the business being sold,” Serb said.

One of the services that business brokers offer to prospective sellers is a financial recasting, which attempts to determine owner benefits. This includes items such as owner’s salary and fringe benefits in addition to depreciation and interest and is used to help determine a value for the business. Once multiples, determined by data collected from past sales of similar businesses, are applied, business brokers can determine the asking price for a business.

After the prospective buyer has signed the non-disclosure statement and reviewed the financial recasting of the business of interest, Serb said it is time for the buyer and seller to meet and try to arrive at an offer and then a contract. It is at this point that due diligence occurs, and the seller must share with the buyer many records of the business, including tax returns, profit and loss statements, sales tax reports, point of sale reports and payroll records. Financing must also be addressed and although the Small Business Administration is a source, requirements are somewhat arduous and cash or seller financing remain the most popular for small businesses.

Once the sale closes, Serb said he steps away.

“It’s not my job to help run a company,” he said.

But Serb, who has a varied work background including an MBA from Case Western and stints as a comptroller, a marketing manager and a divisional head of various auto insurance companies, does have some basic advice for business sellers and buyers.

“For sellers, I say ‘Plan ahead.’ Prepare for the sale. Clean up your books and your warehouse. Dispose of old inventory. Most importantly, do not slow down your business and then decide to sell. You will not get the price that you would have if you had continued working your business,” Serb said.

He also advises business owners to discuss a possible sale with their accountant so they understand the tax implications of the sale. He can only give an overview, not specific tax advice, as he is not a CPA.

For buyers, he said it depends on their level of sophistication. “Serial entrepreneurs,” or people who have bought businesses before, are easier to advise. For buyers seeking to purchase their first business, Serb recommends that they set reasonable expectations, make sure they are comfortable with the industry and research finance options.

John Serb, CBI is a senior broker associate with Transworld Business Brokers of North Florida, LLC. Email him at jserb@tworld.com with any questions or visit www.firstcoastbizbuysell.com

Photo by Martie Thompson

John Serb, CBI is a senior broker associate with Transworld Business Brokers of North Florida, LLC.