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How a Business Broker is Like a Business Coach For Entrepreneurs Looking to Buy or Sell Their Businesses
Aaron Muller is the president of Advantage Commercial Brokers, where he helps people buy and sell businesses. We recently caught up with Aaron to learn about the value of a business broker and hear his suggestions on how to successfully buy or sell a business.
Tell us a bit About Your Background
How did you become a serial entrepreneur?
I never went to college, but I’ve always been entrepreneurial. I was working as a truck washer in high school. I knew I didn’t want to be a laborer forever, so I worked hard and volunteered for a lot of extra responsibilities without asking for increased pay. My boss was impressed enough with me that he made me the manager of the business. By the time I graduated high school, I managed to buy 50% of the truck washing company from my boss.
Over the years, I bought and started several different businesses. Some became very successful; some struggled to survive. The retail business my partner and I started was an absolute struggle, but I call it my college education. The auto repair shop I purchased turned out to be one of the best investments I’ve ever made. I have owned or co-owned over twenty companies in the Pacific Northwest, and I still own eight of them today. Seven of my companies run without my having to be there on a daily basis, and I spend my time working in my business brokerage helping people buy and sell businesses because I enjoy helping fellow entrepreneurs succeed.
Could you Tell us About Some of the Leadership Lessons That You’ve Learned Throughout Your Career?
There are two contrasting styles of leadership: the commander-in-chief who gives orders and tells people what to do, and the background leader who fosters an environment where people work well together and figure out the solutions to their own challenges. I much prefer to be the background leader because I want to have plenty of free time for myself and my family. As the owner of eight companies, I will never have any free time left if I have to be in the foreground all the time.
As a background leader, I empower people to make decisions. I co-create a shared vision of the company with my employees. I pay a lot of attention to the culture of the workplace, which is a set of unspoken and unwritten rules of acceptable social behavior. If the company culture is toxic, the best employees will not stay for long. I allow people the room to fail, and I encourage people to reflect and determine how they can do better the next time. I am there in the background to offer support and guidance when needed, but I am not there every day as a foreground leader who hands out solutions to problems.
How Does a Business Broker Facilitate the Sales of a Business From one Party to Another?
A business broker provides a number of valuable services
- First, a business broker can provide an accurate business valuation. If the listing price is way off, the chances of getting offers can be dramatically reduced.
- Second, a business broker plays an important role in maintaining confidentiality. It can be difficult for a business owner to keep the sale confidential if the business owner is trying to sell the business himself or herself. If the employees, vendors, or the competitors find out the business is for sale, the whole deal can fall apart.
- Third, a business broker can help with marketing. An experienced business broker has networks of buyers and databases to market the business to.
- Fourth, a business broker can help with negotiations. Sometimes, both the buyer’s attorney and the seller’s attorney are involved; and having a good business broker on your side can make the negotiations process go smoothly.
- Fifth, a good business broker has banking contacts. The buyer often needs to get financing to buy your business, and there is a world of difference between lenders. If the wrong lender is used, the deal can drag out for many months and possibly fall apart. Knowing which bank to use for which type of transactions can mean the difference between the success and failure of the sale.
- Sixth, there are often lease negotiations involved with the landlord. The buyer either needs a lease assignment or a new lease. Failure to negotiate properly with the landlord can potentially kill the deal.
- Last but not least, a business broker keeps people’s emotions in check at the closing table.
Many sales have fallen apart at the closing table because the buyer or seller got too emotional. Selling a business is a lot more complicated than selling a house. Without the proper guidance of a business broker, the chances of selling a business successfully are often dramatically reduced.
What are Some Reasons That a Business Owner Might Sell his/her Business?
There are many reasons people choose to sell their business, and it does not necessarily mean the business is failing. Here are some of the common reasons:
- health issues
- the desire to spend more time with family
- bored or tired of doing the same thing after many years
- partnership dispute
- other business interests
- industry trends
- lack of profits
- a predetermined exit strategy that was planned years ago
What are the benefits of selling your business to an absentee owner and then staying on to run the day-to-day operations of the business?
This scenario rarely happens in the world of small business sales. I know that Warren Buffet likes to buy companies with management in place so he can remain as an absentee owner. However, these are large companies with sale prices in the hundreds of millions or billions of dollars. My focus is selling companies with revenues between $500,000 and $20 million. The sellers I work with are looking to move on. The buyers will either run the business or bring in their own management team.
What are Some of the Most Common Pitfalls That Scuttle the Sale of a Business?
Here are seven common pitfalls:
- poor record keeping
- selling the business when revenues are down
- failing to maintain confidentiality
- mentally checking out during the sales process
- making large purchases during the sales process
- listing a price that is too high to begin with
- not obtaining proper guidance
There are appropriate times to save money, but skimping on good advisors during a business sale can lead to much more expensive mistakes down the road.
When taking over a new business, what are some important steps that the new owner can take to facilitate a smooth transition, especially with regards to the employees of the purchased company?
It’s important that the employees do not find out about the business sale until the day after closing. If the employees have several months to worry about whether the new owner will continue to employ them, they may begin searching for other jobs and quit before the sale even happens. The day after the business is sold, the seller should introduce the employees to the buyer. The buyer should stay positive and assure the employees that he or she intends to continue running the business as normal.
It will take the new owner several months at least to learn the business, and the new owner really shouldn’t be making any changes during the first few months anyway. The new owner’s job is to learn the business, get to know the employees, and get to know the customers and vendors. It takes time to build trust with the employees, and they need to know the new owner has their best interests in mind. Any changes the new owner intends to make should come slowly and gradually – and definitely not within the first few months of buying the business.
What Trends do you Expect to see in the Future Regarding the Buying and Selling of Businesses?
One of the biggest myths about entrepreneurship is that buying a business is expensive. The reality is that buying a business is usually cheaper, less risky, and more profitable than starting a business from scratch. I am coming out with a book in the near future that will teach people how to buy a business, grow its profits, and then make the business run without the owner. In the past, most people believe that they have to start a business if they want to be an entrepreneur. It doesn’t occur to people that they can buy an existing business that is already profitable, and that it is cheaper to buy a business than it is to start one in most cases.
That’s about to change. When my book comes out, a lot more aspiring entrepreneurs are going to consider buying a business rather than starting one. It’s been estimated by BizEquity that 7.7 million U.S. businesses will change hands over the next ten years. That’s 7.7 million chances for someone to buy a business, grow it to the next level, and turn it into a lifestyle business. I am very excited about the future of buying and selling businesses and look forward to helping my fellow entrepreneurs succeed.