Business Brokers See Opportunities for Entrepreneurs

Many business brokers in Northwest Arkansas said their traffic was downright dismal during the fourth quarter of 2008. But they said things have picked up dramatically since the middle of the first quarter.

Carl Grimes, owner and principal broker of Sunbelt Business Brokers of Lowell, said many people who are laid off will spend anywhere from three months to a year looking for a job “then they start to look at buying one.”

Mid-March seemed to be the magic tipping point for many “corporate refugees,” as they started looking at going into business for themselves to replace income, he said.

Grimes, who also owns Sunbelt franchise offices in Springfield and Joplin, Mo., said his company closed on about 20 transactions last year.

Ken Leonard, principal broker of Auvan Business Brokers of Springdale, declined to say how many transactions his firm closed in 2008.

“Last year was OK,” he said. “The bank financing part made doing transactions more difficult, but this year looks better than last year because of an understanding of where we are (in the economy).”

 Leonard said he currently has anything from a motel to a convenience store to a small manufacturing operation listed.

Don Godsey, owner of VR Mergers and Acquisitions of Bentonville, said, “2008 was our best year ever. It was a great year.” However, he saw money tighten up in the fourth quarter as well, and he echoed the sentiment about people looking to buy their source of income.

Godsey, who wouldn’t say how many transactions he closed last year, did say he has about 15 listings.

All brokers said buyers are looking for good cash flow in a business.

Brokers typically earn a commission between 4.5 percent and 10 percent of the transaction, which depends on the size of the company and the complexity of the deal. Brokers will help owners valuate their business.

Leonard said a business could be listed for sale anywhere from two weeks to two years, but what he tells sellers is that a national average is 8 to 9 months for quality, cash flowing businesses.

Across the Sunbelt network of offices nationwide, the average closing price is about $450,000.

Grimes is actively trying to educate potential buyers about a little-known financing mechanism that may help some people obtain their own business.

He works with the Whitlock Pyle Group in Houston, which can take a 401(k) or any approved retirement account, and roll it into a new 401(k) profit sharing plan that will help fund a “C” corp.

The result is that a buyer can typically use some or all of their retirement savings as the down payment on a business. As long as the business performs well, the retirement savings continue to grow.