Facts and stats*
- Small businesses, often one-man bands, constitute most of the sector and typically handle transactions worth less than A$100,000
- Sales commissions average 8%-12% of gross selling prices
- Certification and formal training are not mandatory – but they do enhance your credibility
- Brokers who are certified and harness data analytics are particularly successful
- Businesses selling for between A$100,000-A$5m have the most growth potential
*Source: AFP Business Brokers
State of the sector
Best described as real-estate agents for businesses for sale, the business brokerage industry is on the way up. After a slow period immediately following the GFC, the sector has recovered robustly.
However, brokerage owners like Eddie Pampalian from Network Infinity are still urging caution. “It’s extremely tough. If you’re in retail, for example, businesses are consistently going down rather than up.”
As it stands, although the industry as a whole is making a strong recovery, the success of a business brokerage depends heavily on the economic strength of the industry or industries in which you specialise. (Find out what else success depends on in our guide ‘How to Run a Business Brokerage’).
If you specialise in the (currently) declining retail industry, for instance, it may not be such a good time to buy a brokerage reliant on that sector.
You could do worse than buy a brokerage with a strong reputation in recession-proof sectors like food retail or funeral homes. And a business with a broad portfolio, with experience in a range of sectors, will protect you against dips in any one or two industries.
Eddie Pampalian (read our full interview with him here) suggests that pubs, cafes and restaurants are a fruitful area in which to operate. “A major source of clients is the food and beverage industry as they tend to change hands more quickly than other businesses,” he said.
While this is not a high-volume industry, it does have a high margin on sales so you can still be successful with comparatively few transactions.
Neither certification nor formal training is mandatory in this industry – but it certainly helps burnish your credibility and indeed expertise. This is especially so given that the process of buying or selling a business is increasingly data-driven and specialised.
Business valuation services and premium advisory services offer huge opportunities for forward-thinking firms, according to AFP Business Brokers, especially for medium-sized and large companies. Growing numbers of firms also offer services not traditionally offered by business brokers.
The right sector for you?
The success of a business can depend largely on the type of person you are. Do you relish the cut-and-thrust of business ownership?
And is this the right sector for you? It’s a competitive, relationship-driven industry and it helps to have these attributes as an owner:
- Networking skills. Top brokers are good with people and thrive on connecting with a wide range of personalities. If you’re inclined to be shy and retiring, it could be harder for you to get the critical mass of business contacts needed to keep your business rolling.
- Sales skills. This is a sales-orientated profession so you need to know how to build relationships, negotiate and close deals.
- Strong grasp of law/regulations. Buying and selling a business is a legal process framed by regulations. If the thought of poring over legal documents and getting your head around regulations terrifies you – this might not be the business for you.
- Hard work reaps rewards. Being a business broker is not easy; you’ve got to be ready to put in the hours and build up your customer base – especially if you’ve decided to go it alone rather than tap into a franchise like Network Infinity.
- Your background. Previous experience as a business broker working for another company is advantageous. You should, ideally, already have some contacts in the industry and knowledge of how sales and marketing systems work.
Registration and licensing requirements vary between states and territories. Find out more from the Australian Business Licence and Information Service and Australian Institute of Business Brokers. If you fancy getting into business brokerage then Career FAQs has some useful advice.
Browse our business brokerages for sale