According to a recent study by the International Franchise Association, the outlook for the franchise sector is stronger than ever. There are approximately one million franchises operating from coast to coast, employing an impressive 9.1 million workers. In 2016, the GDP generated by the industry topped just over $550 billion, reflecting a steady growth every year since 2010.
All of this is to say the franchise industry is booming, and there are a wealth of entrepreneurs looking to step into their own franchise outfit every year. In addition to that, another 80% of mature, profitable businesses that range from the small to the midsize are quietly up for sale at any given moment. Such business owners rarely advertise their business on the open market, as they don’t want to scare away customers and/or want to ensure they only attract the most qualified of buyers.
So how would anyone know such a business was for sale? How does a seller find the right franchise or the right business to buy into? That’s the nature of the brokerage business. And now is the time to start.
Making Big Money as a Brokerage Business or Business Broker
Those in the brokerage business have several names—broker, business transfer agent, intermediary—that all point to their value. Such professionals act as a special intermediary between the owner of a business and an interested buyer. They walk each through the private business buying and selling process, introducing parties and negotiating contracts.
Some brokerage business firms will work primarily for businesses who are selling, others for entrepreneurs who are buying, and some mix up their clientele with both, but it is important to note that the best brokers remain accessible and fair to both parties while they broker a deal. That’s because one of the key functions of the broker is to act as a mediator between seller and buyer when emotions run high during negotiations. And they will—particularly when it comes to independently owned small businesses. That’s because such a business is often the business owner’s biggest asset—something they’ve spent a great deal of time and money building. An experienced broker knows how to best price a business to ensure that the owner gets a good return and the buyer gets a fair investment.
Of course, this is also where the money-making for the brokerage business owner comes in as well. The average business broker will charge 10 to 15% of the final sale price as a commission for their work. This percentage reflects the amount of time and effort the broker puts in to learning the specifics of a seller’s business (including valuating the business), finding and curating that business to the right buyer (marketing, advertising, and weeding out bad buyers), and all of the negotiations and contract building they do once a good buyer/seller fit has been found. The average sell time of a business is 7 to 9 months, and most brokers will have several running clients at any given time.
The Bottom Line
So what is the bottom line? In a recent survey by the Business Brokerage Press, the average answer to “How much should an industry veteran earn in commissions?” was $156,000. The average answer to “How much can a new business broker expect to earn in their first year?” was $47,000, with the most frequent answer being $50,000.
Of course, everyone’s first year is different, and who and how you begin as a brokerage business will impact your results. To learn more about how our franchise brokerage firm can help you get started with brokering, contact us at Transworld today.