FINDING A BUSINESS BROKER IN:

Dallas TX (2020)

You might be surprised...

 

But there are almost no regulations around business brokers.

 

So it's vital that you do your research and hire the best one for your situation.

This guide will explain:

  • Unique factors about selling a business in Dallas, Texas

  • Finding the best broker in your area

  • & the cost of hiring a broker

Let's dive in.

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CHAPTER 1:

Selling In Dallas, Texas

Dallas, TX has a lot of things going for it when it comes to selling a business.

Population growth, access to talent, lower taxes, and more make Dallas a desirable place to own a business. 

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Location, Location, Location

Business Travel Hub: Dallas is the 3rd largest business travel destination in the US. This is great for buyers as it signals a strong business environment.

Population Growth: In 2018, Dallas was the fastest growing large city in the US and continues to grow rapidly. Whether it's a laundry business for sale or a oil distributor, that means good business.

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Lower Tax Burden: Not having state and local tax means that business owners will keep more of their profits. This will allow buyers to pay higher multiples because they can recoup their investment quicker.

Great Talent: Finding great employees can be challenging and scare off new buyers. But the local university system produces an abundance of great talent.

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HQ For Major Companies: Dallas has always been headquarters for several Fortune 500 companies, but more keep moving in every year. Small business buyers may take the hint from them that Dallas TX is the place to set up shop.

CHAPTER 2:

Finding The Best Business Broker In Dallas, TX

Your needs will be very specific based on your company size and industry.

This chapter will show you how to find the best broker for you, regardless of your business.

With 150+ brokers serving Dallas/Fort Worth and other surrounding counties, you'll have several options.

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What You Need In A Broker

Before working with a business broker, I recommend reading my in-depth post about what brokers do, their value to you, the contracts they use, & more.

After reading that, here's what you need to know...

These are the top criteria you'll be looking for when hiring a business broker:

Industry Experience -

You don't need a broker that only sells in your industry, but you do want one that has sold at least 2 or 3 similar businesses.

Average Deal Size -

What are the smallest and largest businesses they've sold? Is your business somewhere between those?

A $300k business and a $3 million one are completely different. You want a broker that knows how to sell a business of your size.

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Years Of Experience -

You'd be amazed at all the issues that can occur during a deal. You'll want a broker with at least 3-5 years of experience to ensure they've seen many of the issues before and how to overcome them.

Deal Close Rate -

What percentage of listings does the broker actually sell?

Is it a 50/50 shot that they sell your business or an 80/20? Obviously, you'll want the brokers with higher closing rates.

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For more information about vetting a broker and what your looking for, head over to my Vetting A Broker post.

Finding The Best Business Broker

I'm going to show you the #1 way of finding the broker for you, step-by-step.

I love this method because it's easy, fast, and there's no room for deception.

1. Go to BizBuySell.com.

2. You're looking for businesses for sale that are similar to yours. Enter your business category, Texas, and Dallas County. Then hit Search.

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3. On the next page, click "Modify Your Search". This will open a drop-down where you can narrow in on your exact business details.

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4. Only the business category, counties, and price range options will be needed.

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5. Under the categories section, you can be even more specific. If you were an HVAC company for instance, you wouldn't need to look at the heavy construction category.

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6. Usually you'll want to include the counties surrounding you as well. For Dallas, I recommend including Ellis, Tarrant, Denton, Collin, Rockwall, & Kaufman too.

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7. You should also put a min and max price on the search. It doesn't have to be exact, but if you think your business is worth $750k, then make the range $400k to $1.5 million to get a better idea of the EBITDA multiples.

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Now you'll have a very exact search of all the business that are comparable to yours. I recommend looking at 20 or more listings to get a feel for what's out there, how much they sell for, and who their broker is.

You can also click on each broker's profile to learn more about them and their current listings.

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Great, you found some good brokers! But how much will it cost?

Keep reading...

CHAPTER 3:

How Much Will It Cost?

Just like in real estate, the seller pays all the broker fees.

The two usual fees that business brokers charge are a percentage of the total selling price and upfront fees.

 

I'll break down both of those.

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Broker Commissions

If you're a business owner interested in selling, this section is for you. All the broker payments will come out of your pocket.

Commission:

The majority of a business broker's pay is from a percentage of the total selling price of a deal.

 

10% is the industry standard, but some brokers may be as low as 5% or as high as 15% depending on deal size.

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The commission tends to work in increments.

For businesses under $300k, brokers may start charging a flat fee like $20-30k upon closing. So if your business sells for $150k...it's a whooping 20%.

But as you work your way up, the fees will become less. For example:

It's common for a broker to charge 10% on the first million, 8% on the next 1 or 2 million, and 6% onward. So if your business sold for $5 million, you might pay $380k (10% on the 1st MM, 8% on the 2nd and 3rd MM, and 6% on the last 2 MM). Only 7.6% of the total.

Upfront Fees:

The 2nd form of payment is through fees at the beginning of the transaction.

There is no guarantee that a business will sell, but there is a guarantee that the broker will put a lot of work into the deal.

 

Therefore, some brokers charge a fee for the upfront work.

 

Typically it’s anywhere from $3k to $15k. But if the business sells, this fee will then be removed from the closing commission they charge.

Important Note:

A broker's percentage is based on the total selling price of the business.

 

If you, as the seller, receive half of the selling price in cash and the other half as a loan to the buyer, you still owe the broker their commission on the total selling price in cash upon closing.

Listing Agreements:

In another post, I break down the 5 most common contracts that sellers sign with a business broker.

I recommend reading that before reaching out to a broker so you better understand the various arrangements.

Still have questions? Email me at mvalles@sunbeltnetwork.com.

 

I’m happy to help anytime.

Thank you to Icon Scout for several of the illustrations: 1, 2, 3, 4, 5, 6