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Business BrokersDecember 2015 1

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Selling up: Improvements in a range of


macroeconomic variables will boost demand

IBISWorld Industry Report OD4796

Business Brokers in the US


December 2015

Edward Rivera

2 About this Industry

16 International Trade

Industry Definition

17 Business Locations

Main Activities

Similar Industries

19 Competitive Landscape

29 Industry Data

Additional Resources

19 Market Share Concentration

29 Annual Change

19 Key Success Factors

29 Key Ratios

3 Industry at a Glance

28 Industry Assistance

29 Key Statistics

19 Cost Structure Benchmarks


21 Basis of Competition

4 Industry Performance

21 Barriers to Entry

Executive Summary

22 Industry Globalization

Key External Drivers

Current Performance

23 Major Companies

Industry Outlook

23 Murphy Business & Financial Corp.

10 Industry Life Cycle

24 Sunbelt

12 Products & Markets

26 Operating Conditions

12 Supply Chains

26 Capital Intensity

12 Products & Services

27 Technology & Systems

13 Demand Determinants

27 Revenue Volatility

14 Major Markets

28 Regulation & Policy

30 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

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About this Industry


Industry Definition

Companies in this industry act as an


intermediary between buyers and sellers
of small businesses. As part of the process,
business brokers estimate the value of a

Main Activities

The primary activities of this industry are

business, advertise the sale without


disclosing the business name, handle
negotiations and facilitate others aspects
of the sale (including due diligence).

Providing valuation services to small businesses


Providing advertising services during the sale of a small business
Providing negotiation services on behalf of small businesses
Providing due diligence concerning small business transactions
The major products and services in this industry are
Advertising
Due diligence
Valuation
Other services

Similar Industries

52421 Insurance Brokers & Agencies in the US


Operators in this industry primarily act as agents or brokers in selling insurance policies and annuities.
53121 Real Estate Sales & Brokerage in the US
Operators in this industry are primarily engaged in the process of selling, buying or renting real estate for
others.
54119 Conveyancing Services in the US
Operators in this industry provide conveyancing services, which includes the transfer of property rights
involving an attorney to represent each of the buyer, seller and mortgage holder.
54199 Credit Counselors, Surveyors & Appraisers in the US
Operators in this industry primarily provide quantity surveyor services, also known as cost estimation; estate
appraisal services (except real estate); or consumer credit counseling services.

Additional Resources

For additional information on this industry


www.ibba.org
International Business Brokers Association
www.mabia.org
Mid-Atlantic Business Intermediaries Association
www.mbbi.org
Midwest Business Brokers and Intermediaries
nebba.com
New England Business Brokers Association

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Business Brokers in the US December 2015

Industry at a Glance
Business Brokers in 2015

Key Statistics
Snapshot

Revenue

Annual Growth 10-15

Annual Growth 15-20

Profit

Wages

Businesses

3.0%

$1.0bn

$374.5m 2,184

$79.5m

Number of businesses

Revenue vs. employment growth

% change

Murphy Business
& Financial Corp.
5.8%
Sunbelt
4.6%

% change

Market Share

-3
-6

-12

0
-1
-2

-9

Year 07

1.9%

09

11

Revenue

13

15

17

19

21

-3

Year

08

10

12

14

16

18

20

Employment
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p. 23

Products and services segmentation (2015)

10%

Key External Drivers

Advertising

Number of businesses
Access to credit

Business sentiment index

20%

Number of adults
aged 65 and older

Other services

45%
Valuation

25%

p. 4

Due diligence
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Industry Structure

Life Cycle Stage

Mature

Regulation Level

Medium

Revenue Volatility

Low

Technology Change

Low

Capital Intensity

Low

Barriers to Entry

Low

Industry Assistance

Low

Industry Globalization

Low

Concentration Level

Low

Competition Level

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 29

Medium

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Industry Performance

Executive Summary | Key External Drivers | Current Performance


Industry Outlook | Life Cycle Stage
Executive
Summary

Despite a damaged macroeconomic


climate following the recession, an
increasing penchant for small business
owners to sell their companies has
improved the performance of the
Business Brokers industry over the five
years to 2015. Business brokers operate
as intermediaries during the sale of a
small business, providing due diligence,
valuation, advertising and negotiation
services to downstream clients. In
contrast to merger and acquisition
advisors, business brokers focus on
companies that are valued at less than
$2.0 million, often finding the ultimate

In

recent years, optimism surrounding the


business-for-sale market has increased among
business brokers
buyer within a 20-mile radius of the
companys location. According to the
latest available survey data from
BizBuySell, an increasing number of
willing buyers and sellers of small
businesses and more realistic sale price
expectations for current owners have
benefited the industry substantially in
recent years. Consequently, industry
revenue is expected to increase at an
annualized rate of 3.0% to $1.0 billion
from 2010 to 2015, with a 3.5% increase
in 2015.
Industry operators typically earn
10.0% of the ultimate sale price in the

Key External Drivers

Number of businesses
Industry operators earn the majority of
their commissions from the successful
sale of small businesses. While business
brokers are only involved in 10.0% of
these transactions, a growing number of
domestic businesses are beneficial to the
industry as it increases the potential
client base for industry operators. The

form of commission. At least 70.0% of


the ultimate buyers of companies
brokered by industry operators are
individuals rather than existing business
owners. Indicative of the average
operators focus on small transactions for
commissions, an estimated 40.0% of
industry operators are sole proprietors.
In recent years, optimism surrounding
the business-for-sale market has
increased among business brokers. For
example, according to BizBuySell, 57.8%
of surveyed business brokers expected
the landscape for the industry to improve
in 2013 compared to 2012, with their
optimism rewarded as revenue increased
in each subsequent year.
Over the five years to 2020, industry
revenue is forecast to increase at an
annualized rate of 1.9% to $1.1 billion.
Improvements in a range of
macroeconomic variables, including the
number of domestic businesses, are
expected to cause the industrys
transactions to consistently grow.
Moreover, the aging of the domestic
population is anticipated to increase the
willingness of business owners reaching
retirement age to sell their businesses, to
the benefit of industry commissions. Yet,
given the only moderate level of
legislation surrounding business brokers,
potential introductions of industryspecific regulation with the potential to
damage the industrys commission
structure and average profit margin have
become increasingly probable.

number of businesses is expected to


increase in 2015, representing a potential
opportunity for the industry.
Access to credit
At least 70.0% of the ultimate buyers of
industry-brokered businesses are
individuals, rather than existing
companies. These individuals often need

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Industry Performance

access to financing in order to complete


their small business purchase.
Consequently, aggregate increases in
credit access tend to remove barriers
related to small business transactions,
which ultimately benefits industry
commissions. Access to credit is expected
to increase in 2015.
Business sentiment index
The business sentiment index is highly
correlated with the domestic business
sector. As a result, increases in the
business sentiment index tend to boost
the number of potential clients willing to
make small business purchases, to the
benefit of industry revenue. The business

sentiment index is expected to fall in


2015, representing a potential threat to
the industry.
Number of adults aged 65 and older
Given the challenging macroeconomic
climate endured since 2009, a number of
business owners that have exceeded the
traditional retirement age have held onto
their businesses. As the economy
continues to recover and a growing
portion of the domestic population
reaches retirement age, the number of
owners relying on business brokers to sell
their businesses is anticipated to
increase. The number of adults aged 65
and older is expected to increase in 2015.
Access to credit

Number of businesses
2

12

% change

% change

Key External Drivers


continued

-1
-2
-3

Year

0
-4

08

10

12

14

16

18

20

-8

Year

08

10

12

14

16

18

20

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Industry Performance

Industry structure

Improvements in available financing,


business sentiment and corporate profit
since 2010 have benefited the Business
Brokers industry immensely over the five
years to 2015. Industry operators act as
intermediaries between buyers and
sellers of small businesses. Consequently,
business brokers are often compared to
merger and acquisition advisors, with the
distinction that business brokers focus on
relatively small businesses valued under
$2.0 million and often find their buyers
within their local market. Since 2011, a
growing number of owners interested in
selling their businesses, coupled with an
increasing number of interested buyers
and more realistic sales price
expectations, have been key drivers of
growth for business brokers. As a result,
over the five years to 2015, industry

revenue is expected to increase at an


annualized rate of 3.0% to $1.0 billion;
this growth includes a 3.5% rise in
revenue anticipated in 2015 alone.

According to the latest available data from


the International Business Brokers
Association (IBBA), 40.0% of its members
are sole proprietors or nonemployers, which
is indicative of the industry as a whole. For
their efforts during the valuation,
advertising, negotiation and due diligence
stages of the sale, business brokers typically
earn 10.0% of the ultimate sales price in
commission. In aggregate, the average
industry sole proprietor generates between
$200,000 and $300,000 in annual
commissions. Industry employment has
followed improvements in the domestic
economy over the five-year period, with the
number of employees set to increase at an
annualized rate of 0.7% to 3,723 from 2010
to 2015. Similarly, given the industrys
substantial number of nonemployers,
enterprise figures tend to trend with
employment; as a result, the number of
industry enterprises is expected to increase
at an annualized rate of 0.7% over the same
period, reaching 2,184 companies in 2015.
As mentioned, business brokers focus
their efforts on companies with valuations

below $2.0 million, and typically find their


buyers within a short distance of the
companys location. More specifically,
according to the latest available survey data
from the IBBA, for companies valued below
$500,000, 54.0% of ultimate buyers are
located within a 20-mile radius.
Alternatively, for companies valued between
$500,000 and $1.0 million and between
$1.0 million and $2.0 million, 33.0% and
34.0% of buyers, respectively, are located
within a 20-mile radius.
Similarly, the ultimate buyers, while also
located near their purchase, are typically
individuals rather than existing companies.
For example, according to the IBBA, 80.0%
of companies valued below $500,000 are
purchased by individuals, compared to
77.0% and 78.0% of company purchases
valued between $500,000 and $1.0 million
and between $1.0 million and $2.0 million,
respectively, that are individual buyers.
Also, according to the IBBA, personal
services businesses and restaurants
account for nearly a quarter of all sales
for business brokers.

Industry revenue
6
3

% change

Current
Performance

0
-3
-6
-9
-12

Year 07

09

11

13

15

17

19

21

SOURCE: WWW.IBISWORLD.COM

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Industry Performance

Recent trends

In recent years, the aggregate landscape


for business brokers has improved.
According to BizBuySell, an online
marketplace for business sales, business
sentiment among industry operators has
improved slowly but consistently since
2010. In addition, 61.1% of business
brokers cited an improvement in
business-for-sale conditions from 2011
to 2012. The most important reasons for
this improvement included an
increasing number of buyers, a growing
willingness to sell among business
owners and more realistic sale price
expectations. Similarly, in 2013, 57.8%
of surveyed business brokers expected
the landscape for the industry to
improve compared to 2012.
Moreover, the time needed to close a
transaction has decreased since 2010
overall, to the benefit of industry
commissions and margins. According to
the IBBA, the time needed to close a
business valued under $500,000
declined from four to three months since
2012, while the time needed to close a
business valued between $500,000 and
$1.0 million has decreased from six to
five months over the same period. As
commissions are not based on the time
spent on a sale, shortening transaction
requirements lower industry costs and
allows business brokers to focus on
additional sales, benefiting profitability
in turn. In Q2 of 2015, however, these
trends largely reversed as the average
time to close increased in these markets
to five and six months. This hurt

In

recent years, the


aggregate landscape for
business brokers has
improved
profitability in 2015. Consequently, the
industrys average profit margin is
expected to increase slowly over the
five-year period, rising from 6.4% in 2010
to an estimated 7.8% in 2015.
Yet, not all business brokers have
noted improving conditions in recent
years. According to BizBuySell in 2013,
34.4% of respondents that experienced
constant or worsening business broker
conditions and cited a lack of available
financing as the primary reason for
tempered sales. In the two years since,
operators have reported improved
financing conditions, which is in line with
the 5.1% increase in access to credit
expected in 2015. Moreover, according to
IBBA, the three most common obstacles
to closing transactions in 2013 were
related to valuation issues, financing
issues and deal fatigue. Since, survey
participants have changed their
evaluations to first comment on
maintaining unrealistic expectations
about the transaction made by the seller
that damaged their chances of completing
the sale. Alternatively, brokers noted
poor financial records and declining
business value as the largest mistakes
among sellers.

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Industry Performance

Industry
Outlook

Consistent increases in both the number


of businesses and corporate profit are
anticipated to continue aiding the
performance of the Business Brokers
industry over the five years to 2020.
Furthermore, slow improvements in
business-for-sale conditions since 2011
are anticipated to continue in the years
to come. For example, from 2015 to
2020, access to credit and the business
sentiment index are forecast to increase
at annualized rates of 1.4% and 1.8%,
respectively. Growth in these variables
increases the pool of individuals and
existing corporations that have the
means and confidence to make
additional business purchases.

Macroeconomic
environment and
demographic shifts

The number of domestic businesses is


forecast to increase at an annualized rate of
0.8% from 2015 to 2020. In general,
aggregate growth in the number of
businesses is correlated with an increasing
number of owners that are either currently
interested in selling their business or will be
in the near future. Consequently, total
enterprise growth in the United States
generally provides additional commission
opportunities for business brokers.
However, business brokers are only
involved in a relatively small portion of all
domestic business transactions. According
to Diomo Corporation, a resource center for
the business-for-sale market, only 20.0% of
businesses listed for sale eventually sell,
while industry operators are only involved in
10.0% of all business sales. Moving forward,
a renewed focus on elucidating the benefits
of business brokers, particularly during the
due diligence and negotiation stages, will be
critical to expanding the share of business
transactions that rely on industry operators.
In addition, the number of adults aged 65
and older is anticipated to increase at an

Consequently, industry revenue is


expected to increase at an annualized
rate of 1.9% to $1.1 billion over the
five-year period.
Nevertheless, not all trends are
anticipated to benefit business brokers
over the five-year period. For example,
criticism surrounding some industry
operators has increased in recent years,
primarily among those brokers that
charge commissions well above the
industrys average. Furthermore,
industry-specific legislation has the
potential to become stricter, particularly
given these criticisms and the only
moderate level of regulation that
currently surrounds business brokers.

The

number of domestic
businesses is forecast to
increase
average annual rate of 3.4% from 2015 to
2020, benefiting industry revenue as a
result. According to BizBuySell, the
challenging corporate environment faced
during and subsequent to the recession
tempered business transactions in recent
years. Consequently, there is a substantial
and growing volume of business owners
nearing or past the traditional retirement
age that are now interested in selling their
businesses. Swelling downstream demand is
anticipated to attract new entrants to the
Business Brokers industry; consequently,
the number of industry enterprises is
forecast to increase at an annualized rate of
1.0% to 2,293 companies from 2015 to
2020. Similarly, industry employment is
anticipated to rise at an annualized rate of
1.5% over the same period, reaching 4,007
individuals in 2020.

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Industry Performance

Regulatory landscape

There is currently only a moderate


amount of industry-specific legislation.
At the federal level, there are no specific
business broker licensing requirements;
as a result, state governments primarily
regulate the Business Brokers industry.
However, only 16 states mandate that a
business broker maintain a real estate
license, while Illinois requires a
registration process and Nevada
necessitates a specific business
brokerage course.
The potential for additional industryspecific regulation continues to mount,
however, given trends in the financial
services sector as a whole and recent
criticism surrounding the industrys fee
structure. For example, a 2012 article by
Norm Brodsky in Inc. Magazine depicted
a situation in which a business owner
chose not to sell her business due to the
25.0% commission dictated by the

The

potential for additional


industry-specific regulation
continues to mount
relevant business broker. While this
fee was well above the industry
average, this article caused a
substantial amount of bad press for
industry operators that focused on
questions surrounding their necessity
during the transaction process.
Escalating compliance costs associated
with potential regulatory changes are
anticipated to temper the industrys
profitability over the five-year period,
despite growing transaction volumes.
Consequently, the industrys average
profit margin is forecast to increase
only marginally, from 7.8% in 2015 to
8.4% in 2020.

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Industry Performance
Life Cycle Stage

Industry value added is expected to trend in line


with real GDP growth over the 10 years to 2019
Slowing company growth rates

% Growth in share of economy

Reduction in rate of product and


service introductions

20

Maturity

Quality Growth

Company
consolidation;
level of economic
importance stable

High growth in economic


importance; weaker companies
close down; developed
technology and markets

15

Key Features of a Mature Industry


Revenue grows at same pace as economy
Company numbers stabilize; M&A stage
Established technology & processes
Total market acceptance of product & brand
Rationalization of low margin products & brands

10

Quantity Growth

Many new companies;


minor growth in economic
importance; substantial
technology change

Real Estate Sales & Brokerage


0

Single Location Full-Service Restaurants


Insurance Brokers & Agencies

Convenience Stores

Business Brokers

Computer Stores

Decline

-5

Shrinking economic
importance

-10
-10

-5

10

15

20

% Growth in number of establishments


SOURCE: WWW.IBISWORLD.COM.AU

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Industry Performance

Industry Life Cycle


This

industry
is M
 ature

The Business Brokers industry is in the


mature stage of its economic life cycle;
this stage is characterized by both
slowing industry participation growth
and product and service introductions.
Industry value added (IVA), which
measures an industrys contribution to
the overall economy, is expected to
increase at an annualized rate of 1.8%
over the 10 years to 2020. In contrast, US
GDP is projected to grow at an
annualized rate of 2.2% during the same
period. These figures signify that the
industrys share of the US economy is
slowly declining; however, this decline
largely reflects postrecessionary
conditions over the past five years.
While new entrants will be drawn to
increasing transaction volumes, the
Business Brokers industry faces
substantial competition from individuals
that choose to sell their businesses
without the help of a broker. Moreover,

industry operators also compete with


merger and acquisition advisors that
expand their focus to smaller deals
typically dominated by business brokers.
As a result of this significant amount of
external competition, company growth
rates are forecast to remain near their
current levels.
Business brokers have continued to
expand their product lines in recent
years, with many now offering valuation,
advertising, negotiation and due
diligence services to downstream clients.
However, the introduction of new
products and services is forecast to slow
over the five years to 2020, with currently
offered services covering a large portion
of the selling process. Alternatively,
industry operators are anticipated to
focus on their existing services to expand
their involvement in domestic business
transactions, rather than introduce new
products to boost demand.

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Products & Markets

Supply Chain | Products & Services | Demand Determinants


Major Markets | International Trade | Business Locations

Supply Chain

KEY BUYING INDUSTRIES


44512

Convenience Stores in the US


Owner-operated convenience stores represent a significant downstream market segment for
business brokers.

72211b

Single Location Full-Service Restaurants in the US


Many restaurant owners rely on business brokers to find the best candidates to take over their
business.

81211

Hair & Nail Salons in the US


Hair and nail salon owners rely on business brokers to sell their operations.

81232

Dry Cleaners in the US


Independently-owned dry cleaning businesses constitute a significant portion of the
downstream market for business brokers services.

KEY SELLING INDUSTRIES

Products & Services

44312

Computer Stores in the US


Business brokers purchase computers to use for their daily operations from computer stores.

45321

Office Supply Stores in the US


Office supply stores provide business brokers with various goods including pens, paper, office
equipment and furniture.

53112

Commercial Leasing in the US


Business brokers rent office space from commercial leasing companies.

Revenue for the Business Brokers industry


is generated from closed deals, which
follows the entire process of valuing a
business, advertising that business,
conducting due diligence on prospective
buyers and administering the deal
transaction. For the purpose of this report,

IBISWorld has segmented out the different


steps involved in closing a deal and their
respective contribution to industry revenue.
Valuation
Determining the value of a business is
arguably the most important step in the

Products and services segmentation (2015)

10%

Advertising

20%

Other services

45%
Valuation

25%

Total $1.0bn

Due diligence
SOURCE: WWW.IBISWORLD.COM

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Products & Markets

Products & Services


continued

Demand
Determinants

Due diligence
After finding prospective buyers, business
brokers must conduct due diligence on the
buyers to make sure they are a good fit for
the business. Additionally, brokers
conduct due diligence on a business in
order to provide accurate information to
prospective buyers. Acting as the
middleman in these transactions,
performing due diligence and offering
both sellers and prospective buyers with
accurate information is crucial to
successfully close deals. In 2015, this
service is expected to account for 25.0% of
industry revenue.

Advertising
Business brokers advertise businesses
on their websites and through other
channels to find potential buyers.
While independent business owners
can undertake this task on their own,
brokers often have access to extensive
advertising networks and use a
targeted advertising approach to
attract the best prospects. The growing
use of internet advertisements and
websites has helped reduce advertising
expenses for brokers. Consequently,
this segment is anticipated to account
for only 10.0% of industry revenue in
2015.
Other services
Business brokers also help business
owners and buyers coordinate
negotiations and close sales
transactions. Depending on the sale
value, the time to close a deal can take
anywhere between three to six months
on average. After valuing a business,
advertising that business and finding
prospective buyers, brokers must
coordinate with accountants, lawyers
and banks to complete the deal.
IBISWorld estimates this service to
constitute 20.0% of industry revenue
in 2015.

The demand for this industrys services


depends on a number of factors that
drive small business owners to sell their
businesses or individuals to enter the
small business sector. Among personal
reasons that may cause people to exit
their business, independent owners sell
their enterprise either when the business
is growing or declining. During the
growth stage, business owners seek to
turn a substantial profit by selling their
operations when it is performing
exceptionally well. On the other hand,
owners seek brokerage services when
their business is declining and

unprofitable, with the hope of recouping


a fraction of the value of their business.
Several factors also entice individuals
to enter the small business sector and
demand this industrys services. Easy
access to credit and a flourishing small
business environment entice individuals
to pursue small-scale retail stores and
service-oriented businesses. According to
some of the leading lenders in the United
States, such as Citibank and JP Morgan
Chase & Co., lending to small businesses
has increased over the past five years,
helping support the demand for business
brokers services. Despite a strengthening

process of selling and purchasing an


existing small business. Overvaluing or
undervaluing a business can undermine
the authority of a broker and be costly for
the buyer and seller. Consequently, many
independent store owners turn to brokers
for this service alone. There are several
different indicators that are used to
establish the value of a business including
assets, gross sales and income. Moreover,
some brokers use one method or several
different approaches to determine the
most accurate value. IBISWorld estimates
that this service will constitute 45.0% of
industry revenue in 2015.

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Products & Markets

Demand
Determinants
continued

Major Markets

economy and improving small business


environment, uncertainty regarding tax
and regulatory oversight has dampened
the demand for brokerage services.
Other minor factors that influence the
level of demand for this industrys
services include competitive services. For
instance, valuation service providers help
sellers determine the value of their

business. Independent store owners can


then advertise their business and find
prospective buyers at a much lower cost.
Also, internet platforms, such as
Bizbuysell.com, serve as a marketplace
for buyers and sellers of businesses,
reducing the need for brokers.

Major market segmentation (2015)

11.8%

Restaurants

33.4%

12.6%

Retail

Manufacturing

18.4%
Other

Total $1.0bn
Industry firms can be segmented into two
categories: generalists and specialists.
Generalists administer the sale and
purchase of a variety of businesses,
whereas specialists operate in one
specific industry or sector. For instance,
there are many brokers that target the
restaurant industry by helping owners
estimate the value of their enterprise,
coordinate negotiations and supervise
the closing of a deal.
Retail
Retail businesses represent the largest
downstream market segment for business
brokers, accounting for an estimated
33.4% of the market in 2015. This
segment includes a variety of retail stores
including clothing stores, drug stores,
liquor shops and flower shops, among

23.8%
Service

SOURCE: WWW.IBISWORLD.COM

others. Many retail store owners have


operated their business for many years
and only decide to exit the business when
they approach retirement or when
demand for their goods declines.
Moreover, convenience stores constitute
a substantial portion of this market
segment, as a majority of stores are
independently owned in the United
States. While the demand for this
industrys services from convenience
stores has expanded in recent years,
unfavorable operating conditions for
small business owners have placed
downward pressure on the demand from
this market segment as a whole. Overall,
Americans are increasingly turning to
big-box retailers, such as Walmart and
Costco, and e-commerce websites to
purchase a range of goods. Consequently,

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Products & Markets

Major Markets
continued

as smaller retailers lose business to super


centers and warehouse clubs, the demand
for brokerage services from owneroperated retail stores is anticipated to
further decline in the longer term.
Service
Service providers ranging from small
marketing firms to childcare providers also
rely on business brokers services. In 2015,
this segment is anticipated to account for
23.8% of the market for brokerage services.
Beauty salons and dry cleaners constitute a
significant share of this segment, as well as
car wash providers in certain regions.
While this market is highly fragmented and
the demand for brokerage services can vary
drastically, demand from this segment as a
whole has continued to increase after
hitting a low during the recession. In 2010,
consumer demand for services declined
due to lower disposable income. For
instance, many people purchased home
dry-cleaning kits and steamers to reduce
their dry-cleaning expenses. As the demand
for these services declined, many
owner-operated small businesses failed
during the recession, causing the
demand for brokerage services to
decline. However, as discretionary
income continued to rise in the following
years, service-based businesses began to
grow again, causing owners to turn to
industry firms for their services.
Manufacturing
Manufacturers are estimated to
constitute 12.6% of the market for this
industrys services in 2015. This figure
represents no change from 2010.
Manufacturers produce a variety of goods
including food products, medical device
equipment, furniture and fixtures, among
others. Due to the range of goods
produced by operators in this
downstream market, growing demand
from another industry offsets declining
demand from one industry. Furthermore,

demand for brokerage services from


food manufacturers is fairly steady due
to the low barriers to entry for smallscale food production businesses and
the high rate of failure during the first
several years of operating.
Restaurants
Restaurants also provide a steady stream
of revenue to industry operators,
accounting for an estimated 11.8% of the
market for brokerage services in 2015.
Most of the restaurant owners who turn
to business brokers only own one
restaurant or operate a small franchise.
Furthermore, a majority of the sales price
for restaurants is under $1.0 million,
while a limited number of transactions
exceed this amount. Over the past five
years, this segments share of the market
has increased after sinking in 2010. At
this time, many restaurants went out of
business due to exceptionally reduced
foot traffic. As consumer spending
recovered in the following years and the
restaurant industry began to flourish
again, the demand for brokerage
services from this segment of the market
slightly increased.
Other
Other small businesses constitute about
18.4% of the downstream market for
business brokers services in 2015.
Examples of businesses included in this
market segment are pawn shops, physical
therapy clinics and publication
distribution companies. The largest
segment within this group is
construction, which represented an
estimated 8.6% of revenue in 2015 and
healthcare, which represented 7.2% over
the year. in summary, this segment
constitutes the smallest share of the
market because these businesses target
niche markets. Overall, this segments
share of the market has remained steady
over the past five years.

Business Brokersin the US December 2015 16

WWW.IBISWORLD.COM

Products & Markets

International Trade

Due to the service-based nature of this


industry, firms do not engage in
international trade.

Business Brokersin the US December 2015 17

WWW.IBISWORLD.COM

Products & Markets


Business Locations 2015

West
New
England

AK
0.3

Great
Lakes
WA

ND

MT

2.4

Rocky
Mountains
ID

OR
1.3

West NV
1.1

3.3

SD
0.2

WY

0.7

MN

0.2

0.3

Plains

CO

1.5

KY

0.6

OK
1.1

NC
2.2

TN

AZ

NM

2.6

0.6

Southwest
TX
6.6

HI
0.3

Additional States (as marked on map)


1 VT

2 NH

3 MA

4 RI

5 CT

6 NJ

7 DE

8 MD

0.1
0.5

0.2

3.0

2.9

0.3

SC

Southeast

0.4

MS

AL
0.6

1.2

GA
2.8

0.4

LA
2.4

FL

11.1

Establishments (%)

0.2

1.6

AR

0.1

0.8

12.1

WV VA
4.1

0.7

1.2

CA

West

1.7

MO

KS

2.5

OH

1.0

5.3

3.7

IN

IL

0.3

UT

PA

3.2

0.5

0.3

1 2
3
NY
7.3
5 4

MI

1.2

IA

NE

0.4

WI

ME

MidAtlantic

9 DC
0.4

Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
SOURCE: WWW.IBISWORLD.COM

Business Brokersin the US December 2015 18

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Products & Markets

Distribution of establishments vs. population


30

20

10

Southwest

Southeast

Plains

New England

Rocky Mountains

Establishments

Mid-Atlantic

Great Lakes

0
West

The geographic spread of industry


establishments closely mirrors the
distribution of the population across the
United States. As such, slightly over
one-fourth of brokerage offices are
located in the Southeast, while an
additional 17.5% of establishments are in
the West. States with densely populated
cities, such as California and New York,
account for a substantial share of
establishments. Furthermore, demand
for brokerage services is substantial in
cities with a high small business turnover
rate, including New York City, Miami and
Los Angeles.

Business Locations

Population
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM

Business Brokers in the US December 2015

19

Competitive Landscape

Market Share Concentration | Key Success Factors | Cost Structure Benchmarks


Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration

in
this industry is L ow

Key Success Factors


IBISWorld

identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:

Cost Structure
Benchmarks

The Business Brokers industry is highly


fragmented, with the top four firms
expected to account for 15.8% of industry
revenue in 2015. While a few of the
leading firms have an extensive presence
across the United States, most industry
operators service a very limited
geographic area and specialize in
particular business sectors. Over the past

five years, market share concentration


has remained relatively constant, despite
Sunbelt Networks focus on expanding its
franchise network and contribution to
the industry. IBISWorld anticipates
industry concentration to remain low in
the upcoming years due to the local
nature of the industry and the absence of
merger and acquisition activity.

Ability to compete on tender


Due to the level of competition in the
industry, firms must compete on services
and price to close deals.

important to establish a good reputation


to secure a substantial client base.

Aggressive marketing given the


high level of competition
As the number of transactions declined in
recent years, industry participants have
focused on marketing their services by
joining trade associations, revamping
their websites and investing in online ads
to drive demand.

Experienced work force


It is essential for industry operators to
have experienced employees who can
administer smooth transactions for
clients. Additionally, some states
require business brokers to have a
minimum of several years of real estate
experience prior to entering this
specific industry.

Having a good reputation


Many brokers build their business
through referrals. Therefore, it is

Market research and understanding


Business brokers must understand the
intricacies of their clients industries to
connect them to the best buyers.

Profit
Industry profit, defined as earnings
before interest and taxes, is expected to
increase during the five years to 2015,
rising from 6.4% of revenue in 2010 to
7.8% in 2015. While the industrys
commission structure has remained
relatively constant over the five-year
period, declining wages and shortening
transaction periods have benefited the
industrys profitability in recent years.
Tempered downstream demand forced
enterprises in the industry to cut
employee labor costs sharply in the
first-half of the period, causing wages to
ultimately grow at an annualized rate of
just 0.6% from 2010 to 2015.

Moreover, the time needed to close a


transaction has shortened in recent
years. According to the latest available
information from the International
Business Brokers Association, the time
needed to close a business valued
under $500,000 has declined from
four to three months from 2012 to
2013, while the time needed to close a
business valued between $500,000
and $1.0 million has decreased from
six to five months over the same
period. Declining transaction times
reduce deal costs for industry
operators while also allowing them to
take on additional sales, ultimately
benefiting profit margins in turn.

WWW.IBISWORLD.COM

Business Brokers in the US December 2015

20

Competitive Landscape

Wages
Salaries, commissions and benefits
combine to account for the largest cost
category for business brokers. However,
wages have declined sharply as a share of
revenue over the five-year period, falling
from 41.4% of industry revenue in 2010 to
an estimated 36.8% in 2015. As mentioned,
enterprises in the industry cut salaries and
commissions during the recession as a
means to counteract the poor
macroeconomic landscape. However, given
that an estimated 40.0% of industry
enterprises are nonemployers,
commissions as a share of industry revenue
are expected to remain high and continue
to dominate industry costs over the five
years to 2020.
Rent and utilities
In 2015, rent and utilities are anticipated to
account for 8.3% of total industry revenue.
As a method to attract new clients, business

brokers often invest heavily in their offices,


with the quality of their facilities
representative of their brand and talents.
Moreover, utility costs are relatively high for
business brokers, as a result of their typical
small size and their reliance on computers
and smartphones for communication with
potential and current clients.
Other
Other expenses for industry operators
include insurance costs, professional
service fees, association dues and legal
fees, among others. Moreover, interest
costs associated with business financing
are also included in the other cost category
for business brokers. Furthermore, in
2015, purchases and marketing expenses
are anticipated to account for 4.0% and
2.8% of industry revenue, respectively,
while depreciation is expected to represent
an additional 1.5% of total industry
revenue in the same year.

Sector vs. Industry Costs


Average Costs of
all Industries in
sector (2015)
100

80

Percentage of revenue

Cost Structure
Benchmarks
continued

Industry Costs
(2015)

12.5

7.8

27.1

36.8

14.1

4.9
2.8
8.3

n Profit
n Wages
n Purchases
n Depreciation
n Marketing
n Rent & Utilities
n Other

60

40

20

1.9

3.1
39.2

2.1

1.5

37.9

0
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM

Business Brokers in the US December 2015

21

Competitive Landscape

Basis of Competition
Level & Trend
 ompetition
C

in
this industry is
Mediumand the
trend is I ncreasing

Barriers to Entry
Level & Trend
 arriers to Entry
B

in this industry are


Lowand S
 teady

Internal competition
Industry participants compete based on a
number of factors including area of
expertise, roster of closed deals and fees
charged. Many brokers serve a limited
geographic area and therefore only
compete directly with brokers in the
same city or state. However, national
brokers, such as Sunbelt Network and
Murphy Business and Financial
Corporation, have branch offices located
throughout the United States and abroad.
These firms benefit from a substantial
number of listings and expertise in a
variety of industries including restaurant,
finance, manufacturing and healthcare,
among others.
To establish a good reputation in the
small business community, business
brokers must hire experienced employees
who possess industry knowledge and
provide excellent customer service.
Consequently, larger firms compete to
hire the most experienced and reputable
professionals in the industry. While firms
also compete to offer the most attractive
fees to drive demand, brokers charge

The barriers to entry for this industry


remain low in 2015. The Business
Brokers industry is highly fragmented,
with the leading firms accounting for less
than one-fourth of total industry revenue.
Moreover, most brokers have a limited
geographic reach, usually only offering
services within one state. While there are
several larger brokers with branches
located throughout the United States,
prospective entrants have the
opportunity to successfully enter the
industry by targeting a niche industry,
such as agriculture or information
systems. Additionally, the industry is
loosely regulated at the federal- and
state-levels of government, with only
about 17 states requiring business

between an 8.0% to 12.0% commission


on the value of the sales price on average,
according to the International Business
Brokers Association.
External competition
Business brokers face competition from
potential clients selling their businesses
without the help of a broker. In recent
years, negative publicity regarding
higher-than-average broker fees have
caused some business owners to seek
potential buyers online to forego the fees
that brokers charge. The emergence of
online marketplaces, like Bizbuysell.com,
that list businesses for sale has made it
easier for business owners to sell without
going through a middleman. However,
many business owners still prefer to sell
through brokers due to the various
benefits they offer such as optimal
pricing, negotiating expertise and legal
knowhow. Moreover, business brokers
continue to face increasing external
competition from merger and acquisition
advisors that offer similar industry
services to larger clients.

Barriers to Entry checklist


Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance

Medium
Low
Mature
Low
Low
Medium
Low
SOURCE: WWW.IBISWORLD.COM

brokers to obtain real estate licenses to


operate in their respective states.
Furthermore, passing the real estate
broker license exam is relatively easy,
and license fees usually cost around
$200.00 in most states.

WWW.IBISWORLD.COM

Business Brokers in the US December 2015

Competitive Landscape

Industry
Globalization
Level & Trend
 lobalization
G

in this
industry is L owand
the trend is S
 teady

The Business Brokers industry exhibits a


low level of globalization due to the absence
of international trade. Additionally, most

firms are based in the United States, and


only a few of the leading companies have
branches located abroad.

22

Business Brokersin the US December 2015 23

WWW.IBISWORLD.COM

Major Companies

Murphy Business & Financial Corp. | Sunbelt | Other Companies

Major players

Sunbelt 4.6%

(Market share)

89.6%
Other

Murphy Business & Financial Corp. 5.8%

Player Performance
Murphy Business &
Financial Corp.
Market share: 5.8%

SOURCE: WWW.IBISWORLD.COM

Murphy Business & Financial


Corporation (Murphy Business) was
founded in 1994 by Roger J. Murphy and
is one of the largest business brokerage
firms in North America. The company
was formed in Florida, originally as a
network of brokers, and soon grew to
become a national franchise in 2006.
Over the past decade, Murphy Business
has expanded its presence rapidly across
the United States and into Canada
through its chain of franchises. Murphy
Business now has an estimated 24
corporate employees and roughly 150
franchises in 25 regions around the
country and in Canada.
Murphy Business specializes in
business, franchise and commercial real
estate sales and valuation services. Their
employees provide clients with plans to
promote and sell their businesses
through a number of targeted mediums

including marketing, direct mail,


consumer and/or trade advertising. For
those looking to buy a business, Murphy
Business provides an extensive directory
of sales listings, as well as assistance to
customers looking to arrange financing,
including both traditional financing and
SBA small business loans.
In February 2014, Murphy Business
announced a new partnership with The
International Franchise Professional
Group. The arrangement is expected to
expand the companys purview into the
market of franchise development and
allow it to present clients with a greater
array of business ownership
opportunities. Business brokers have
traditionally been limited to offering
clients existing businesses; however,
many operators are now dealing with
franchises in an effort to expand their
sales opportunities.

Murphy Business & Financial Corporation (US industry-specific


operations) - financial performance*
Year

Revenue
($ million)

(% change)

Operating Income
($ million)

2010

53.5

N/C

3.4

N/C

2011

55.0

2.8

3.8

11.8

2012

57.2

4.0

4.6

21.1

2013

57.6

0.7

5.1

10.9

2014

58.7

1.9

5.0

-2.0

2015

59.5

1.4

4.6

-8.0

*Estimates

(% change)

SOURCE: IBISWORLD

Business Brokersin the US December 2015 24

WWW.IBISWORLD.COM

Major Companies

Player Performance
continued

Financial performance
Murphy Business is a privately held
company and does not disclose financial
results. Like many business brokers,
Murphy Business struggled during the
recession when the market plummeted
and private lending dried up. The
companys earnings spiraled downward
in the wake of the markets collapse,

falling from their prerecessionary level of


$8.0 million to $3.8 million in 2011.
However, pent up demand in 2012
helped encourage buyers to reenter the
market. IBISWorld estimates that
company revenue climbed modestly after
the recession at an average annual rate of
2.1% to $59.5 million over the five years
to 2015.

Player Performance

Founded in 1978 in Charleston, SC,


Sunbelt Network (Sunbelt) is a franchise
network of brokers who focus on
facilitating business sales and purchases.
The company accelerated its operations
in the mid 1990s when it began licensing
business brokerage offices under the
Sunbelt name. Since then, Sunbelt has
developed and systematically expanded
its franchise system across the United
States to 119 locations. The company also
has offices in 74 international locations
including Australia, Brazil, England and
Canada, making it the worlds largest
business brokerage network.
Sunbelt uses its network of brokers
and its proprietary business database to
help serve customers looking to buy and
sell businesses. The company also
provides a number of free resources,

recommended readings, a blog, radio


station and a variety of educational
programs to help clients through the
buying and selling process. Like most
other business brokers, the company also
provides business valuations. Sunbelt
assists its own franchisees with a number
of services such as training programs and
online and marketing support.
Merrymeeting, Inc., a private
investment company that specializes in
developing and supporting franchise
networks, acquired Sunbelt in 2006.
Merrymeeting focuses its operating
activities on selling Sunbelt franchises
and providing services to Sunbelts
franchisees. More recently, in 2013,
Sunbelt partnered with Simply.Biz, an
online platform for connecting business
brokers, buyers and sellers. The company

Sunbelt
Market share: 4.6%

Sunbelt Network (US industry-specific operations) - financial


performance*
Year

Revenue
($ million)

(% change)

Operating Income
($ million)

2010

39.6

N/C

2.5

N/C

2011

41.1

3.8

2.8

12.0

2012

43.5

5.8

3.5

25.0

2013

44.5

2.3

4.0

14.3

2014

45.7

2.7

3.9

-2.5

2015

47.2

3.2

3.7

-5.1

*Estimates

(% change)

SOURCE: IBISWORLD

Business Brokersin the US December 2015 25

WWW.IBISWORLD.COM

Major Companies

Player Performance
continued

cited the partnership as a move to help


Sunbelt spread their coverage as wide as
possible in a marketplace that is
increasingly turning to online resources
for business sales.
Financial Performance
Sunbelt is a privately held company and
does not disclose financial results. During
and after the recession, Sunbelt
experienced a fall in revenue as the
market for business deals dried up.
Nevertheless, the company is optimistic

Other Companies

Transworld Business Advisors

Estimated market share: 3.0%


Transworld Business Advisors is a
conglomeration of three businesses focused
on brokerage, franchise consulting and
franchise development. The company is a
joint venture with United Franchise Group
(UFG), an industry leader in the
development of successful franchise
systems with over 1,400 franchisees in 50
countries. As a member of United
Franchise Group, Transworld handles both
Main Street business sales of less than $2.0
million, as well as major mergers and
acquisitions. IBISWorld estimates
Transworlds industry-specific revenue will
reach $30.5 million in 2015.

VR Business Brokers

Estimated market share: 2.4%


Valued Representation Business Brokers
(VR Brokers) was founded in 1979 in Fort

that 2015 will mark a significant


rebound in buying and selling activity.
Sunbelt is currently seeing stronger
support from traditional lenders for
purchases as well as higher valuations.
This is in large part due to the improving
economy, but also to the growing group
of baby boomer retirees looking to sell
their businesses. The companys revenue
has recovered since the recession and is
estimated to rise at an average annual
rate of 3.6% to $47.2 million in the five
years to 2015.

Lauderdale, FL, as a business broker


franchise. The company specializes in
the sale of Main Street businesses
valued at under $2.0 million, as well as
larger mergers and acquisitions
through its network of brokers. VR
operates in over 50 offices in the
United States as well as in 19 locations
internationally, offering
comprehensive training programs for
both franchise owners and associates,
a wide range of marketing materials
and back-office systems to support the
offices of its franchisees. VR was able
to weather the recession by focusing
its sales facilitation on the lower
middle-market sector of business
transactions; its sales have improved
markedly ever since. IBISWorld
estimates VR is expected to achieve
industry-specific revenue of
$24.5million in 2015.

Business Brokersin the US December 2015 26

WWW.IBISWORLD.COM

Operating Conditions

Capital Intensity | Technology & Systems | Revenue Volatility


Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level

of capital
intensity is L ow

The Business Brokers industry operates


with a low level of capital intensity.
IBISWorld estimates that for every $1.00
spent on wages, the industry will allocate
$0.04 to capital investment. Due to the
service-based nature of this industry,
operators rely heavily on labor and their
employees knowledge of industries and
fields of business to close transactions.
Consequently, wages account for a
substantial share of revenue, as most
employees have undergone significant
training. While the industry does not
emphasize obtaining a college degree for
employment, most employees have a
background in real estate and
considerable experience in prospecting
and valuing enterprises. Firms focus on
hiring and retaining employees with

Capital intensity

Capital units per labor unit


0.5
0.4
0.3
0.2
0.1
0.0

Economy

Advisory &
Financial
Services

Business Brokers

Dotted line shows a high level of capital intensity


SOURCE: WWW.IBISWORLD.COM

exceptional interpersonal skills and a


substantial roster of closed deals because
clients usually turn to brokers through

Tools of the Trade: Growth Strategies for Success


Investment Economy

Recreation, Personal Services,


Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.

Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.

Business Brokers

Capital Intensive

Labor Intensive

New Age Economy

Real Estate Sales & Brokerage


Convenience Stores
Insurance Brokers & Agencies
Single Location Full-Service Restaurants
Traditional Service Economy
Old Economy
Computer
Stores
Wholesale and Retail. Reliant
Agriculture and Manufacturing.
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.

Traded goods can be produced


using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.

Change in Share of the Economy

SOURCE: WWW.IBISWORLD.COM

Business Brokersin the US December 2015 27

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Operating Conditions

Capital Intensity
continued

referrals. Brokers also rely on attorneys


to close sales, which further raises the
wage costs for industry participants.
Depreciation slightly increased over the
past five years due to the growing

Technology & Systems The internet is the most important


of
Technology
Change is L ow

Revenue Volatility
Level
The level

of
Volatility is L ow

technological advancement that has


changed the way business brokers
advertise their services and source
prospects. Brokers can now reach a wider
audience and potential client base
through company websites and online
advertisements. While the internet allows
for targeted advertising at a lower cost
than traditional means, competition has
intensified as the worldwide web lowered
the barriers to enter this industry.

Furthermore, it is relatively easy to


establish a sole proprietorship and
promote ones business through the use
of a website and social media.
Consequently, prospective clients can
now browse the internet for brokers that
charge the lowest fees and have a
reputation for exceptional service. As
social media and website use become
more important in the future, IT
spending is anticipated to increase during
the next five years.

IBISWorld estimates that the industry


has a low level of revenue volatility
during the five years to 2015. Volatility
for the industry is primarily impacted by
any aggregate changes in commission
structure or small business sales.
Business brokers typically earn 10.0% of
the ultimate sales price in commission,
with this rate remaining relatively

unchanged over the five-year period.


Consequently, revenue volatility in recent
years has primarily abated due to less
fluctuation in the number of individuals
or existing companies looking to
purchase small businesses.
During the recession, willing buyers of
small businesses dropped in number
substantially as a result of faltering

A higher level of revenue


volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.

Volatility vs Growth
1000

Revenue volatility* (%)

Level
The level

importance of managing a companys


online presence and the use of websites
as a marketing tool. As a result, capital
intensity increased marginally over the
past five years.

Hazardous

Rollercoaster

100
10

Business Brokers

1
0.1

Stagnant
30

10

Blue Chip
10

30

50

70

Five year annualized revenue growth (%)


* Axis is in logarithmic scale
SOURCE: WWW.IBISWORLD.COM

Business Brokersin the US December 2015 28

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Operating Conditions

Revenue Volatility
continued

business sentiment and a lack of available


financing. However, conditions have
improved for the Business Brokers
industry since 2011. For example,
according to survey data from BizBuySell,
61.1% of business brokers cited an
improvement in business-for-sale
conditions from 2011 to 2012, with a

large portion mentioning an increasing


number of buyers and a growing
willingness to sell among business
owners as important reasons for this
improvement. As the macroeconomic
landscape continues to improve over the
five years to 2020, industry revenue
volatility is expected to drop significantly.

Regulation & Policy

Business brokers are subject to a host of


regulations administered by the federaland state-levels of government. Because
industry firms assist in the sale and
purchase of owner-operated businesses
that are valued at less than $2.0 million
(and usually do not involve the sale or
purchase of stocks), they are not tightly
regulated by the Securities and Exchange
Commission (SEC). Additionally, brokers
can request a no-action letter from the
SEC if they are unsure of whether a
service or action would constitute a
violation of a federal securities law.
Other regulations and policies that firms
must abide by include those pertaining
to employment, wages, facilities and
taxes. The US Department of Labor
administers laws related to wages,
benefits, safety, health and
nondiscrimination policies.

While there are not any specific


business broker licensing requirements at
the federal level, about 16 states require a
real estate license to represent real estate for
sale. Regulations vary from state to state,
with some states, such as Florida and
Michigan, requiring a license regardless of
whether real estate is involved in an
operators transactions. Some states, such as
Oregon, have additional licensing
requirements, which include having at least
three years of active real estate license
experience. Operators must pay for the
license application fee and pass the real
estate broker license exam. On the other
hand, brokers that primarily facilitate the
sale and purchase of service-oriented or
technology businesses where the assets sold
are patented technology and other
intellectual property are not required to
obtain real estate licenses.

Due to the service-based nature of this


industry, firms do not receive direct
assistance from the federal government
in the form of tariffs. However,
business brokers receive considerable
guidance from trade organizations. For
instance, the International Business
Brokers Association Inc. (IBBA) is an
international trade organization that
has assisted industry operators by

providing education, conferences and


networking opportunities since 1991.
Moreover, in the United States, most
states have a trade association that
offers similar benefits as the IBBA. Some
examples of state trade associations
include the Texas Association of
Business Brokers, Ohio Business
Brokers Association and California
Association of Business Brokers.

Level & Trend


 he level of
T

Regulation is
Mediumand the
trend is S
 teady

Industry Assistance
Level & Trend
 he level of
T

Industry Assistance
is L owand the
trend is S
 teady

WWW.IBISWORLD.COM

Business Brokers in the US December 2015

29

Key Statistics
Industry Data
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

Revenue
($m)
1,011.3
922.7
868.9
880.0
893.8
933.2
958.9
984.5
1,019.1
1,042.7
1,067.3
1,083.1
1,100.6
1,121.3
1,138.6

Annual Change
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

Industry
Value Added Establish($m)
ments
554.1
2,688
507.0
2,553
440.7
2,473
433.8
2,469
403.9
2,438
424.0
2,448
453.5
2,498
459.6
2,518
469.3
2,569
481.7
2,606
491.9
2,633
499.8
2,653
508.9
2,673
519.6
2,706
528.3
2,737

Revenue
(%)
-8.8
-5.8
1.3
1.6
4.4
2.8
2.7
3.5
2.3
2.4
1.5
1.6
1.9
1.5

Industry
Value Added
(%)
-8.5
-13.1
-1.6
-6.9
5.0
7.0
1.3
2.1
2.6
2.1
1.6
1.8
2.1
1.7

IVA/Revenue
(%)
54.79
54.95
50.72
49.30
45.19
45.44
47.29
46.68
46.05
46.20
46.09
46.15
46.24
46.34
46.40

Imports/
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Key Ratios
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

Figures are in inflation-adjusted 2015 dollars.

Establishments
(%)
-5.0
-3.1
-0.2
-1.3
0.4
2.0
0.8
2.0
1.4
1.0
0.8
0.8
1.2
1.1

Enterprises Employment
2,305
3,959
2,186
3,785
2,117
3,635
2,114
3,592
2,087
3,513
2,100
3,500
2,133
3,577
2,147
3,635
2,184
3,723
2,211
3,779
2,231
3,843
2,248
3,888
2,265
3,943
2,293
4,007
2,319
4,071

Exports
----------------

Enterprises Employment
(%)
(%)
-5.2
-4.4
-3.2
-4.0
-0.1
-1.2
-1.3
-2.2
0.6
-0.4
1.6
2.2
0.7
1.6
1.7
2.4
1.2
1.5
0.9
1.7
0.8
1.2
0.8
1.4
1.2
1.6
1.1
1.6

Exports/
Revenue
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Revenue per
Employee
($000)
255.44
243.78
239.04
244.99
254.43
266.63
268.07
270.84
273.73
275.92
277.73
278.58
279.13
279.84
279.69

Exports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Wages/Revenue
(%)
46.10
45.25
41.81
41.39
36.80
36.03
36.89
36.68
36.75
36.60
36.48
36.44
36.44
36.43
36.50

Imports
----------------

Wages
($m)
466.2
417.5
363.3
364.2
328.9
336.2
353.7
361.1
374.5
381.6
389.4
394.7
401.1
408.5
415.6

Imports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Employees
per Est.
1.47
1.48
1.47
1.45
1.44
1.43
1.43
1.44
1.45
1.45
1.46
1.47
1.48
1.48
1.49

Wages
(%)
-10.4
-13.0
0.2
-9.7
2.2
5.2
2.1
3.7
1.9
2.0
1.4
1.6
1.8
1.7

Corporate
Profit
($b)
1,529.0
1,285.1
1,397.0
1,746.4
1,816.6
1,998.2
2,037.4
2,072.9
2,100.5
2,116.0
2,249.4
2,292.3
2,331.9
2,351.1
2,333.3

Domestic
Demand
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Domestic
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Average Wage
($)
117,757.01
110,303.83
99,944.98
101,391.98
93,623.68
96,057.14
98,881.74
99,339.75
100,590.92
100,979.09
101,327.09
101,517.49
101,724.58
101,946.59
102,087.94

Corporate
Profit
(%)
-16.0
8.7
25.0
4.0
10.0
2.0
1.7
1.3
0.7
6.3
1.9
1.7
0.8
-0.8

Share of the
Economy
(%)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

SOURCE: WWW.IBISWORLD.COM

Business Brokersin the US December 2015 30

WWW.IBISWORLD.COM

Jargon & Glossary

Industry Jargon

BUSINESS-FOR-SALE MARKETThe market describing


trends in both the propensity to buy and sell businesses.
DUE DILIGENCEAn audit of a potential investment
that confirms all crucial facts with respect to a potential
sale.

IBISWorld Glossary

BARRIERS TO ENTRYHigh barriers to entry mean that


new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITY Compares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity. High
capital intensity is more than $0.333 of capital to $1 of
labor; medium is $0.125 to $0.333 of capital to $1 of labor;
low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICESThe dollar figures in the Key Statistics
table, including forecasts, are adjusted for inflation using
the current year (i.e. year published) as the base year. This
removes the impact of changes in the purchasing power of
the dollar, leaving only the real growth or decline in
industry metrics. The inflation adjustments in IBISWorlds
reports are made using the US Bureau of Economic
Analysis implicit GDP price deflator.
DOMESTIC DEMANDSpending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to industry
revenue, and then subtracting exports.
EMPLOYMENTThe number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed and
keeps management accounts. Each enterprise consists of
one or more establishments that are under common
ownership or control.
ESTABLISHMENTThe smallest type of accounting unit
within an enterprise, an establishment is a single physical
location where business is conducted or where services or
industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
EXPORTSTotal value of industry goods and services sold
by US companies to customers abroad.
IMPORTS Total value of industry goods and services
brought in from foreign countries to be sold in the United
States.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players account
for more than 70% of industry revenue. Medium is 40% to
70% of industry revenue. Low is less than 40%.

MERGER AND ACQUISITION ADVISORCompanies


similar to business brokers that typically represent
businesses valued in excess of $2.0 million throughout
the selling process.

INDUSTRY REVENUEThe total sales of industry goods


and services (exclusive of excise and sales tax); subsidies on
production; all other operating income from outside the
firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and capital
work done by rental or lease. Receipts from interest
royalties, dividends and the sale of fixed tangible assets are
excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is also
described as the industrys contribution to GDP, or profit
plus wages and depreciation.
INTERNATIONAL TRADEThe level of international trade
is determined by ratios of exports to revenue and imports
to domestic demand. For exports/revenue: low is less than
5%, medium is 5% to 20%, and high is more than 20%.
Imports/domestic demand: low is less than 5%, medium is
5% to 35%, and high is more than 35%.
LIFE CYCLEAll industries go through periods of growth,
maturity and decline. IBISWorld determines an industrys
life cycle by considering its growth rate (measured by IVA)
compared with GDP; the growth rate of the number of
establishments; the amount of change the industrys
products are undergoing; the rate of technological change;
and the level of customer acceptance of industry products
and services.
NONEMPLOYING ESTABLISHMENT Businesses with no
paid employment or payroll, also known as nonemployers.
These are mostly set up by self-employed individuals.
PROFITIBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding interest
and tax.
VOLATILITYThe level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate volatility
is 3% to 10%; and low volatility is less than 3%.
WAGESThe gross total wages and salaries of all
employees in the industry. The cost of benefits is also
included in this figure.

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