Business Brokers as Business Valuators

The pros and cons of being both salesperson and valuator can be examined as the meeting of two opposite disciplines. The best sales representatives are renowned as not usually being the best administrators or sales managers. Top sales experts are worth their weight in gold because they adapt to uniquely personal self-imposed goals, and because they get ‘‘a special rush’’ out of each new sale. Top professional salespeople are difficult to manage within bureaucratic corporate structures because they pursue the selling process with a vengeance of personal success criteria, and ‘‘numbers and schemes’’ are often considered in their way. In many instances, they see their territories as personal businesses but expect ‘‘corporate’’ to keep track of what they do. The natural characteristics of top selling professionals call upon attributes that are inconsistent with the finite detail and analysis necessary to perform business valuation tasks. However, they are the most in-touch persons with any given market action. They gain the most sensitivity to ultimate consumers, and, thus, they are substantially representative of this consumer ‘‘voice.’’

As we know, not all salespeople are top performers. Thus, as we dip down on the scale of productivity, we tend to find individuals who exhibit broader-based ambitions and even multiple skills. Larger companies tend to select their sales management from these ranks. They know about selling, plus they tend to possess ambitions for higher management. Consequently, they more readily accept paperwork, analysis, budgeting, and supervisory responsibilities that go along with any administrative job. Business brokerage is principally a selling field. Though brokers may perform many other duties, they get paid from sales completed. To get paid they must concentrate on selling, but we know from experience that some do better than others. Rare is the ‘‘agency,’’ large or small, that is filled with all top performers. Subsequently, some brokers commingle selling with other office tasks, including business valuation. In combination with appropriate skills of a broker-valuator, larger of.ces with a few top salespeople can be especially well suited to conduct valuation tasks. Within such ‘‘grouping’’ of brokers, excellent firsthand market data can be found; and assuming the value-processor has relative skills, the predicted values being rendered can be quite reliable, particularly in relationship to local markets.

However, trade-news reports indicate that the size of business brokerage of.ces is decreasing and that larger of.ces tend to be located in metropolitan areas. Also reported is that brokerage practices tend more often to provide ‘‘opinions of value’’ versus full-scale valuation services. Thus, one cannot predictably count on finding qualified business valuation specialists in brokerage firms.

Ostensibly, one might generally look upon the business brokerage office as an ‘‘intuit-to-value-service’’ rather than broad-scale expertise.

I would also be amiss by not offering what I call ‘‘The Wounded Knee Theory.’’ Selling suggests we have ‘‘inventories’’ to sell from. In the brokerage trade, inventory refers to the number of ‘‘listings’’ booked into of.ces. The dilemma presented in my ‘‘theory’’ is that of ‘‘volume’’ played against quality in listings. Shoppers (buyers) like to ‘‘kick the tires’’ as they shop the row (wide selection) of listings. Thus, some listings are taken simply to .ll out the selection (50% of listings actually sold for an office is considered quite good within the industry). Since sales are what keep of.ces and brokers going, and buyers are attracted to of.ces with larger selections, I have great difficulty envisioning any substantial focus by brokers on detailed business valuation assignments. Nevertheless, a few do. To summarize, brokerage of.ces and brokers are prone to compile the best market information with regard to comparable ‘‘local’’ transactions. From their firsthand experiences with both buyers and sellers, they may also render the more accurate ‘‘opinions of value.’’ However, it is less likely that they will possess all the variable skills required of the full-scale valuation assignment. A few that do can make great experts.