What Should You Look for in a Business Broker? An Interview with Transworld CEO Andrew Cagnetta

Business brokers help current business owners sell their businesses and also help prospective business owners find attractive businesses for sale. Their services include evaluating the business, setting the listing price, advertising the business, screening potential buyers, and working with professionals like lawyers and accountants to complete the sale. While fees vary depending on the broker and deal size, they will typically charge in the neighborhood of 12% of the transaction price. This fee is paid to the broker by the seller.

Andrew Cagnetta is the CEO of Transworld Business Advisors, one of the most successful business brokers in the United States. While the company has offices throughout the United States, its largest operation is in Florida where it was involved in 352 business sales in 2015. The typical transaction was around $350,000.

I had a chance to interview Andrew Cagnetta for Fit Small Business. The following Q & A is reconstructed from my notes and is not an exact transcript of his answers.

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What should you look for in a business broker?

You want a business broker who has a track record of successfully selling businesses. You also want to look for one that will market your business to a large audience of potential buyers, understands the importance of confidentiality, and can help present your company financials in the most positive light.

Some good questions to ask a potential broker include, “How many transactions have you completed?”, “What is your marketing plan for selling the business?”, “Do you have professional certifications, like the CBI from the IBBA?”. The question about the marketing plan is important for several reasons. You want your business to be listed on the major business directories and likely buyers to be contacted regarding the availability of the business. However, you also want to know the business broker’s philosophy. Many business owners don’t want their companies marketed in the same way that you might a house or property. For example, will your  business broker protect the identity of the business for sale or will he/she post a yard sign saying business “for sale?” In many circumstances, knowing a business is for sale and about to change ownership might make existing customers choose alternatives, which is not good. So, you need to know your broker’s philosophy before you agree to anything.

How important is it for a business owner to find a broker who has sold businesses similar to the one the owner hopes to sell?

That is common question among buyers. Honestly, I believe finding a business broker with lots of industry experience is not very important for businesses with under $2 Million in annual revenues. In my opinion, finding a business broker that is skilled in the marketing and negotiating process of selling businesses far outweighs the importance of having sold a specific type of business.

One misconception is that the most logical buyer is a company that engages in the same exact business. In fact, those in adjacent industries or coming from outside of the industry may pay a much higher price for a business. An outside buyer is paying for the company’s goodwill (name and reputation) and knowledge of running the business as well as the physical assets and customers of the business. An industry insider will tend not to assign a high value to the goodwill or knowledge that will be acquired with the sale and will therefore pay much less than an outsider might.

Is it possible to sell a business that is not currently profitable?

Yes, we have sold businesses that are unprofitable or ones that have not even actively operated for a period time. We have even sold businesses where one might think the business was completely dependent on the business owner. This is not to say every business can be sold. For example, it would be very difficult to sell a dog-walking business generating $15,000/year in revenues.

Many people might think that it would be difficult to sell a therapy practice. We have sold many therapy practices. Actually, in the example that comes to mind, there were lots of potential buyers. However, the seller rejected most buyers. The practice owner was a female therapist and wanted a female therapist with similar treatment philosophies and practices to replace her. Money was not her top consideration. Believe it or not, we run into quite a few business owners who are looking for buyers with certain traits or experience, not just the one who will pay the most money. While many businesses sell for 2 or 3 times seller’s discretionary earnings, this transaction went for 1 time earnings.

Many business sellers are very involved in the business and want to know the business is in good hands after their departure. When a potential buyer meets a business owner, we really recommend they put on their “A” game. We find many sellers are willing to be flexible on terms when they find the “right” buyer.

Andrew R. Cagnetta Jr, CEO Transworld Business Advisors, LLC.

Andy came down to Florida in 1995. While looking to buy a business, he encountered a company named Transworld Business Brokers. He continued his search for a business, but was offered a position at Transworld as an agent. He joined the company and quickly became one of South Florida’s top performers.

Now over thirty five years old, Transworld Business Advisors is the number one business brokerage in the State of Florida and a nationwide Franchisor. They have currently over 250 business brokers in the organization and have over 3,000 businesses for sale. They also have 80+ franchisee’s in the US and three internationally.

Andy is a recognized speaker and trainer in the subject of business sales, valuation and negotiations. He has taught his self-authored negotiations class to associations, construction companies, media sales teams, government agencies, high school & university students.

His signature charity event “Andy’s Family Pasta Dinner” is in its 14th year and has raised well over $680,000. He is father to two. Rachel, Lauren and his wife, Allison are Hollywood residents (Allison since 1970, Andy since 1994).

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