BBF
Co – Brokering
And
MLS
Rules
Presented by:
Ken Stebbins CBI.BCI.
Business Brokers of Florida
Co-brokering Rules
CO-OPERATION ON LISTINGS
The Business Brokers of Florida Bylaws mandate that each member office cooperates with other BBF
members on all of their listings, including open listings, exclusive agency listings and exclusive right of
sale listings. The exclusive agency and exclusive right of sale listings must be put on the MLS system
within 7 days from the first advertisement date. Subsequent changes to the listing be entered on the BLl
and submitted to MLS system within 24 hours. Open listings are not allowed to be posted within the MLS
system and be distributed to other members. However, they will appear in your own office listings. If you
advertise an open listing and another member wishes to show it or any of your open listings, you are
obligated to co-broker those listings. You are also obligated to co-broker any other businesses you have for
sale.
OPEN LISTINGS
It is highly recommended that member offices handle only listings on an exclusive right of sale basis or to
an exclusive agency. However, it is also understood that open listings can be taken on occasion. The
following rule is enacted to protect other BBF members regarding open listings. If a BBF Member learns
of an open listing with another BBF member because information was given to him by the listing office, he
shall honor the other BBF members listing and cooperate with the listing broker during the listing period.
WITHHELD INFORMATION
Sometimes upon receiving instructions from the seller of a business, the listing agent is asked to withhold
the name of the business or other information about that business. If instructions are issued by the seller
and are not the recommendation of the listing agent, the seller must sign the BBF "Withheld Information"
form and this form must be on file with the MLS Service in order for the listing to be included on the MLS
Data. When entering information on the BLl, the listing agent should state where the name of the business
or other information should appear that it is "Withheld at the request of the seller". The MLS operator will
periodically review all listings whereby the name or other information has been withheld by the listing
agent. If in the opinion of the MLS operator an individual agent has an abnormal number of "Withheld"
listings, the MLS operator will report this to the district president for investigation and possible
disciplinary action.
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MULTI-COUNTY LISTINGS
If a Seller is doing business or has operations in various counties (Perhaps in multiple locations)
throughout the state, a BLI can be displayed in more than one county. However, there must be an
individual listing number for each location even though several locations could be available. An example
would be a franchiser who has available 67 franchises (One or more for each county), within the State of
Florida. It would be necessary for the listing office to make out 67 BLI's and change the listing number
and the county in each BLI. This can be done through the MLS program using the "Duplicate Key".
REASON FOR SALE
Currently, under Florida statutes, the reason that a business is for sale is not allowed to be published or
given to a potential buyer unless the listing office has the seller's written permission to do so. The standard
BBF listing contracts and BLI's do allow the BBF member to disclose the reason for sale. The State of
Florida has taken the position that if a buyer knows that seller is under compulsion to sell the business; this
becomes an undue or unfair negotiating advantage for the buyer. This is the number 2 asked question
when a potential buyer inquires about a business.
INVENTORY NOT INCLUDED IN SALE
The sale of a business entity as an asset sale business normally includes the inventory that is necessary to
conduct the ongoing operations of that particular business. Therefore, it is recommended that the
inventory that is used in the operations be included in the sale price. The amount of inventory included in
the sale directly affects the amount of down payment and the purchase price of the business. To not include
it in the overall sale price and the required down payment could broadcast conditions that could be
construed to be inaccurate. The practice of not including inventory in the price of the business and the
down payment could create all kinds of problems for a buyer working with other BBF members who
adhere to the recommended policy of including inventory in the price of the business and the down
payment necessary to purchase the business. For example, a BBF agent could be searching the computer
for a buyer that has $100,000 cash to invest in a business. The buyer also needs a $100,000 net profit in
order to support his family. The selling agent diligently searches our MLS system and Finds a few
businesses that fit the criteria. He then makes an appointment with the listing broker and proceeds to put
the buyer in his car to show all the businesses to him. However, upon close examination of the BLI's
several of them indicate that the inventory is not included in the price and therefore must be added to both
the price of the business and the down payment. The amount of inventory in this particular case is
$75,000.00. Therefore the buyer needs a minimum of $l75, 000.00 down to purchase the business and of
course the price is also increased by $75,000.00. We must have a standard and criteria that apply to all
businesses listed for sale on the MLS and all BBF members. Therefore it is recommended that the
"inventory" must be included in the price of the business and in the down payment amount if applicable.
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FINANCIAL INFORMATION
The most recent financial information must be entered in the lst column (left one) of the BLI. All financial
information put in the left hand column of the BLI (in the financial information section) by the listing
agent must not be older than 24 months from the date the listing is placed in the MLS.
FINANCIAL DOCUMENTATION
It is the responsibility of the listing office to make certain that they clearly state the financial document
used for the source (P&L and/or tax return) and it is on file at the office. This does not mean that the
financial information obtained from the seller is verbal and that the seller said that it is on the tax return or
the listing agent has seen copies of sales tax return. The document source stated for the financial
information, must be on file at the listing office and available to the selling broker upon request. Our
ability to cooperate and provide the best service to our clients and customers depends on the extent to
which we each adhere to common standards and conventions.
INACCURATE OR INCOMPLETE LISTING
It is the responsibility of the listing broker to make certain that all listings are kept current and up to date.
This means that all information should be changed on the BLI as soon as possible after it has been received
from the seller. If the broker finds out that something is wrong with the business or with the information
about the business that is on the BLI, the listing agent must disclose such information on the BLI or he
must withdraw the listing from the MLS. For example, if he has had two or three potential buyers check
out a business represented as having $100,000.00 net profit and the potential buyers can only verify is an
amount substantially lower, the listing broker has a potential problem. At this point in time the listing
broker should withdraw the listing from sale or make the necessary corrections to make certain that the
information in the MLS going to other brokers is current and correct. Additionally there are legal
ramifications that could result from a broker keeping a listing active on the MLS that has something wrong
with it or placing the business back on the market without correcting the problem.
LISTINGS AUTHORIZATIONS
A. Listing A Sole Proprietorship
If you take a listing that is a sole proprietorship it is highly recommended that the listing agent have both
the husband and the wife sign the listing agreement. Many times a business is being sold in consideration
of a pending divorce.
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B. Listing a Partnership
While only one signature can obligate other partners when selling a business it is recommended that the
signature of all partners be obtained.
C. Listing a Corporation
A duly authorized corporation must have one person designated to negotiate and sign on behalf of the
corporation. BBF members should use a Corporate Resolution to protect themselves and other BBF
members. It is recommended that each listing that is a corporation be checked with the Secretary of State
by clicking on the "Blue" lead when entering information on the BLI or by calling the secretary of State's
office that the corporation is in good standing and that the person doing the authorizing on behalf of the
corporation has the right to do so.
DUPLICATE LISTINGS ON THE MLS
There have been occasions whereby a seller has given an exclusive right of sale listing to two different
brokers. When this happens it will be the duty of the MLS service to contact both brokers and ask for a
copy of the listing agreement. The earliest dated listing agreement will take precedent and the second
listing must be withdrawn within 7 days of receiving notice from MLS listing service of the conflict.
ADVERTISING OTHER MEMBERS LISTINGS
It is not permissible to advertise or promote any business listing which is on the Business Brokers of
Florida MLS list of businesses for sale as your own list of businesses for sale, nor can you advertise
listings of other BBF members without their written consent unless it is done on a link back through the
MLS provider.
BUYER IDENTIFICATION
It is the responsibility of the selling agent to know with whom they are dealing. The selling agent is being
asked by a potential buyer (in most cases a person that the selling agent doesn’t know) to give out
information on a business that is for sale. Many prospects use a nickname and/or an Americanized pseudo
name, and a non-disclosure form would provide no protection for either the seller or the brokers. The
seller’s information has been supplied to the selling agent by the listing agent on a confidential basis and
should not be available to non Qualified buyers. This confidential information is conveyed to the selling
agent on a form called a "BLI" via the multiple listing service.
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The bottom of the BBF Disclosure Statement form has a place for identification information on the buyer.
It is highly recommended that the selling agent obtain a copy of a photo ID from the buyer in all cases as a
means of identification. The copy of the photo ID such as the buyers Driver's License, etc. should be
attached to the disclosure statement which is kept on file at the selling office. It is not necessary to forward
a copy of the picture to the listing office. However, it should be kept on file at the selling office, should
the need arise to utilize it. Husband and wife should both be asked to produce photo, as they do not always
have the same last name.
QUALIFYING BUYERS
It is the responsibility of the selling agent to pre-qualify all buyers of a particular business on which the
buyer will receive information. Qualifying the buyer does not necessarily mean that the buyer has the
money. Certain businesses require certain types of professional licenses or have a prerequisite of
experience. For example, it would be bad idea to take a person that has never seen a computer to look at a
computer software programming company that is for sale. It is the responsibility of the selling agent to
make sure that the buyer is qualified to look at the business.
BUYERS WHO ARE COMPETITORS OF THE SELLER
It is the responsibility of the selling agent to determine if the prospective buyer is a competitor or is
involved with a competitor of the seller. Once it is determined that the buyer is a competitor or is involved
with a competitor no further discussions about the sellers business should take place unless authorized by
the seller. It is the responsibility of the selling agent to notify the listing agent that they have a prospect
interested in the seller's business who is a competitor of the seller. The listing agent should contact the
seller to obtain permission for the selling agent to give information about the sellers business to this
potential buyer. To protect all parties concerned the members should have the authority in writing.
BBF DISCLOSURE STATEMENT
The BBF Disclosure Statement should be given to the buyer and the buyer asked to read it before it is
signed. In addition, the contents of this form should be explained thoroughly by the licensee. It is
recommenced that the disclosure be generated from the MLS computer program and only be used for one
(1) business. The practice of putting more than one business on the disclosure form is discouraged. The
MLS program is designed to notify the listing broker by e-mail that a disclosure form has been issued
pertaining to the listing. This makes certain that the listing agent is aware of all activity about the listing.
This disclosure form can not be modified.
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DISCLOSURE FORM SIGNATURES
It is mandatory that a BBF disclosure and confidentially statement be signed when showing another
members listing. This is a serious breach of the rules under our bylaws. It is not permitted that a prospect
sign a blank confidentiality disclosure statement at one time and then allows the selling agent to add other
businesses at a later date. In fact, our corporate counsel has advised us that in each case the buyer should
sign for any information on an individual basis for each business on which he has received information.
The more proof you have that the buyer received information on a particular business from a particular
licensee on a certain date, the better off the BBF member will be if it ever becomes necessary to defend the
fact against any contrary claims by the buyer or other members, etc.
COMPLETED BBF DISCLOSURE FORMS
It is recommended that the BBF disclosure form be filled out completely. The name, address, and
telephone number should not be omitted or left blank. One of the reasons why it should not be done is the
fact that the listing office is in charge of marketing of the business and must advise the seller the names of
all buyers who looked at or information has been given to on his business. We have a two year provision
in our agreements protecting us in case the buyer goes back and buys the business without a broker within
that two year period, entitling us to our commission. If the listing office does not have the full name,
address, and phone number of the buyer, what happens if the buyer goes back and buys this within a year
and in the meantime the other office is no longer a BBF member or has gone out of business. The listing
office will need a copy of the disclosure form to prove their claim. In addition, the selling agent's BBF
identification number should appear with the selling agent's name at the bottom of the form. Many times it
is impossible for the listing office to determine whom the selling agent and office is since the signature is
unreadable.
DISCLOSURE STATEMENT TRANSMITTING
Copies of the signed BBF Disclosure Statement must be sent to the listing broker within 24 hours from the
time the information was given to the buyer. There should be no exceptions to this procedure.
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INFORMATION REQUEST BY SELLING OFFICE
When information is requested by the selling office every effort should be made by the listing agent and or
office to get the information faxed, e-mailed or over night mailed to the requesting party as soon as
possible. It is also recommended that each office install a procedure to cover a situation if the listing agent
is not available or is out of town. Someone in the listing Office should be able to go to the file and fax the
information that is requested. Many times the selling agent will have the potential buyer sitting in their
office and the information is needed immediately. TREAT THE OTHER AGENT'S REQUEST AS IF
YOU.ARE THE REQUESTING PARTY.
SCHEDULED SHOWINGS
The selling office must never show a business without the permission of the listing office. The listing
office controls all showings and schedules all showings of their businesses. It is the responsibility of the
selling agent to call the listing agent and/or listing office to have the showing scheduled. The selling agent
must attend all showings of the business. If the selling agent does not attend the showing and other
meetings then the normal commission split of 50/50 will change to a 80/20 referral as set forth in our
bylaws. However, the listing agent may at his discretion be present or not be present. It is not
permissible for the selling agent to Send the buyer to meet with the seller without the selling agent being
present unless it is with the consent of all parties. The listing broker should never be asked to do the work
of the selling broker.
MEETING PLACE
It is recommended that a meeting place between the buyer, the selling agent and/or the listing agent be
some place with a telephone and located close to the business. This will allow a brief meeting between the
agents and buyers whereby the listing agent might be able to answer some questions about the business
from the buyer. For example, a restaurant would be fine. If one party is going to be late, then they would
have a telephone where they could call and tell the other parties about the delay. It is recommended that
the meeting place is never the business itself. If it is scheduled at the place of the business we have found
that in most cases the buyer will arrive early and by the time the brokers get there, the meeting between the
buyer and seller is already over.
SHOWING REPORT
Within 24 hours after the showing the selling broker should convey the feelings of the buyer and any comments
that the buyer has about the business to the listing broker. This information should be helpful in assisting the
listing agent in showing this business to future buyers and will help in discussing with the seller why the business
is not selling.
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DRIVE BYS
The practice of giving a potential buyer the name and address of a business and telling the buyer to drive
by and call me later if you have any interest is definitely discouraged. Many times particularly with
certain types of businesses, when the name and address is given to a buyer they don’t drive by but they do
go over and start talking to the seller and in some cases start talking to some of the employees. This results
in strained relations between the listing agent and the seller. In most cases it is not even the listing agent's
fault that somebody gave the information out to a potential buyer and there was no regard for any
confidentiality instructions or the additional showing instructions that the selling agent requested. The
selling agent is accountable for the actions of the buyer.
SELLING OFFICE'S BUYER APPROACHES LISTING OFFICE
If a buyer who already looked at a business through another BBF office and this particular buyer
approaches the listing agent and or listing agents office to obtain additional information regarding the
business he looked at, it is recommended that the listing agent refer the buyer back to the selling agent
Unless written permission is given to the listing agent to work directly with this buyer from the selling
agent.
The aforementioned situation could result in the buyer having a closer relationship with the listing agent
than the buyer currently has with the selling agent. As the buyer gains trust and confidence in the ability
of the listing agent to handle the sale of businesses he might want to start working directly with the listing
agent to look at and purchase other businesses in the area. Therefore the original selling agent would wind
up with no buyer and no commission even though there was no intent on the listing agent's part to nurture a
relationship with the buyer. However, it would appear to the selling agent that the listing agent "stole the
buyer".
STEALING OF BUYERS
It is not permitted that an office and or agent receiving BBF confidentiality form with the complete name,
address, and phone number of the potential buyer is allowed to contact or solicit this buyer. This practice
is strictly prohibited as the information is being sent to you on a confidential basis.
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OFFERS
No BBF Member can tell another member how to write an offer or what form to use. It is preferred that all
offers prepared by the selling office be put on the BBF “Purchase and Sale Contract” which is contained in
the MLS system. This document has been approved by the BBF State Board of Directors and approved by
our State Legal Counsel. It also has the approval of another law firm hired by the association. This form
allows the person preparing the offer to “fill the blanks” and was designed to cover over 90% of the
businesses that most of the BBF members handle.
NUMBER OF ORIGINAL OFFERING DOCUMENTS
While legally one original offering document is all that is needed, it should be remembered that the listing
office controls and it may have a policy requiring more than one original. Many firms believe that each
participant should be in possession of an original. This would include brokers, attorneys, buyer, and seller.
This would mean no less than six originals in addition to the one that the buyer received when drawing up
the offer. The obvious protocol here is for the selling agent to adhere to the listing office’s request.
ESCROW DEPOSITS
All deposits received by a BBF member on the sale of a business or property might be placed in escrow in
accordance with FREC regulations. To transfer monies out of escrow for the purpose’ of returning the
deposit to the buyer, a release of Deposit must be signed by all parties. This includes the listing office, the
selling office, the buyer and the seller. If release signatures cannot be obtained from all parties then the
person holding the escrow finds must abide by FREC rules. This procedure also applies on letters of intent
in addition to purchase and sale agreements. It should be noted that not all deposits are considered
“escrow” until an accepted offer exists. Prior to acceptance by the parties the broker is holding finds for
the buyer.
ALLOCATION OF SALES
It is highly recommended that professional business brokers do not allocate the purchase price of a sale.
This procedure and advice should be left to the tax advisors for each individual party involved in the
purchase and sale of the business being sold.
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LISTING OFFICE CONTROLS THE TRANSACTION
It is the obligation of the selling agent to submit all verbal as well as written offers received on any
business or property listed with another BBF member directly to the listing broker, and the selling agent
shall not under any circumstances present an offer directly to the owner of said business or property
without the permission of the listing office.
DELIVER OF OFFERING CONTRACT OBLIGATION
The selling agent must get the signed offer to purchase contract to the listing office not the reverse for
presentation to the seller. Conversely, if there is a counter offer from the seller or the offer to purchase is
accepted by the seller, the listing office must deliver to the selling agent all executed copies of the contract
for any additional signatures of the buyer (acknowledgment that the buyer received an executed copy of
the contract signed by the seller) as required by FREC regulations.
ATTACHMENTS TO OFFERS
All offers to purchase should have all the attachments attached when signed by the buyer and seller.
Schedule "A" is referred to in the purchase agreement as a list of equipment being transferred in the
transaction and should be initialed by both parties. Any other documents, as set forth in the purchase
agreement should be attached. Some examples could be; copy of an assumable note, copy of equipment
lease, copy of property lease, etc.
PRESENTATION OF OFFERS
All offers should be presented to the seller as soon as possible. The selling office has the responsibility to
get the original copies of the purchase offer to the listing office. In some cases a Fax or an email will be
acceptable. However, it is advisable to call the listing office to find out how many copies they need and if
the listing office will accept a faxed or email copy of the offer. The selling agent has a right to request to
be present when the offer is made, but attendance is not mandatory. In the absence of any over-riding
condition to the contrary, the request may not be denied.
MULTIPLE OFFERS
It is recommended that if the listing office has received multiple offers, (all offers received at the same
time) that a third party, preferably the BBF Rep or Broker accompanies the listing agent to present these
offers. This is to insure that all offers are presented on an equal basis and that preferential treatment is not
given to "IN HOUSE OFFERS".
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ATTENDANCE AT CLOSING
BBF listing agreements require a broker's representative be notified and permitted to attend the closing.
Attendance by the participating brokers is not required but it can not be too strongly recommended that a
broker's representative be present.
CLOSING STATEMENT
A copy of the closing statements is to be obtained for the listing and selling office files. It is the
responsibility of the person attending the closing to obtain copies of all closing statements and to make
certain that the other broker receives a copy of the closing statement and a check (if applicable) payable to
the other broker in a co- brokering situation if only one brokerage office is in attendance.
FAXED or E-MAILED FORMS
Forms and other documents that are faxed or E-mailed for the sake of expediency do not relieve the
obligation to get the original forms to the listing agent if so required.
CONTACTING THE PRINCIPALS IN THE TRANSACTION
Unless prearranged or agreed to by the cooperating broker, the other broker is to accept no direct contact
with the other agent's customer or client. Always refer people to the appropriate party.
MLS ACCESS
It is not permissible to allow non-BBF members to access the multi-list program. BBF members except in
house employees are also cautioned that they should not co-broker another BBF members listing with a
non-BBF member with out the permission of the listing office. That permission should not be withheld if
the non-BBF Broker signs non-disclosure and Selling Broker remains responsible. Dealing with a non
BBF member who is not schooled in science of selling businesses could lead to problems for the listing
office even if the listing office could be acting as a transaction broker.
CONTRACT PENDING
Within 24 hours of having a signed letter of intent or purchase and sale agreement signed by both the
buyer and seller you must post "Contract Pending" on the listing. This will alert all BBF brokers and
agents that there is an accepted offer. However, an agent may call to see if they can still show the business
and if the listing agent will accept back up offers. The association has found in that past that too many
agents were working with a buyer, spent many hours getting the buyer interested enough to look at the
business listed by another BBF member, only to find out when they call the listing brokers for an
appointment that it has been under contract for one month. Time wasted. It is under the listing agent's
control if they will show the business or take back up offers.
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MEMBERS EMPLOYEES / OTHER OFFICE AGENTS
It is not permissible to have an associate of a member office, an employee of a member office or anyone
associated with a members office represent themselves as a BBF member if they are not members in good
standing. This is especially important in offices that have both a residential section and a business
opportunity department.
PRESENTING THE BUSINESS CARD
Perceptions are important in all aspects of our conduct. The offering of business cards to other BBF
member's seller or prospective buyer, while perhaps most innocents in motive, could easily appear to be
misinterpreted by the other agent. It should therefore not take place without the permission of the other
Broker. If the principal of the other agent requests a business card then give it to the other broker and let
that broker give it to his client.
COMPLAINTS ABOUT OTHER BBF MEMBERS
If you feel that the ethics and operating procedures and standards of another BBF member are in conflict
with BBF standards, then this should be handled through remedial policies rather than slander and making
negative and derogatory comments about the other member or the BBF. We have a grievance policy that
is put in place and it is easily available to all members of our association. The complaint properly filled
out along with a check for $50.00 should be forwarded to the local district president who in turn will
assign it to the grievance committee who will look, into the allegations and make its determination. This is
a VERY IMPORTANT PRACTICE AND THIS PROCEDURE SHOULD BE FOLLOWED. We do not
want "LOOSE CANNONS" within the organization and if we do have members operating at the edge, then
this should be brought to the attention of the local regions. A formal complaint is the vehicle to accomplish
this.
COMMISSIONS AND COMMISSION SPLIT
Commission split is set by the BBF Bylaws and may not be changed without written mutual consent
between all brokers involved. The Bylaws covers how a broker may reduce their share of the commission
without affecting the other broker's portion. Each broker may reduce his or her share of the commission as
long as the share of the other broker remains unchanged. The total commission is split is always 50/50
with no costs taken out unless arranged differently in advance.
BOTH THE LISTING AND THE SELLING AGENT SHOULD NEVER BRING UP THE COMMISSION IN
FRONT OF THE BUYER AND SELLER.
ONLY THE LISTING AGENT CAN DICUSS COMMISSIONS WITH THE SELLER.
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BUSINESS NAME PRINTED ON BLI (AGENTS BLI)
It is not permissible to print the BLI with the business name, address, agent name, and commission rate to
be given to a prospective buyer unless it is on an "IN HOUSE LISTING". BBF members are not allowed
to print the "AGENT BLI" for their non-in-house listings and give it to a prospective buyer. The reasons
for this are many with the most obvious one being that a prospective buyer could somehow leave a copy of
this information at the business or somewhere near the business and this information then filters down to
the employees that the business is for sale. The information also could be sent to competitors and
customers. In any event, any information that leaks out that the business is for sale could spell DISASTER
for the seller.
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Business Brokers
of
Florida
MLS/BLI
Input Information
Rules
Presented by:
Ken Stebbins CBI, BCI
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SALE OF ASSETS
The basic rule that has been applied to “Sale of Assets” in the MLS is as follows:
The selling price of the operating business can not exceed the hard asset value of the business being
sold.
Also no mention of any financial information can be put into the comments section of the BLI.
The sale of assets classification was created and designed to force the listing broker to upgrade the listing
by making the agent obtain financial information when the business was listed in order to be put into the
MLS. Prior to adopting this rule brokers were listing businesses without obtaining any financial
information and relying on what the seller said pertaining to profit. When due diligence was performed
over 95% of the business “blew up” and in most cases after that happened, the buyers went elsewhere to
buy a business and the selling broker lost his customer because the buyer lost confidence in him. The
selling broker complained about this as he had relied on the information supplied by the listing broker.
When the classification was created the following example was used:
An owner of the card store in the mall invested $500,000 in equipment and inventory. After operating the
business for 2 years he was tired of loosing money. The seller was embarrassed to show any financial
information as he felt that if a buyer knew just how much money he was loosing he would not look at the
business. All the seller wanted to do was get whatever he could for the business and stop his losses. The
only value that his business had was the hard assets: It was decided to use this (the value of the hard assets)
as a basis with no provision for goodwill as there was none. The cash in bank, any accounts receivable
would be taken by the seller. It was like an orderly liquidation sale.
This rule was also designed to stop the following type of business from appearing in the MLS.
An owner of a bar calls up the broker and wants to sell. The owner tells the broker that he is making plenty
of money but he refuses to show any financial information to the broker or the potential buyer.
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CLOSED BUSINESSES
The basic rule for "CLOSED BUSINESS" in the MLS is as follows:
All kinds of asset values are allowed such as Franchise Fees, accounts, hard assets, accounts receivable,
lease value, patent value, copyright value, etc or no assets are required and no financial information is
required. However the business must be closed. (When a closed business is entered we look in the
comments section during our review process to make sure there is no mention that the business is really
open and operating).
In addition financial information can be included in the comments section or it can be included in the
financial section.
Also listed in the closed business section are mostly franchises (as they haven't opened yet), start up
businesses and business that are not open at the time they are listed.
COMMENTS SECTION
Please remember that the public looks at most of our businesses through the Internet and other advertising
media. We have been successful in the past because we (our association) have a reviewed MLS system
and the public has “confidence in” the information that is being put into the BLI's is accurate. We all are
licensed by the state of Florida. The general public expects that because we do have a State license, some
due diligence or verification is being done by the broker prior to the business being listed and marketed.
Due to the fact that the MLS service does post your listings on several commercial internet web sites you
can not have any reference to your name, e-mail address or phone number in the comments section. The
use of “Call Listing Brokers” is prohibited. We don't want a buyer thinking they are speaking to the
listing broker when they are talking to the selling broker.
The association gets complaints from the public, BBF agents and brokers expressing that our MLS
standards are not high enough and that too much garbage is getting into the MLS system. All of the
brokers with this type of complaint have all been advised that we (the MLS service) enforce the current
rules. We understand that there is some questionable listing in the system. However they are within the
current rules for inclusion in the system. We try and administer the rules the same for everybody with a
little latitude. We strive for consistency in our judgment when applying these rules.
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CATEGORIES FOR THE SELLER’S REPRESENTATION OF FINANCIALS ON BLI
The topic of how businesses are represented on our BBFMLS in BLI's (Business Listing Information) and
websites has become a topic of concern. The goal of the MLS is to have businesses represented on a
consistent basis in order for brokers and the buyers to be able to compare them and evaluate the business
for sale.
Our ultimate goal would be for all brokers to guide our sellers and be able to enter the seller's
representation into our MLS exactly the same way. Therefore a broker wishing to co-broker could rely on
the information as presented. In turn, their buyers could then properly compare opportunities they are
considering for purchase.
Our MLS system gives an agent the ability to enter three years of financials. The financials should have
the most current year in the left column and can add past years or other period's numbers in two other
columns to the right.
The financials are a representation of the gross revenues minus the expenses that generate a net income.
Add backs are then listed and an Owner Benefit is generated on the bottom line. (Owner Benefit equal to
Sellers Discretionary Earnings (SDE) or Seller's Discretionary Cash Flow (SDCF). But this is not an
Owner Benefit or recasting lesson; we are here to focus on how to categorize the seller's representations.
The financial columns on the BLI are as follows:
Year: 2009
Source: Tax return (or other category)
Gross Revenue Cost
of Goods Other
Expense Net Income
Add Backs
Owner Salary
Benefits
Interest Expense
Depreciation
Other
Owners Benefit
The financial input choices on our MLS system are as follows:
Tax Returns
P & L Statements
Annualized
Owner to Prove
Owner Estimate
Proforma
Part Year
Non-operating Business (Closed or new franchise or Start up)
Asset Sale
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1) Tax Return - This is obviously the most reliable of the categories and therefore sought after by
buyers. The numbers represented must come directly from the tax return and be able to be proven as
accurate and correct. Gross revenue on the BLI must match the gross revenue on the tax returns. NO
ADDED GROSS should be added to the top line or added to any additional lines below the net income to
add to Owner Benefit. For example, if the seller has 50K of gross sales not reflected on the tax returns,
you could not add that to the top line or stick in Other as an add back. Once you try to bring numbers
into a tax return that are not on the tax return. It becomes Owner to Prove!
2) P&L Statement - Much like the tax return, all numbers should be documented on the P&L. The
P&L should be from an accountant, perhaps the client, and possibly QuickBooks. Once again, there
should be no unreported Gross Revenue figures added to the top line or Other line. The same goes for
undocumented inventory or any other revenue adding from outside the P&L. Rule of thumb is you
cannot bring outside numbers into Tax Return or P&L. Once your "import" dollars, you are now
OWNER TO PROVE!
3) Annualized - This should be simply ACTUAL numbers that have been extrapolated across 12
months. There should be no adjustment for future growth or plans to add revenues. For example, you
may multiply the first quarter numbers by four and call the result annualized. Some normalization could
be used if the business is seasonal. But any normalization should be able to be documented through
previous year comparisons.
4) Owner to Prove - This category should be self-explanatory! Everyone should start at the
documented level (tax returns or P &L) then have some "other" revenues that are PROVABLE! What
does provable mean? I have seen everything from perfectly kept spreadsheets and ledgers to Z tapes
with rubber bands. I would even consider an inspection period to be owner to prove. In the end, the
seller must be willing and able to prove the represented Gross Revenues and expenses to have this
choice of representation.
5) Owners Estimate - This is the category to be used when the numbers flat out are speculative, the
owner is unwilling or unable to prove them, or simply unknown. This category should be used sparingly
and only when the numbers are truly must be estimated. (I often refer to this category as Owner's
Guesstimate!)
6) Proforma - Literally defined in the financial dictionary as "a financial projection based on
assumption". These numbers should be based on either a realist business plan or events that have
happened recently in a business. For example, the first quarter is over and the business grossed 250K.
That means we could Annualize 1M dollars in gross. However, the business just landed contracts that
will double sales for the last two quarters of the year you could use Proforma and have the sales figure
of 1.5M. Proforma should be based on some attainable numbers without additional cash injections. For
instance, if someone gave me 10M for my business and 5M went to advertising, I could incorrectly try
to Proforma 2M in earnings. I believe that is the incorrect use of the category. Simply stated,
annualized numbers are actual numbers multiplied to reflect 12months. Proforma numbers are not
based on past financials, but they are future numbers based on recent or upcoming events.
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7) Part year - This category could be owner to prove or P&L numbers. Part Year should not be used in
the left-hand column due to the fact the left hand numbers are shown on one-line advertisements online
and searches. It should only be used in the center or right columns and should reflect the column numbers
to the left. For instance, if you use the current year numbers annualized in the left column, you could
highlight the actual numbers in the column immediately to the right. Remember to always reflect what
part of the year numbers you are representing in the comment section. (For example, you could write in
the comments "the part year numbers are for the first 4 months of this year").
8) Non-operating business - This is self-explanatory. You should use this for a closed business such as a
salon or empty restaurant. This should not be used for any businesses that are operating.
9) Asset Sale - According to the rules all asset sales must be priced at or below the value of the assets.
WHY? The association in the past had an issue with brokers being lazy or uncooperative and just putting
asset sale for all their listings. That way a 1M-dollar business earning 300K looked bad on the BLI when
represented with no numbers under an asset sale classification even though the business only had 100K in
assets. Therefore the listing agent could save the sale for himself or herself. We restrict the use of the
asset category to only businesses having equal of more assets than the asking price. The rule would deter
brokers from using the category unreasonably and the tact has succeeded. This category should be used
for inventory and asset liquidation and other under performing businesses that will sell for less than asset
value.
Warning! You may be challenged on asset values on such things as intangibles.
The goal of these guidelines is to standardize the representations that sellers make on BLI's. Therefore
buyers and brokers could compare the businesses for sale (apples to apples) and more businesses could be
sold.
BBF Revised 2/28/11
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