Murphy Goes Nationwide

Murphy Goes Nationwide

COMPANIES by Dave Szymanski | Tampa Bay Editor

The Clearwater-based business brokerage, which expanded into real estate, wants to take its formula outside Florida through franchises.

This is the story of a CEO's decision to change his company's model from a local private business to a national franchise.  

If this sounds familiar, it may be, especially if the business sells hamburgers, car repair services or pizzas.

But Roger Murphy, CEO of Murphy Business & Financial Services, a Clearwater-based brokerage firm, is making it happen with business brokers - people who, like Realtors, find sellers and buyers. Instead of houses, Murphy helps sell businesses.

Business services are among the top five business concepts being franchised in the United States, according to the International Franchise Association. Business services have created more than 26,000 franchises in America. There are 95 different concepts on the market in that niche.

So far, Murphy has sold franchises in 13 regions of the United States. The company has identified 40 regions for the company's expansion. Each region can support 40 to 70 franchise offices. It also has 32 franchisees in Florida.

Murphy's vision: 100 franchise offices this year, 225 in 2008 and 500-600 offices in three to five years.

"Ultimately, our goal is 1,200 or so," Murphy says. "It will be international."

The company sold about 300 businesses and had revenues of $10 million in 2006. Less than 10% of the sales were franchises, such as dry cleaners, transmission repair shops and restaurants. Most of the sales are existing businesses.

"There are a lot more buyers than sellers," Murphy says. "The crown jewel is sellers."

So besides selling other companies' franchises, Murphy is now selling franchises of its own.

Besting the competition

That happened as a result of having built a growing business brokerage operation in Florida. Murphy, 55, has a number of competitors, some of which have more franchisees. Similar brokerages include VR Business Brokers of Fort Lauderdale, which has 90 locations, and behemoth Sunbelt Business Advisors of Ohio, which has 300 units.

But Murphy believes he has designed a better business brokerage model, one that will be attractive to people around the world, not just in Florida.

Some of the keys to that model, which Murphy provides to each office, are:

• Access to a database of companies for sale

• An in-house business valuation company

• A franchise sales division

• Comprehensive training

• A commercial real estate division

• Central administration, freeing up brokers to work more with clients

Part of this decision involves timing and demographics. The brokerages have an appeal to aging Baby Boomers leaving the corporate world in search of a business opportunity. But some brokerages aren't set up to allow for maximum sales.

"The typical broker is a 55-year-old guy, typing listings into a Web site," Murphy says. "He's putting packages together. Stuffing envelopes. This keeps him away from clients. We've built a franchise program where all they do is spend time with clients.

"We believe we'll be in the top 10% of the fastest-growing franchises," Murphy says.

Murphy also brought on a new partner, Tom Miller, a 25-year veteran of franchising, who is helping lead the national expansion.

"To run a successful business, you need to drive the best quality people you can find, empower them to do their job and not micromanage," he adds.

 Murphy also grew his firm horizontally, adding services that complemented each other. For example, he added a commercial real estate division that assists clients in divesting or leasing their properties in addition to their businesses. It now does business in 35 states. It also added a certified financial planner who is available to consult with sellers and it has affiliations with financial services companies.

"We're trying to be a one-stop shop for business owners," he says. "We're trying to help people figure out how to structure the transaction.

It's a franchise world

While nothing is guaranteed in franchising, since Murphy established 32 franchisees in Florida, and 10 others outside Florida, he should be able to replicate that success in other states if he finds the right franchise operators, says Terry Hill, vice president with the International Franchise Association in Washington.

"When you get to that size, you are doing something right," Hill says. "The concept has been tested in the marketplace."

However, Hill noted that the association cautions some investors to study a business before buying a franchise to make sure they will enjoy the experience.

"Franchising is not for everyone," Hill said. "If you're an entrepreneurial person, not used to working under someone else's structure, someone else's rules, you may want to reconsider. The parent company doesn't want you playing around with the model because they know it works."

Yet some executives like buying franchises because they are a proven concept. Murphy represents 100 franchises who want to sell new locations to buyers.

"A lot of buyers are corporate people and they can't quite get their arms around the person in charge," Murphy says. "It's scary to some people. But when you buy a franchise, it's a proven concept."

Keep it lean

Murphy only has a staff of 15 at the Clearwater headquarters. But he has 120 independent contractors working as brokers for him, similar to the residential real estate industry.

The key to the company's overall growth: training employees and conservative spending. Murphy Business has no bank debt.

The company started 14 years ago in Murphy's Palm Harbor home as Murphy Business & Financial Services. Murphy, a self proclaimed "burned out corporate guy," researched the business brokerage industry, and from his perspective, brokerages were doing a poor job marketing businesses for sale.

"They had no clue on how to put together marketing materials and a sales package," he says. "We developed a system, when marketing a business, to develop a very comprehensive package on the business. This results in more sales."

His packaging and publishing experience came in handy. Before he founded Murphy Business, Murphy, a New Hampshire native, worked in Peterborough, N.H. as president and CEO for the magazine division of IDG Communications for 15 years. Some of the 17 national publications included PC World, Computer World, Mac World and Info World.

Murphy came to Florida and did magazine consulting in 1992. He then began to help people with business transactions. That got him thinking of starting what is now Murphy Business & Financial.

Getting your business ready to sell

Factors that can help owners determine it's time to sell:

• There are more buyers than sellers now because corporate America is downsizing 40- to 50-year-old executives and forcing them into early retirement

• The availability of relatively low interest rates is making it easier for these buyers to get financing

• Insufficient capital to grow

• Burnout

• Receiving an unsolicited offer

• The desire to achieve estate liquidity.

Tips to help owners get their businesses ready to sell:

• Organize your finances first. Make sure all financial records are in order and that all expenses and revenues are included in your accounting records.

• Make sure your building and equipment are in good shape.

• Take stock of your staff. You should have the proper staff and management in place so you can phase out of day-to-day operations. Your ultimate goal is to become less essential to the daily operations so that the transition from one owner to the next is as smooth as possible for employees, customers and vendors.

• Determine your business's market value. This is the most critical step. A broker can help determine the market value and usually determine that the business is worth two to four times your discretionary cash flow. Other things brokers look at to determine the value include how good your staff is, condition of assets, quality of customer base, whether the business is growing or downsizing, the business's age and reputation. This information will provide the basis for an improvement or growth plan if your business is appraised for the amount you need for retirement.

• Be realistic when determining a sale price. With the availability of Internet research and other market value databases, buyers are knowledgeable about realistic asking prices. As a result, they're unlikely to pay too much for a business. However, sellers often tend to overvalue their own business, a condition that may delay a transaction with an otherwise ready buyer. Consider seeking a professional business valuation to ensure you know the true value of your business.

• Seek tax and legal advice before selling. Tax advice is particularly important, as you will not be able to keep all of the money from the sale of your business. In some situations, the taxes can amount to as much as 50%. Having the sale properly structured, whether as stock or an asset sale, can minimize taxes.

• Negotiate with more than one buyer. With more than one prospective buyer you can negotiate from a position of strength and mix and match some features of each offer. Keep the business on the market until closing.

• Don't "nitpick" in negotiations. Buyers and sellers sometimes argue over details that aren't critical. Compromise makes for a more successful process.

• Evaluate the buyers' personality and skills. Sellers often do some of the financing of the sale themselves, so you should determine if the buyer can be successful running your company. Also, be honest with your buyer about what it takes to run your company.

• Don't stop running the business during the sale process. It's easy to mentally "check out" of the business when you get an interested buyer. Unfortunately, this can make your business regress if the sale falls through. In other cases, the sale may be contingent upon the business continuing at a certain revenue level. In addition, don't make any major purchases without letting the potential buyer know. Until the closing, focus on your business.

Source: Murphy Business & Financial Services

Franchising

in America

Franchising overall:

• Nearly one-third of all retail sales

• More than $1 trillion in annual sales

• 2,165 active franchise systems

• 525,159 total units. More than 300 new franchise concepts in 2005

Largest industries by

number of franchises:

• Fast Food (more than 350)

• Restaurants (little less than 200)

• Maintenance Services

• Automotive Services

• Business Services

Fastest-growing

industries: New concepts

• Fast Food 84

• Restaurants 44

• Maintenance Services 41

• Retail food 35

• Health & Fitness 34

Largest industries

by number of franchised units:

• Fast Food 126,400

• Real Estate 40,915

• Maintenance Services 31,615

• Business Services 26,804

• Retail 20,327

Source: International Franchise Association 

AT A GLANCE

Murphy Business & Financial franchise breakdown

13 regional master franchisees:

• Clearwater

• Atlanta

• Charlotte, N.C.

• Washington D.C. (serves Washington D.C., Virginia, West Virginia)

• Springfield, Mo. (serves, Nebraska, Arkansas, Missouri, Oklahoma)

• Dallas (serves North Texas)

• Billings, Mont. (serves Montana, Idaho, N. Dakota, S. Dakota, northern 2/3 of Wyoming)

• Tucson, AZ (serves Arizona, New Mexico, El Paso)

• Sacramento (serves Northern California and Southern Nevada)

• Laguna Niguel (serves Southern California)

• Reno (serves Northern Nevada)

• San Antonio/Austin

• Costa Rica

52 local franchisees

(includes 23 in Florida):

Florida locations are:

• Clearwater/St. Petersburg

• Alachua

• Boca Raton

• Bonita Springs

• Brandon

• Cooper City

• Coral Gables

• Delray Beach

• Fort Lauderdale

• Jacksonville (2)

• Lakeland

• Naples

• Orlando (2)

• Ormond Beach

• Panama City

• Punta Gorda

• St. Augustine

• San Antonio

• Sarasota

• Springhill

• Tallahassee

REVIEW SUMMARY

Company: Murphy Business & Financial Services

Industry: Clearwater-based business brokerage

Key: Free brokers of administrative tasks so they can work with clients, and expand the concept nationally through franchises.