Maximizing Your Business Brokerage Success: The Top 7 KPI Metrics

Welcome to our latest blog post discussing the top seven business brokerage KPI metrics. As a serial entrepreneur who has started and running many businesses, I can attest to the importance of regularly tracking and evaluating key performance indicators to ensure the success of your brokerage. With the industry continuously growing, it's essential to keep a close eye on these metrics to stay competitive and efficient.

• Number of successful transactions completed: This metric represents the total number of transactions that have closed within a specific timeframe. It is a crucial indicator of your brokerage's ability to deliver results for clients.
• Average time to close a transaction: This metric represents the average length of time it takes to complete a transaction from start to finish. A shorter time frame typically signifies a more efficient and effective brokerage.
• Percentage of repeat business: This metric represents the percentage of clients who have returned to your brokerage to do business again. A high percentage indicates that your brokerage is providing satisfactory service and building valuable relationships with clients.

These are just a few of the essential KPIs our team will be discussing in this article. Keep scrolling to learn more about the size of the brokerage's database of available businesses, the number of new listings added to the database per month, the average commission percentage earned per transaction, and the net promoter score (NPS) from clients (buyers and sellers).

Number of successful transactions completed

A key performance indicator in the business brokerage industry is the number of successful transactions completed. This KPI measures the effectiveness of a brokerage firm in facilitating successful deals between buyers and sellers. Here is a detailed explanation of this KPI:

Definition

The number of successful transactions completed is the total number of deals or transactions the business brokerage firm has facilitated that have closed successfully within a specific period.

Use Case

This KPI helps business brokerage firms evaluate their success rate in connecting buyers and sellers of businesses. It can also help identify which type of businesses are easier or more difficult to sell, allowing for a more targeted approach to marketing efforts.

How To Calculate KPI

The formula for calculating the number of successful transactions completed is:

Calculation Example

If a brokerage completes 30 deals in a quarter and 10 of them do not close, the calculation of successful transactions completed would be:

KPI Advantages

• Indicates the overall success rate of the brokerage in facilitating deals.
• Helps identify strengths and weaknesses in the brokerage's business model.
• Enables businesses to compare their success rates to industry benchmarks.

KPI Disadvantages

• Does not take into account the value or quality of transactions completed.
• May not differentiate between complex deals and simple deals.
• May not account for external factors that may have influenced transaction success.

KPI Industry Benchmarks

The average number of successful transactions completed varies by industry, but according to industry research, most business brokers close between 50-70% of their attempted deals.

What are the Top Seven Business Brokerage KPI Metrics. How to Track and Calculate.

Average time to close a transaction

Definition: The average time taken to close a deal or transaction from the initial inquiry to the final stage of completing the sale process.

Use Case: This KPI metric helps to determine the efficiency of your business brokerage processes. By measuring the time taken to close a transaction, you can identify the bottlenecks in your sales process and make necessary improvements to achieve faster and smoother transactions.

How To Calculate KPI: To calculate the average time to close a transaction KPI, add up the time taken to close each transaction and divide it by the total number of transactions.

Calculation Example: Suppose you closed 10 transactions in a month. Out of which, first transaction took 10 days, second transaction took 20 days and so on. The total time taken to close all transactions is 200 days. So, the average time to close a transaction for this month will be:

KPI Advantages:

• Helps to monitor the efficiency of the business brokerage service
• Helps to identify bottlenecks in the sales process and improve it
• Helps to set realistic goals and targets for the sales team

KPI Disadvantages:

• Does not take into account the complexity of the transaction
• Does not reflect any other factors that may affect the closing time, such as external market changes

KPI Industry Benchmarks: The industry benchmark for average time to close a transaction KPI in the business brokerage market is 90 days.

Percentage of Repeat Business

Definition

The percentage of repeat business is a KPI metric used to measure the loyalty of customers. It calculates the percentage of customers who have made more than one purchase from the business.

Use Case

The percentage of repeat business is an essential KPI for businesses that want to measure customer satisfaction and create effective strategies to increase customer retention. By analyzing the metric, businesses can determine whether they are meeting customer expectations, identify areas of improvement, and enhance customer experiences.

How to Calculate KPI

To calculate the percentage of repeat business, use the following formula:

Calculation Example

If your business has 500 customers, and 100 of them have made more than one purchase, the calculation would be:

KPI Advantages

• Helps businesses understand customer loyalty
• Enables companies to create personalized strategies to retain customers
• Assists in building brand loyalty

KPI Disadvantages

• Does not consider new customers, who may become loyal in the future
• Does not account for customers who make only one purchase but have a significant impact on the business (e.g., high-value purchases)
• May not be suitable for businesses with irregular purchase patterns

KPI Industry Benchmarks

The percentage of repeat business can vary significantly by industry. As a general rule of thumb, a repeat business rate of 20% to 40% is average for most industries, while a rate higher than 40% is excellent.

Size of the Brokerage's Database of Available Businesses

Definition

The size of the brokerage's database of available businesses measures the number of businesses that are actively for sale on the brokerage's platform.

Use Case

Tracking the size of the brokerage's database enables you to assess the overall health of the brokerage's business pipeline and identify trends over time. This KPI is especially valuable for brokers who specialize in niche market segments or geographic areas where transaction volume is relatively low.

How to Calculate KPI

To calculate the size of the brokerage's database of available businesses, count the number of active listings on the brokerage's platform on the first day of the month:

Calculation Example

On the first day of the month, Brokerage A has 78 active listings on its platform.

KPI Advantages

• Provides insight into the strength of the brokerage's business pipeline
• Helps brokers identify areas where they may need to focus their marketing efforts to attract more listings
• Allows brokers to monitor changes in the market and adjust their strategy accordingly

KPI Disadvantages

• Does not account for listings that may have been removed or sold during the month
• Can be influenced by external factors outside of the brokerage's control, such as changes in the overall market or the economy
• Might not be as relevant for large brokerage firms that handle a significant volume of transactions

KPI Industry Benchmarks

As an industry benchmark, the average number of active listings for a business brokerage is roughly 40 to 50. However, this number can vary widely depending on the size of the brokerage, the types of businesses they specialize in, and their geographic location.

Top Seven Business Brokerage KPI Metrics: How to Track and Calculate

Number of new listings added to the database per month

Top Seven Business Brokerage KPI Metrics. How to Track and Calculate.

Average commission percentage earned per transaction

Definition: This KPI metric measures the commission percentage earned, on average, per transaction. This KPI indicates the profitability of the business broker, and whether they are earning enough revenue per transaction.

Use Case: This KPI is important for business brokers to track as it helps them to understand their revenue per transaction. By monitoring this KPI, brokers can optimize their commission rates to ensure maximum profitability. In addition, this KPI can also help brokers to evaluate their pricing strategies.

How To Calculate KPI: To calculate this KPI, divide the total commission earned from a transaction by the transaction value, and then multiply by 100 to get a percentage. KPI formula: (Total Commission Earned / Transaction Value) * 100.

KPI Advantages: This KPI provides important information about a broker's revenue per transaction. By monitoring this KPI, brokers can optimize their commission rates and evaluate their pricing strategies. It also helps brokers to track their profitability per deal.

KPI Disadvantages: This KPI does not take into consideration the complexity of the transaction, and therefore, may not accurately reflect the broker's workload or costs associated with the deal. It is also important to note that this KPI may vary widely across different industries.

KPI Industry Benchmarks: According to industry data, the average commission percentage earned per transaction for business brokers ranges from 1% to 10%. However, this can vary depending on the specific industry and transaction complexity.

Net Promoter Score (NPS) from Clients (Buyers and Sellers)

Definition

The Net Promoter Score (NPS) measures the willingness of clients to recommend a company's products or services to others. This KPI is often used in the business brokerage industry to gauge client satisfaction and loyalty.

Use Case

Tracking NPS from clients helps business brokers understand how likely their clients are to refer new business. This KPI also helps brokers identify areas of improvement to enhance client satisfaction and loyalty.

How to Calculate KPI

To calculate NPS, start by asking clients the following question: 'On a scale from 0 to 10, how likely are you to recommend our company to others?' Responses are then categorized into three groups:

• Promoters: Clients who respond with a 9 or 10
• Passives: Clients who respond with a 7 or 8
• Detractors: Clients who respond with a score of 0 to 6

Calculation Example

If 50% of clients are promoters, 20% are passives, and 30% are detractors, the NPS would be calculated as follows:

KPI Advantages

• Easy to understand and interpret
• Provides insight into customer loyalty and satisfaction
• Can be compared to industry benchmarks to gauge performance

KPI Disadvantages

• Only measures one aspect of a client's relationship with a company
• Can be influenced by extraneous factors, such as recent events or changes in the market
• Does not provide actionable steps for improving client satisfaction

Industry Benchmarks for NPS

According to a 2021 study by Satmetrix, the global average NPS for the business brokerage industry is 24.

The success of a business brokerage relies heavily on its ability to deliver results for clients. It's crucial to regularly track and evaluate key performance indicators to stay competitive and efficient in the industry. In this blog post, we have discussed seven essential KPI metrics that can help you monitor the performance of your brokerage.

• Number of successful transactions completed: This metric is a crucial indicator of your brokerage's ability to deliver results for clients and achieve their goals.
• Average time to close a transaction: A shorter time frame signifies a more efficient and effective brokerage that can handle transactions quickly to the satisfaction of clients.
• Percentage of repeat business: This metric indicates your brokerage's ability to provide satisfactory service and build valuable relationships with clients, leading to repeat business.

In addition to these essential metrics, it's also important to consider the size of your brokerage's database of available businesses, the number of new listings added to the database per month, the average commission percentage earned per transaction, and the net promoter score (NPS) from clients (buyers and sellers).

By regularly monitoring and evaluating these KPI metrics, you can make data-driven decisions and identify areas for improvement to ensure the success and growth of your business brokerage.