Buying or selling a brick and mortar location can prove difficult for small business owners. A number of pain points can arise for both buyers and sellers during the process. To name a few: high commissions, months-long transaction closings, and a valuation process that is either incomplete or prone to errors.
Enter BizPappa, a company that co-founder Shan Sundaram said envisions itself as the Zillow or Redfin of mom and pop stores in the Seattle and Eastside markets.
“There’s so much technology that helps people through the homebuying process,” Sundaram said. “But if you look at small businesses, no one has built anything to improve that process — people still use platforms like Craigslist, it takes a long time, and there’s not a lot of trust. We have this great opportunity to build a platform to help improve all of that.”
The company — made up of longtime Microsoft product manager Sundaram, restaurant owner Aravind Namasivayam, and real estate broker and food industry veteran Aimee Zhang —launched in July and currently is focusing its energy on facilitating the process of buying and selling restaurants.
“Eventually, we’ll expand to salons, gas stations, other small businesses,” Sundaram said. “We want to make it solid before rushing too quickly into other markets.”
The BizPappa website helps buyers and sellers of restaurants — and in the future, of other businesses — adds transparency, and speeds up the process.
Sellers, Sundaram explained, most often come up against the problem of not having proper bookkeeping when they are looking to sell. BizPappa works with owners to sort out all the numbers before the listing goes on the market so that an extended back-and-forth between buyer and seller is less necessary.
“We spend time with the sellers collecting rich financial data for the last few years in order to fill that gap,” Sundaram said. “If a seller comes to us and wants to sell a business for $400,000, but in their bookkeeping, they only show revenue for $200,000, they’re going to have problems with the buyer because the buyer will want to see the numbers. That’s a major pain point we’re addressing.”
Another pain point is the lack of adequate visual materials when a business owner is looking to sell. Sundaram said that, in order to attract a buyer, financials have to be clear and transparent, but there also have to be good photos and videos of the space that present it in a polished and professional manner.
These steps are helpful to buyers, too, who have easy access through BizPappa’s website of virtual tours of locations while having a clearer financial understanding of the business they are looking to purchase.
“We’re turning a process that takes at least a week or two into one that is much faster,” Sundaram said. “Traditional brokers are less motivated on small business transactions than on home real estate, so we are building a network of in-house brokers to respond quickly. And as long as there is good data, buyers are able to better trust businesses and move fast on a transaction, which is not what is happening now.”
Currently, BizPappa is fairly simple in following a Zillow-like model: creating clean, transparent listings with the necessary information included and verified to create a more painless process. Sundaram said, however, that the vision for the company is much bigger.
“We want to create a concierge of professional services for small businesses that help them both pre-launch and post-launch,” Sundaram said, explaining that the build-out of such services will hopefully be available in the next three years. “Once you buy a business, there are a number of licenses and permits you have to obtain. Instead of jumping through all those hoops yourself, you could pay BizPappa a professional service fee, and we will help get everything sorted out so that launching the business is easy and you’re ready to go on day one.”
That pre-launch help can be coupled with additional post-launch assistance around proper bookkeeping, quick website building, and other needs that small business owners have when juggling their many responsibilities. Then, ideally down the road, Sundaram said, if a business working with BizPappa wanted to sell, it would have the proper information and financial data it needed to sell quickly.
“We want it to be more than a platform to buy and sell businesses, but also a day-to-day tool for entrepreneurs to easily keep their businesses running correctly,” Sundaram said.
While those elements are still in development, BizPappa makes its money through a typical real estate model, taking 7 to 8 percent of the sale, with an option down the road to give the buyer a 2 percent rebate to attract them to use the platform.
And as the company grows into a permanent office space and begins to hire employees beyond its current contractors, Sundaram looks to the once-valued $4.5 billion company Zenefits —before its 2016 legal troubles — as a source of inspiration.
“For startup companies, Zenefits did the payroll, the insurance, and they made it big,” he said. “Similar to that, we want to provide those professional services for local small businesses, including insurance, because local small restaurants struggle to find the right business insurance, the right payroll packages — they’re doing it all in spreadsheets. The long-term vision is to become the (Zillow) for mom and pop shops to buy and sell, as well as the Zenefits for them to successfully operate.”