Selling a residential or commercial property is usually a taxing affair, but selling a business is much more complex. Even if you are selling a business alongside its property, it’s vital to know the differences between the two and have the right people help you reach the right buyer. Doing it incorrectly won’t just lose you money, it could cripple your business while you try and find a buyer. Below are four of the most common reasons that selling a business isn’t like selling real property.
1. Business Listings Need to Stay Confidential
When it comes to selling a property like a home, the more publicity the better: put a sign on the lawn, host open houses, and place your address with all the listings. However, when it comes to selling a business, confidentiality is key. A significant portion of most business’s value lies in its customers, staff, and business partners: if they get spooked before or during a deal, the deal can become compromised and fail from exposure, causing a backlash to your business.
2. The Intangibles of a Business
Intangibles – those values of a business or property outside of material assets – are in turn valued and dismissed by potential buyers. And while a home might have “good neighbors” or be “kid friendly”, businesses have so many more non-physical assets. Brand recognition, company goodwill, intellectual property – all are something each business has and needs to properly explain to buyers and sellers as part of the business’s value.
3. The Need for a Business Valuation
With real estate, there are governmental databases that real estate agents have easy access to, allowing quick comparisons between the current properties and similar completed sales. While there are such comprehensive databases for business sales, they do not go into enough detail about each sale to be the sole means of placing a value on the company. This means that each business needs to be assessed on an individual basis, factoring in many different aspects in the process of a business valuation. Only after this is complete can a seller really know the value of his business.
4. Buyer and Seller Mediation
Negotiations for real estate can be brutal, but they don’t hold a candle to getting buyers and sellers to agree on the price of a business. Due diligence, computation of working capital, allocation of the selling price and more can cause considerable friction between parties: this is one of the places business brokers and M&A advisors shine. Not only will they work with the sellers to figure out their fair market price and the terms of their deal, but they also work as an intermediary between both sides to make sure both sides win.
At George & Company we’ve been selling businesses for over 35 years, from brokering small local businesses to multi-million dollar companies through M&A. If you want to learn about more differences between selling a business and a property, download our Reasons Not to Sell a Business through a Real Estate Agent article, where we compare the differences between a business broker and a real estate agent when it comes to selling your property. To learn more about buying or selling a business, contact us and look at our listings.