When a business owner contemplates the sale of his business, the idea of hiring a real estate agent (sometimes referred to as a real estate broker) may seem reasonable, especially if commercial property is included in the sale of the business. The owner may also believe there is an opportunity to save money if the real estate agent charges a lower commission than a business broker. In truth, many business brokers have real estate licenses, making them capable of selling the property just as well as the real estate agent; meanwhile, there are many tasks a business broker is uniquely equipped to handle, whereas a real estate broker is not skilled in the same areas.
We go over the top 5 reasons not to sell a business through a real estate agent.
1. Business Brokers Know Business
It goes without saying that real estate brokers know a great deal about real estate; it is their bread and butter. Any broker hired to sell a business must understand much more than property issues, however. Worthwhile business brokers have valuable experience selling businesses, often bringing to the table business degrees and familiarity as business owners themselves. They understand financial statements, employee needs, management concerns, and the like.
2. Business Brokers Know Where to Market
Business sales and property sales are both heavily (and primarily) marketed online, but the sites where they are marketed are not the same. A monthly subscription is required for most sites that list businesses for sale, and business brokers are more likely than other brokers to pay for these sites. Frequently, a business broker will have exclusive access to a list of businesses for sale.
Undoubtedly the largest boon, however, is that Google will rank a business broker’s website higher in search results than it will other sites when a potential buyer searches for a business to buy. In short, a prospective buyer is more likely to find a listing for a company for sale on a business broker’s website than one on a site not affiliated with a business broker.
3. Business Brokers Know Buyers
Real estate agents and business brokers have very different business connections and lists of buyers. As expected, business brokers maintain a list of people who are in the market to buy a business. Real estate brokers have strong ties to people who want to buy a home. While it is possible for a real estate agent to know of someone who is looking to invest in real estate, it is important to note that most potential investors choose that route specifically because it does not require active management. Owning a business requires the desire and ability to manage, therefore a business broker will bring more appropriate prospective buyers into the picture.
4. Business Brokers Know Pricing
Pricing a business is very different from pricing real estate. One of the most important functions of a business broker is to help the owner decide on a reasonable (and profitable) selling price. Price the business too low, and the owner will be shortchanged; price the business too high, and the business will remain on the market longer than necessary (and a lengthy time on the market will also affect potential buyers’ perception of the business’s value and desirability). The business broker’s ability to assess the value of the business properly will result in easier and more intelligent negotiations with potential buyers.
5. Business Brokers Know How to Close
While much of the terminology is similar for the closing of a business sale and the closing of a real estate sale, their processes are very different. Both involve due diligence, financing, and purchase and sale agreements, but only a business broker will be knowledgeable enough about the required paperwork and information needed to ensure that the sale closes without incident.
A commercial real estate broker is most certainly a fine choice to assist someone who wishes to sell property to an investor. In sales involving both real estate and a business, however, the sale of the business is the overriding priority. Once the decision to purchase the business is made, then the real estate sale may be discussed. At that point, the question becomes whether the new buyer would rather rent the property as opposed to owning it. Although both are called brokers, real estate brokers and business brokers are very different, and selling a business is best accomplished with the help of someone who specializes in selling businesses.
If you are interested in selling a business or have more questions about whether a business broker is the right choice for you, please contact George and Company, located in Worcester, MA. We have honed our business skills over decades of appraising, selling, and financing small to middle-market companies. It would be our pleasure to assist you in making the decisions that will best benefit you.