Should a Real Estate Agent or Business Broker Sell your Business?

by Dean Demeyer 1st of November, 2023

Real Estate Agent or Business Broker

Over the years I have sold several real estate properties through real estate agents, and without failure, the agent has added great value and ROI for their commission.

However, when it comes to the sale of an operating business, including project managing the many interested parties through to settlement, hiring a professional Business Broker is the best decision you can make.

Usually, every property that is listed for sale is sold; it’s just a matter of price and time. Unfortunately, that success rate does not apply to the sale of businesses, which is more like less than 33 percent actually sell. The two or more unsuccessful businesses sell off their assets individually at low values, or merely close down after years of risk, sweat, and toil.

An active business is a much more complex structure than simple static land and buildings. The dynamics around establishing a fair price for a business are very complex and often challenged by buyers, their advisers, and banks who will not lend money against Business Goodwill.

Buyers of businesses will always ask hundreds of questions around the operations, assets, employees, and free cash flow of a business. Buyers want to discuss these things with an intermediary, who can answer their questions with confidence, and therefore must possess a deep knowledge of the business dynamics.

Listing businesses for sale is easy, but well-prepared documentation that answers all likely questions from buyers’ accountants and lenders is always required for a sale at a fair price. The larger the business, the more critical that documentation becomes.

Remember, selling a business is in fact selling a future cash flow, and an experienced broker is gifted at selling goodwill – the invisible. To sell it you must know where the goodwill comes from. Is it business IP, location, repeatable systems and processes, a niche industry, the management team that’s in place? You see, there are many other things that makeup business value other than financial performance.

For example, growth potential, customer and supplier diversification, employee dependency, owner dependency, positive cash flow cycles, what kind of recurrent revenues you have, customer satisfaction to keep repurchasing, your control over pricing (margin control), etc. These are complex topics that will add exponential value to a business.

Matching appropriate buyers with sellers is a critical value proposition for a business broker. They must meet both parties’ objectives and financial goals. Think of it as like eHarmony for businesses.

My last piece of advice is to not let what may be the biggest financial transaction you will make, and possibly a large percentage of your retirement nest egg, become a racetrack bet as you may spend precious years wasting time with the wrong style selling agent. Someone with a large hat, but no cattle.

Please hire an experienced Business Broker who will add additional value to give you the highest ROI, not just be another cost of doing business.

Tags: business brokers selling a business