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Should I Sell My Business With A Business Broker Or Traditional Real Estate Agent Who Mostly Sells Homes?

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Comments & Replies: 2     Views: 2572     Posted By: Joe Ranieri  



Topics: Business Brokerage, Selling A Business     Tags: broker cooperation, business brokers, selling a business



If you're in the real estate business then youíve probably heard when talking with a potential seller, "well, let me think about it, one of my family member has a real estate license." The real estate business, either commercial or residential can often defy the practices of other businesses. Ask yourself, have you ever had a problem with a business broker who didn't return your calls? If a person ran any other type of business and didnít return potential customers' calls in a prompt matter, how long would they be in business? Getting a real estate license compared to other professions is quite a short process, and so to the public, they sometimes cannot tell at first who the seasoned pro is vs the novice. There are some sellers who believe the skills of the business broker and residential real estate agent are interchangeable, but they are vastly different, both of course require tenacity and tough negotiating skills, but differ in the process of how the deals get done.

The average real estate agent who sells homes will typically sell their own listings about 20% of the time, while 80% of the time the buyer will be represented by another agent. When an agent represents both buyer and seller it is called "dual agency", leaving either the seller or buyer questioning "who's interest is he/she looking out for, me or the other person?" Many times, to avoid this conflict of interest scenario, the agent will refer the buyer to an office colleague, and that person will represent him/her. The business broker on the other hand will represent both buyer and seller 80% of the time, while 20% cooperating with an outside broker. A large portion of brokers either work under their own brokerage alone or work with 2-3 other people. Most brokers are responsible to procure their own buyers for their listings, making "dual agency" a standard in the business. It takes true negotiating skills, because the seller obviously wants the highest price possible, while the buyer wants the lowest price possible.

Before one is representing the buyer, one must make it easy enough for the buyer to find them. The only way for a real estate agent to sell a home is put it in the MLS (Multiple Listing Service), which once in that system, will go into about 30-40 other sites such as Realtor.com, Homes.com, etc. the point of course, is once listed, the whole world can see your neighbor just listed their home, as an example. There is a category for "businesses opportunities" in the MLS, and this information does not auto populate into other sites accessible to the public. Many agents who sell homes and sell the occasional business will just put it in the MLS, which leaves the business about 80%-90% unexposed, since most buyers themselves will actively look for their own opportunities and not work with a "buyer's agent". Many business brokers don't belong to a local real estate board, so they don't even have access to the MLS, and so they sell their listings through sites like BizBen.com, allowing buyers to search for opportunities, since classified ads in print newspapers have become almost non-effective.

Pricing a business takes years of experience, while one could use a general multiplier of the monthly gross sales, the problem is different businesses use different formulas, and all businesses have factors (high/low rent, heavy labor costs, etc.) that could affect the price. Unlike a home, one canít just sell a business by saying "well, a pizza shop around the corner sold for this price, so that's what we will sell yours forÖ", because each business has too many variables.

Even a blind pig will find the occasional trough, as the saying goes, which basically means, one could list a business, price it right, find the buyer, and get it into escrow, but only someone who knows what they're doing can routinely get it to close. Holding a deal together and getting it to close is when being a professional pays off, because transactions can blow up for several reasons, such as buyer gets cold feet, landlord rejects buyer, seller changes their mind, and many, many more reasons. Selling a home, once the buyer has loan approval and apart from inspections, basically goes on auto-pilot once contingencies start being removed, but selling a business involves constant problem solving and negotiating that can only be learned through constant trial and error through years of experience.


In California in order to represent a business for sale, the business broker must hold a California real estate license. That means that I am legally allowed to sell and lease houses, commercial buildings, and land, engage in property management, and various other activities, including selling businesses. But, just as one doesn't visit a dermatologist for an irregular heartbeat, one shouldn't use a residential or commercial real estate agent to sell a business. As in medicine, law, and most other professions, experience and specialization count ... for a lot.

For example: We are presently offering a business for sale that also includes commercial property and residential property. It's complicated. My area of expertise is businesses. So I have partnered with a well-established brokerage office with expertise in both residential and commercial real estate. Together we are providing the seller with the very best representation, with each broker handling the parts we know best.


  Helpful Resources To Assist In Selling And Buying California Businesses

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 800-864-0420.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Brad Steinberg, Broker - Laundromat Specialists

Laundry specialists - founded in 1968 by three laundry professionals, PWS is a family-owned corporation. Through the years it has grown to become the largest vended laundry equipment distributor in the United States. Call Brad Steinberg at 323-721-8832 to sell or buy a coin or card laundromat.


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The Bottomline: What Exactly Is Adjusted Net Income, SDC, And Cash Flow?

The use of add backs & adjusted net income is common among sellers of businesses when showing their financial information/performance. But buyers are cautioned to review financials and tax returns / documents closely. Peter Siegel, MBA with BizBen (ProBuy & ProSell, Financing Expert) explains.

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Selling Your Business To One Of Your Employees - A Good Idea? Pros And Con

After investing years of time and talent into a company, many small business owners want to feel like they are leaving their business in good hands and for that reason, some sellers opt to sell their business to an employee. Peter Siegel, MBA talks about the pros and cons to taking this route.

Before Buying A California Business, 10 Questions You Should Ask Yourself

Before buying a business, all serious business buyers should ask themselves some key questions about possible buying a small California business, franchise, or opportunity - from Peter Siegel, MBA (Business Purchase Financing Expert, ProBuy & ProSell Program Advisor with BizBen) at 866-270-6278.

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