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The Differences Between Real Estate Agents and Business Brokers


There are a lot of real estate agents in California. Some suggest that one out of every seventy-five people has a real estate license. It’s no wonder that when the housing market drops (as it has this year in California) more real estate agents decide to list small businesses for sale.

However, being a successful residential real estate agent doesn’t automatically translate into being a successful business broker. Selling a small business is more complex and requires more training but almost anyone can claim to be a business broker. To sell a business in California you need a real estate license. In some states you don’t even need that. That’s one reason ninety to ninety-five percent of business brokers fail even faster than most new businesses. They close in their very first year.

There are many reasons why selling a business is more complex. Here are some key points to consider:

Small businesses have more drastic price fluxuations. Home prices are not as volatile as small businesses are. The value of a business can change in thirty days, a week, or even a day. That’s why knowing what’s necessary for each step in the buying process is critical.

 

 

You must keep the business listing confidential. You can’t show a business like a home and just start showing it. There is a delicate balance between advertising the business to potential buyers and keeping it under wraps to customers, vendors, and employees. From the listing until the business deal closes, confidentiality is important. Many deals are compromised or fall through because of breeches in confidentiality.

You need errors and omissions insurance. Selling a business is more complicated than selling a home. Lawsuits can and do result even when you’re prepared. To protect themselves business brokers carry this insurance. That way they are covered if costly problems occur that they could be responsible for during the sale.

Due diligence is much more complex. It’s a buyer’s responsibility to do due diligence to spot potential problems or inaccuracies before buying a business. Sellers are not always honest and there are often surprises. A good business broker knows this and can help you work through problems. They’ll help make sure the records, tax returns, and financials are accurate. Most sellers over exaggerate the price. Agents may take the owners word on the value of the business. Business brokers and agents who understand this won’t take a listing if the price is unrealistic because they know the business won’t sell. A professional business broker will help establish a fair market price and deal terms. They’ll also make sure the business is ready to sell before it hits the market.

Peter Siegel, MBA is the founder and President of BizBen.com - Businesses For Sale In California. A nationally recognized author (3 books and a syndicated small business blog) and expert consultant (national SBA small business specialist) on selling and buying businesses, he provides professional assistance to business brokers, agents, and business owners in getting maximum response in their advertising & marketing efforts in regards to selling small to mid-sized businesses. If you are selling a business and need professional assistance utilizing high performance advertising, marketing, and highly effective strategies, or individual customization with your BizBen Power Search options in buying a California business, you can reach him at 866-270-6278.


Comments Regarding This Blog Post


It's true, I've seen real estate agents who sell houses try to sell businesses, and they are mostly not qualified to do so. The agents may think that one puts a for sale sign in the window or they have to show the businesses to the potential buyers like one would do if they were showing a house for sale. Selling a business is much different then selling a home. Selling a home, one could put it in the MLS and have it sold that night and in escrow the very next day, but with businesses, it could take months and months of fielding calls from buyers. My advice would be each stay in their lane, so that they can fully represent the seller to the best of their ability. If a real estate agent has a friend/client who wants to sell, then refer them to a business broker and negotiate a referral fee, that way they can get paid if it sells, and also give them time to continue to build their business.


  Helpful Resources To Assist In Selling And Buying California Businesses
Joe Sandbank, Esq. - Legal Services

I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.

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.

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.

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.

Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers

I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements.

Brad Steinberg, Broker - Laundromat Specialists

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.


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Despite challenges in the business for sale marketplace, some of the business brokers who make a living by facilitating a deal between buyer and seller are known to stand in the way of a completed transaction because of some outdated ideas. Too bad they put greed ahead of the needs of their clients.

What Should I Do If Other Buyers Are Trying To Buy The Same Business As Me?

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5 Myths About Selling A California Business: Best Tips For Sellers & Brokers

Peter Siegel, MBA (at 866-270-6278) - BizBen Director discusses myths associated with the process of selling a business and some of them can actually cause deals to fall through. Don't let your sale be comprised, be aware of these common misconceptions related to the process of selling a business.

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