Making the choice to sell a business, as highlighted in ‘What Is the Difference Between a Real Estate Agent and Business Broker?’, stands as a pivotal moment in an individual’s journey. After investing effort and nurturing a prosperous company, the potential rewards are substantial. However, reaching the finish line demands extensive groundwork. Central to this preparation is identifying the ideal professional to guide through the intricacies of marketing, price negotiations, and other crucial facets of the transaction.
When you’re ready to sell your business in Washington DC, the first thing to consider is where to turn for help with facilitating the sale. Although some business owners turn to real estate agents, that’s not the best approach. Hiring a business broker is a better way to maximize profits from the sale, but understanding why that’s the case requires developing a clear picture of what both real estate agents and business brokers do and what the key differences are between them.
What Are Real Estate Agents?
Real estate agents are individuals who hold licenses to sell residential and commercial properties. Commercial real estate agents often work with established businesses to find buyers for their buildings and properties. Although some also sell the occasional business, their primary focus is creating property listings and getting them in front of as many eyes as possible. That’s not always the best approach to selling a business.
What Are Business Brokers?
Business brokers specialize in selling companies, though many hold real estate licenses to facilitate sales that involve commercial properties. Some people assume that they only work with large, well-established companies when in fact, business brokers assist in the sale of companies of all sizes. These professionals offer assistance with every step in the process, from business valuation to vetting buyers, preparing documents, and closing the sale.
Key Differences Between the Two
In the context of ‘What Is the Difference Between a Real Estate Agent and Business Broker?’, it’s evident that the distinctions between real estate agents and business brokers are more than just their primary roles. While some real estate agents venture into business sales and many business brokers possess real estate licenses, it might seem their differences are minor. However, the subsequent exploration of their unique attributes provides a compelling argument against such a notion.
Preparing for the Sale
When real estate agents think about how to prepare for a sale, their primary concerns are aesthetic. They may encourage clients to fix minor issues around the home or stage it before taking photos to make it easier for potential buyers to see themselves living there. These superficial concerns are much less important when selling a business, even if it owns property that the buyer will want to view.
When preparing a business for sale, the key is to make sure buyers understand its potential. Business owners often spend years getting their finances in order, stabilizing their client bases, and implementing operational changes before placing a company up for sale. Brokers can help with this process by performing valuations and offering insight into what a potential buyer will be looking for, whereas real estate agents are not qualified to do so.
Determining a Price
The process of pricing a business is very different from that of pricing a piece of commercial real estate. When real estate agents determine appropriate pricing, they consider factors such as market conditions, comparable recent sales, incentives, and net proceeds estimates. While market conditions, in particular, can also impact what a company is worth, valuing a business is very different.
There are many methods for valuing businesses, but each follows a distinct and consistent process. Every aspect of a business must be evaluated, from its assets and liabilities to its cash flow and future earning potential. Sellers should expect to provide information about how they priced the business to buyers, so having an industry professional perform the valuation is essential.
Buyer Outreach
In the realm of ‘What Is the Difference Between a Real Estate Agent and Business Broker?’, real estate agents typically attract buyers through online listings, open houses, and other public engagements. On the other hand, business brokers, with their distinct priorities, adopt a different approach. Instead of merely attracting a broad audience, they aim to pinpoint qualified buyers, ensuring the impending sale remains discreet. This discretion prevents potential disruptions like increased employee attrition or jeopardizing customer trust, and it safeguards against revealing sensitive details to rivals.
Brokers generally pre-qualify buyers by blind profiles and confidential information memorandums (CIMs). The first of these documents garners the attention of potential buyers without giving away any identifying information about the company. If buyers express interest, brokers have them sign non-disclosure agreements before they send over CIMs for review. Only once a potential buyer has signed an NDA will they get information about the business’s operations, finances, management, and other key factors.
The Closing Process
The closing processes for real estate sales versus business brokerage also differ significantly. Business sales are more complex than real estate transactions. Brokers have specific industry knowledge of how these transactions work, including how purchases are financed, what to expect from due diligence, and how to draft purchase and sale agreements. Real estate agents don’t generally have all the knowledge required to close the deal.
The process of transferring real estate from a seller to a buyer is generally pretty straightforward. Business sales, on the other hand, can be complicated. It’s not uncommon for sales to involve the transfer of only some assets or liabilities or include provisions for keeping former business owners on as consultants or employees for a time to ease the transition. Real estate agents may not understand these complexities.
Find the Right Professional to Facilitate a Sale
When considering the question of ‘What Is the Difference Between a Real Estate Agent and Business Broker?’, it’s essential to note the following: If a business owner intends to sell only their commercial properties without selling the actual business, a real estate agent is the right choice. In such scenarios, the steps to ready the properties and secure a buyer are straightforward, and a commercial real estate agent possesses the expertise needed. However, for those looking to sell their entire business, partnering with seasoned business brokers, like the professionals at CGK Business Sales, is imperative.
