In this review, we discuss the differences between a real estate broker and a business broker. We also discuss the process for selling a business and why you should work with a business broker for this form of transaction. This information should help you make an informed decision as to whether a real estate broker or a business broker is right for you.
Real Estate vs. Business Broker: What is The Difference?
A real estate and business broker deal with different assets; real estate brokers deal with the transaction of real estate properties, whereas a business broker deals with the transaction of a company. Below is a closer look at the definition for each.
What is a Real Estate Broker?
A real estate broker assists with real estate transactions. There are two types of real estate brokers — residential and commercial. A residential real estate broker helps clients who are searching for a place to live or residential properties in which they can invest. A commercial real estate broker helps buyers who are searching for a place to work or operate business (i.e. a storefront for a retail shop).
What is a Business Broker?
A business broker assists with business sales. For instance, an individual would hire a business broker if they were planning their exit strategy (i.e. retirement) and needed assistance with selling their company. Specifically, a business broker helps business owners determine the worth of their company (via a professional valuation), prepare for the business sale, find potential buyers, and close the sale. In some cases, real estate is included in a business sale.
Should I Work With a Real Estate or Business Broker to Sell My Business?
You should work with a real estate broker if you buy or sell a real estate property that is not associated with a business sale. This could be for a commercial or residential property. For example, if you want to purchase a warehouse for your company to better expand its operations, then it may be best to work with a real estate agent.
However, if you are selling your company now or in the near future, then you should work with a business broker. As mentioned, a business broker can also assist you if there is real estate included in your business sale. For example, if you are selling your manufacturing company and are including your warehouse(s) in the sale, then you should work with a business broker. The broker can determine the full value of your company and seek a buyer for fair market value. This process may involve a real estate appraisal to determine the appraised and fair market value of your commercial property.
What are The Benefits of Working With a Business Broker During a Business Sale?
It is always best to choose a business broker to work with when you sell a business. Below are key benefits sellers receive from a business broker during a company sale.
Trained and Educated Specifically on How to Sell a Business
A business broker specializes in business transactions. In most cases, real estate brokers do not assist with the business sale process. In the event a real estate broker does offer business brokerage services, it is best to choose a professional who specializes in business sales. This is because the sales process is far different than that of a real estate transaction.
Take The Necessary Steps to Protect The Confidentiality of The Sale
During a business sale, the seller (and all potential buyers) must maintain the confidentiality of the sales process. Otherwise, news of the deal could be leaked to the public and the company’s value and business operations could subsequently be impacted in a negative manner. A business broker understands precisely how to protect the confidentiality of the sale. For instance, they may use a confidential information memorandum (CIM) and have any potential buyers who view the CIM to sign a non-disclosure agreement (NDA).
A real estate broker is not concerned with the confidentiality of a real estate sale. In fact, the opposite is usually true. A real estate broker wants as much attention as possible, and they may utilize public marketing channels and listings to ensure the real estate property has as far of a public reach as possible.
Able to Provide a Justifiable Valuation
Whether you sell a real estate property or a company, it is essential to get your asking price right and gain a full understanding of the market value for your asset. Otherwise, you risk selling for below your company’s worth or not selling for at all due to a high asking price. For most real estate sales, the real estate broker along with the assistance of a real estate appraiser determines the property’s value. For a business sale, the business broker provides a professional business valuation. This involved the use of either a market-based, asset-based, or income-based approach.
For business sales, a business broker provides the most accurate valuation for your company. This ensures you can justify the valuation once you market your company and begin negotiations. Although real estate brokers are great at pricing real estate properties, they are not nearly as reliable when it comes to providing a valuation of your business. Therefore, it is imperative to choose a business broker, who specializes in the valuation process specifically for businesses.
Understand How to Find Buyers in The Most Effective Manner
A business broker can help you find buyers that are willing to pay fair market value for your company and meet your other (non-financial) sales goals. For many, this is the most important benefit a business broker can provide. A real estate broker is not able to provide this benefit to the same extent as the process for real estate sales and business sales are different.
Contact Our Business Brokerage Team at Sigma Mergers and Acquisitions
Sigma Mergers and Acquisitions is a business brokerage in the Dallas, Texas area that helps business owners sell for fair market value. From the SaaS industry to manufacturing, we can help you no matter your industry. To learn more and get started with a free, no-obligation business valuation, contact us today.