Selling Businesses Is Not the Same As Selling Real Estate

There is a danger in treating the sale of a business the same way as the sale of real estate. Many business owners think of it as the same process but when you take a closer look you will see great differences and will understand why treating business buyers as property buyers is a trap to be avoided at the all cost. Lets examine the important differences and what a seller should do to compensate or take advantage of each of them

1. In most cases of property sale, the vendor and purchaser don’t meet. While in the sale of a business, the owner of the business is a crucial part of the business sale. The owner is essential for the introduction of buyers to the business during the sales process and when the business sale takes place, the owner plays a big role during the business handover to the new owner.

That’s why it is paramount that the owner and the buyer establish a good relationship. In some cases, depending on the size and complexity of the business a longer handover may be needed, and it would be difficult for the buyer to believe that she or he can successfully take over the business and sustain the profits if the seller is not cooperative or they simply they don’t get along.

2. When purchasing property, buyers normally have decided to buy the house, then only need to decide which house they going to buy. When buying a business, buyers have the desire of owning a business, the decision to buy a business and to which particular business to buy happen simultaneously. While selling the business you have to present the business in a way that clearly shows both the risks and benefits to the potential purchaser. Present and give to the buyers all the documents and information required to evaluate the business. Create processes and do as much as you can to ensure a successful takeover of your business by the new owner

Doing this will give more confidence to the buyers and will help them make the decision to buy your business

3. Selling Real Estate is all about marketing and attracting buyers to your property. Selling business is not only about attracting buyers to your business but even more than that it is about presenting your business to the buyers and devising a plan of handover of the business that will help the future owner continue operation of the business without interruptions and with continued success. Before putting the business on the market, owners of the business should take actions to reduce the reliance of the business on themselves as much as possible. This will not only increase the likelihood of a successful sale but also increase the sale price of the business as well.

4. Real estate purchasers can supplement their funds by borrowing from the bank. It is not so easy to borrow money against a business. In some instances owners of the business should be prepared to enter into a payment arrangement or provide vendor finance in order to secure the sale of the business.

5. When you are selling a house the only competition on the market are other houses. Business sellers are competing against other businesses, other forms of investment (Property, managed funds, share investments etc.), buyers starting a business from scratch and even not buying a business at all. When pricing the business you must not only look at other similar businesses on the market but also you have to keep in mind other investments and options available to buyers.

So, due to the intangible nature of business and the reliance on the owner in most SMB’s, a business sale is a much more complex process than selling real estate, recognizing this is the first step to a successful sale of your business.