Can a Real Estate Agent Sell a Business?
When you think of a real estate agent, the first thing that often comes to mind is home tours, open houses, and the sale of residences and commercial properties. But there's a broader horizon many real estate agents might not have considered: business brokerage. This article delves deep into the comparison and crossovers between real estate professionals and business brokers.
Unraveling the Roles
As a starting point, it may be helpful to outline the two roles and the ways in which they’re similar and different:
Real Estate Agents
These professionals primarily focus on assisting clients in purchasing or selling properties. They deal with myriad properties ranging from residential homes to commercial establishments. Their success is tied to their understanding of local property markets, negotiation skills, and understanding of their client's needs.
Business Brokers
These experts help clients in buying or selling businesses. This includes understanding a business's worth, the potential for profitability, and navigating the intricate details of business operations and potential growth.
Where the Paths Converge and Diverge
One of the glaring similarities between real estate agents and business brokers is valuation. Real estate agents, based on their knowledge of real estate transactions, look at comparative market analyses to value properties. Business brokers, on the other hand, often examine financial statements, cash flow, earnings before interest, taxes, depreciation, and amortization (EBITDA) and other financial metrics to determine a business's value.
Both professionals also engage in creating detailed listings for their clients. Whether it’s a seller's memorandum for businesses or a detailed property listing, both documents serve as a comprehensive guide for potential buyers.
On the commission front, the scenario varies. Real estate agents are usually remunerated a percentage of the property's sale price, whereas business brokers often earn 10-15% of the business's final selling price.
Where they notably diverge is in the nature of their sales and the confidential nature of the listings. Real estate agents often deal with tangible assets, properties with physical boundaries. Business brokers handle intangible assets like brand value, market position, and customer loyalty. Business brokers also manage deals that are held confidentially. For most businesses, maintaining confidentiality is essential. In some cases, public knowledge of a business sale can hurt the brand, sales, worry employees and clients, and impact valuation negatively. Business brokers are adept at marketing businesses while keeping transactions private.
Branching Out: From Real Estate to Business Brokerage
Many skills that real estate agents hone over the years seamlessly fit the world of business brokerage. Their robust understanding of negotiations, contracts, and marketing can be invaluable. Furthermore, the relationships and networks they cultivate can be leveraged for referrals, potentially bringing in businesses looking for a change in ownership.
The art of showcasing a property by a real estate agent can be morphed into the skill of presenting a business in the best light. This involves highlighting its potential, profitability, and the value it brings to potential buyers.
If you're a real estate agent wondering about this transition, consider the following:
- Education and Licensing: While your real estate license is invaluable, delving into business brokerage might necessitate additional courses or certifications. This not only equips you with the knowledge but also adds credibility.
- Partnering with Business Brokers: Collaboration can be the key to diversification. Engage with seasoned business brokers to learn the ropes and even co-broker some deals. This provides a safety net while expanding your professional repertoire.
Collaborating with Business Brokers
Complex business transactions, particularly those that involve both operational intricacies and real estate components, necessitate a multifaceted approach. In such nuanced situations, the collaboration of a real estate agent with a business broker isn't just beneficial—it's often imperative.
There are 17 states that currently require business brokers to have real estate licenses, since many business transactions involve leased or real property. So, many business brokers are adept at handling the real estate components of a business sale in addition to understanding the core operations of a business. Brokers assess profitability, cash flow, customer base, market positioning, and future growth potential. Their understanding of financial statements, company culture, and operational challenges adds a different layer of depth to the evaluation process.
For those business brokers that do not have a real estate license, real estate agents bring to the table a depth of knowledge about property markets, valuations, and the nuances of physical assets. Their expertise ensures that any real estate associated with a business—be it the primary place of operation, warehouses, or additional commercial properties—is appropriately valued and positioned for sale. Additionally, they can provide insights into the potential of the property, taking into account factors such as location, future development prospects, and comparable property values.
When these two professionals collaborate:
- Holistic Evaluation: Both tangible assets (like properties) and intangible assets (like brand value or customer loyalty) are assessed and valued comprehensively. This ensures that every aspect of the business—its physical assets and its operational potential—is showcased to prospective buyers.
- Comprehensive Services for Clients: Clients benefit immensely from this synergy. Instead of juggling between different professionals for varied aspects of the sale, they receive a streamlined service where both the real estate and business components are handled efficiently under one collaborative umbrella.
- Optimized Negotiations: With insights from both realms, negotiations become more strategic. For instance, while a business broker might emphasize the company's steady cash flow or potential for expansion, a real estate agent can leverage the location advantage or the quality of the property to fetch a better deal.
- Efficient Due Diligence: The combined expertise ensures that due diligence is thorough. From scrutinizing lease agreements to reviewing financial projections, every detail is meticulously covered, reducing potential pitfalls and oversights.
In essence, for intricate transactions, the fusion of a real estate agent's property expertise with the operational acumen of a business broker provides an unparalleled advantage. It ensures that clients receive an all-encompassing, efficient, and effective service, maximizing the value and potential of their business sale. This collaborative approach stands as a testament to the importance of interdisciplinary partnerships in the modern business landscape.
A New Chapter in Brokerage
As the lines between different professions blur and interdisciplinary collaborations become more commonplace, it’s opportune for real estate agents to consider expanding their horizons. With a strong foundation, a willingness to learn, and the right partnerships, they can effectively navigate the world of business brokerage.
In conclusion, while the core of real estate and business brokerage remains distinct in many regions, the overlaps present exciting opportunities. For real estate agents contemplating this shift, the journey promises growth, diversification, and the chance to tap into a broader market.
If you’re a business owner looking for professional help, BizBuySell’s Business Broker Directory is the place to start.