Owned Real Estate and Selling Your Business

Business owners wishing to sell their business often own the real estate occupied by the business. It is important to drive value where it belongs. In general, the real estate is valued based on the income it produces. If the rent paid by the business is below market, then in all likelihood, the real estate will be undervalued and the business will be overvalued due to the resultant inflated profits. When pricing your business for sale, insure that underlying financial performance includes a market based rental rate. If you retain the property after the business is sold, make sure the lease is based on market rate rents.

Real estate brokers and business brokers have two very different sets of skills, utilize different marketing techniques, and work in very different pools of prospective buyers. Using one type of broker to sell both types of assets may not be your best alternative. If the business is highly dependent on that specific piece of real estate, one broker may work. Think about what will drive the transaction and hire the right broker. Will the real estate buyer want to own the business or will the business buyer need to own the real estate?