More and more frequently, I am running across business owners coming off of listings produced by a residential or commercial realtor with no business brokerage experience. The vast majority of these owners are very reluctant to list with me due to the inappropriate marketing of their business. Here are two (of many) common, critical mistakes made by residential and commercial realtors in listing a business for sale:
1. Breach of confidentiality. A business is not a residential or commercial property. A visible listing makes customers, employees and suppliers nervous at best and "former" customers, employees and suppliers at worst. While reviewing the financial information, I have seen a lot of damage done to businesses and business owners through listings stating the business name and/or photos of the business.
2. Improper valuation of the business. I have seldom met a business owner who thought their business was worth less than it really is. Just as in valuing a residential or commercial property you need data, it is the same for businesses. If you do not know the business market, including historical multiples, comparables, the local listings and most importantly, if you do not have the knowledge and skills to recast financials, you cannot value a business. I have seen so many businesses listed by residential and commercial realtors at two or three times their market value. Buyers today are far too sophisticated. They won't waste their time looking at businesses priced too far out of reason.
Now my plea: If you are a residential or commercial realtor with a business owner as a client and you have little experience valuing and marketing businesses, get me involved. The benefits should be obvious;
1. The means to confidentially market the business will result in continuity in business performance.
2. The proper valuation will result in more prospective buyers and realistic expectations from the business owner.
3. You won't waste your time or your client's time with an improper listing.
4. Your probability of selling increases dramatically; hence, the probability of earning a commission does as well.
5. Your client will be much happier with you and will enhance your reputation because you provided the best advice.
So, if you have a client with a business for sale, contact someone with business sales experience. I can be contacted at 800-599-0503 and would be glad to write a sell side commission agreement to help you and your client.
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