Business owners who plan to sell a business that has real estate attached to it need to make special considerations when planning their exit strategy. Take the time to make sure you know your options, understand the financial implications and choose the right person to help sell your business. This will help minimize buyer concerns and get you higher potential offers.
Should You Sell Your Business and Real Estate Together or Separate?
This question does not have a right answer and numerous factors need to be considered before making answering it. There are other financial considerations to take into account when choosing to sell a business and property together or separate. Knowing the value of each entity separately could give you some perspective on which option nets a higher value. Sellers should speak to a CPA to figure out the potential tax burden of selling the real estate. The tax implications will differ depending on whether your company owns it, or whether you own it with a separate entity. The current state of the real estate market will also play a factor in deciding if it’s the right time to sell the property.
From a buyer’s perspective, many are only interested in leasing, and not owning the property. However, a lender would be more willing to finance the purchase of a business if real estate is involved, because it will likely hold its value even if the business fails. This may also depend on the financials of both the business and the buyer. If the business shows great cash-flow and the buyer has strong financials and credit, they’ll probably have an easier time obtaining financing. However if either the cash-flow of the business or the financials of the buyer are less than stellar, qualifying for a loan may be very difficult without real estate attached to the sale. While selling a business and real estate together may reduce the number of buyer candidates because the asking price will be higher, it will also allow a seller to maximize the value.
Keeping the property and selling the business by itself can also present an opportunity to make money by leasing the property to the buyer, and then the real estate can be sold at a later date. When leasing the property to the buyer, you’ll want to make sure a lease is in place that clearly specifies your responsibility to the property as a landlord. However, if your goal is liquidity and you want to remove yourself from continued involvement all together, you can sell the property to a 3rd party who will lease it back to the business. If you choose this option, you will be able to attract more buyers who don’t have to worry about a real estate investment and cash in on the value of the real estate. If you’re still unsure about whether to keep the two assets separate or not, giving the buyer the option to either purchase or lease the property is a great way to increase the number of potential buyers.
Who Should Your Hire to Sell a Business With Real Estate?
While a commercial real estate agent will certainly be qualified to sell the real property attached to your business, they generally lack the expertise required to sell the business itself. Of all the complexities involved with business sales, one of the most important is being able to sell it confidentially. This is an important nuance of selling a business because of the damage that can be done to a company if customers or competitors find out. Keeping the sale confidential is also critical to protecting your business’s sensitive information. It is tough for real estate agents to do this because their primary marketing tool is the MLS. Usually real estate agents attract real estate investors and not potential business owners.
Business brokers have the experience and expertise to sell both the business and the real estate and to do it confidentially. They know how to market your business to potential buyers and have a network of buyers looking for businesses to purchase. Business brokers can also provide you with the most accurate market valuation of your business and real estate, making sure that all factors are considered. They have the knowledge and experience to advise potential sellers on figuring out the proper exit strategy based on your personal and financial goals.
Corporate Investment Business Brokers has completed over 3,000 business sales and purchases over a wide range of industries and sizes. We have sold many businesses with and without real estate. If you are considering selling your company with property or on its own, contact us and get the process started with a free, no obligation business valuation. We can help you realize the full potential of your business investment.