by David Lewis, ProForma West, Guest Blogger
(Ed: Business Brokers sell only businesses. They are a specialty unto themselves because they deal with business property which can be either real estate or not. So, UCCC regulations are involved that are outside the expertise of almost all residential real estate brokers. David explains what he does as a Business Broker representing either Buyers or Sellers)
David Lewis, Business Broker, works with Proforma West
The Colorado Real Estate Commission licenses business brokers in the same way it licenses real estate brokers. The license is exactly the same and enables the State to oversee business broker activities. Another reason for the license requirement is that generally a lease will attach to the deal, and occasionally transactions will include the sale of real estate.
Buyer Brokers negotiate the sale or businesses in Denver
Like real estate brokers, business brokers may also work with buyers pursuant to a buyer broker arrangement. Licensing is about where the similarities end, however, as, business brokers tend to stick with selling businesses and Realtors stick with selling real estate.
The reason for this lies in the difference between skill-set requirements. In my opinion, to be an effective business broker requires extensive previous business experience and detailed knowledge of accounting, financial analysis, tax laws, U. S. industry, valuation theory, organizational management and structure, and more. Plus, a business broker must find the buyer while maintaining a strict adherence to confidentiality…no one must know a business is for sale; employees, and customers could be jeopardized.
In other words, no MLS, per se, exists, nor is co-brokering prevalent, again because of the need for confidentiality. As you can see, though the licensing is the same for folks doing only real estate, whether residential or commercial, the skills required to sell businesses are very different.
On occasion, we have given licensed Realtors with residential and commercial real estate experience an opportunity to become successful as a business broker because they expressed confidence in themselves though acknowledging they knew little about the intricacies of the business transfer process. So far, each failed to reach the degree of success enabling them to continue with the profession beyond one or two years. In one case an individual, who was not with ProForma West, ended up in a lawsuit when a transaction failed due to a poorly handled transaction. The only winners were the attorneys and the broker lost his license.
Liability and litigation are always a potentiality in business transactions, because a failed business often leaves no tangible assets behind for recovery by a damaged party. In contrast, in real estate the real estate asset is usually still standing if all else fails.
Selling businesses requires an investment of great care and caution in making sure all facts are correct as represented; it is critical we avoid letting our ambition get in the way of good sense.
Many of the business owners we have worked with over the years were introduced to us by their real estate broker. Conversely, we refer non-business related real estate opportunities to real estate brokers…a win-win for all. We welcome referals for businesses of any size and any locality.
The following, from our brochure provides further introduction to our services.
Your Exit Strategy Team
As a top intermediary firm, ProForma West has assisted hundreds of business owners achieve a successful, satisfying and profitable exit from their companies. At this critical juncture in the lifecycle of any viable business, a seller must work with a qualified organization and an expert business intermediary. Unfortunately, not all business intermediaries are created equal. We urge you to consider your options carefully because we know that ProForma West will offer you the combination of quality and service that is required to help you achieve your objective.
Our Exclusive Seller services include:
§ Performing a Market Value Assessment to help identify the value potential in your company
§ Proprietary program for preparing and presenting your company for sale
§ Local, regional, national and international buyer searches
§ Comprehensive deal management-from buyer introduction through negotiations, contracts and closing
§ Post acquisition consultation
Market Value Assessments
You know what your house is worth, how much is in your checking and savings accounts and in your IRA, but do you know what your most important and complex asset is worth and how it is valued? It’s surprising how many business owners haven’t considered the importance of understanding the value of their business. This is critical for business planning purposes, but may also be important for estate and retirement planning as well. ProForma West’s professional intermediaries employ multiple methods for arriving at an opinion of value for your company. Among the methods used are:
§ Excess Earnings
§ Capitalization of Earnings
§ Discretionary Earnings
§ Discounted Future Cash Flows
Every business owner who is serious about understanding how to maximize the value of their business should have periodic Assessments performed.
I welcome inquiries from our real estate oriented peers about our services and haw we can work together to effectively serve our clients. You can reach me at:
303.427.0800
6 Comments
Interest Read! In Utah a regular real estate agent can sell a business but I think your system is much more mature. That last thing I want is a first year Realtor or even some 5th year guys out selling businesses.
Very interesting article. Having worked with business owners looking to sell a business, having a real estate agent that understands sale of business is great! It makes both their lives, and mine, much easier since all the professionals involved understand the process.
Elizabeth Lewis´s last blog post..Denver City Club – Commentary
This is a great post. In Ontario there is much overlap between business brokers vs. real estate agents that also will sell businesses. It is also the same licensing requirement. That being said, I have met many real estate agents with more knowledge and professionalism in business sales vs. some ‘specialists’ that solely focus on businesses.
While I agree that business brokerage requires a very different set of skills and mindset than real estate, I do understand why some states in the US and some provinces in Canada require a business broker to hold a real estate license. The principal reason is customer protection. Real estate regulations are very strict in terms of agency disclosure, agency regulations, and trust monies protection.
I absolutely agree with the assumptions above that handling a business transaction and a real estate transaction requires a different skill set and therefore different knowledge and background by a person transacting a business deal than one handling a real property sale. Main concern among sellers that have dealt with real estate agents who were not well versed in business transactions is the confidentiality issue. The way of marketing a business for sale has a very different dynamic than marketing a house – while in a real property sale you want everybody and anybody to be aware of what you are selling, selling your business requires targeted and careful marketing under strict confidentiality rules.
Interesting discussion – I just wanted to add that in a market like Canada, where share sales are much more prevalent than in the US, for example – business broker knowledge goes well beyond what a real estate agent is comfortable with. The drafting of the purchase agreements, due diligence period management as well as successful closing moderation requires an in-depth knowledge of various aspects of the process. And in many instances, the ability to put a team together that can execute a successful deal is as important as negotiation techniques or process navigation.