Burt M. Polson - Commercial Real Estate Broker

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Is it really a business opportunity?

Selling business opportunities is a specialized field of commercial real estate. Oftentimes, a business can be sold as part of a commercial real estate transaction when the business owner also owns the real estate. But when the business owner leases a property you will need to deal with the landlord to insure a solid, long-term lease is in place.

In either case you will often find business brokers involved in the sale of a business opportunity. Many aspects of selling a business differ from that of

selling commercial real estate; therefore you will find this to be a specialized field of commercial real estate that many of us leave to those with the proper knowledge.

Calculating the value of a business, marketing an opportunity and facilitating an escrow for a business transaction differ from that of a commercial real estate transaction.

The value of a business is not only inclusive of its tangible assets such as furnishing, fixtures and equipment, machinery, inventory, leasehold improvements and real estate. Often included is goodwill, which is the difference between tangible assets and the purchase price.

Examples of goodwill could include: reputation, trade secrets, customer databases, copyrights and patents, website addresses, trademarks, name recognition and even location.

Calculating value is not always a straight-forward process because of goodwill involved. A buyer could consider the value of tangible assets as well as the net present value of future cash flows (what future income probability is worth today), which gives a good indication of value. But, the value consideration of goodwill could become subjective.

Marketing a business for sale is dependent on several factors such as the type of business, industry, size of company, competition, location, etc. Many could be in a niche market where specialized knowledge of the field is required.

Lastly, an escrow for a business includes many additional tasks not normally found in a commercial real estate transaction. A business escrow includes a bulk sale transfer -- the transfer of assets and liabilities to a new owner. Part of this is notifying the public of a pending sale and placing any creditors on notice. There could be several legs to an escrow especially when there is a liquor license, payroll taxes, sales tax and equipment leases involved. This is why you will need to secure the services of a specialized escrow company.

If you are considering selling or buying a business use a qualified business broker and be sure to go through the escrow process to mitigate any surprises down the road.

Ever sell or buy a business? Was it a good move or a nightmare? Leave your story in the comment section below.

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