SELLING an Operable Business?
This requires a unique approach and a careful valuation to get to the “value” of your business. A typical valuation is based on a percentage of the cash flow of the business, but many variables are considered for each business individually, not all business sales are measured equally.
The business sale has a detailed contract agreement; necessary to proceed with transfer of business assets. This type of transaction is not contracted in a standard commercial real estate purchase contract.
The valuations for an operable business is analyzed differently vs real property. An operable business will have “good will” considerations, besides existing possible supplier agreements. “Good will” is intangible, and certain supplier agreements might include clauses that prohibit it in the sell’s transfer.
Profit and Loss vs Cash Flow:
A skilled Business Broker will review a cash flow analysis; and it is one of the most important financial documents required for a proper valuation of the business.
It is suggested to make some adjustments to the value of the business; based on items in the cash flow, to include:
- Detail of all income
- Detail of all expenses
- What expenses to benefit the owner
- An addition to expenses that will require the new buyer to increase expenses, such as, owner managed the business and buyer will have to hire a manager
SELLING the Real Estate?
The Commercial Real Estate Broker has the knowledge and expertise to provide a valuation from an analysis from rental income and expenses. In most market analysis the Broker shall perform the valuation with a 7% CAP rate or greater to be a desirable market for investors looking for real estate investments.
In summary, once the evaluation has been completed for the business and an analysis for the real property; you may advise the client a selling price for both real estate and business in one sales price. However, it will take a skilled and professional “business broker” and real estate brokerage professional (Pell Realty Group Brokerage Firm) to handle each skill set to advise a client of SELLING their business and real estate.
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Looking for a professional commercial brokerage firm; Sylvia Pell with Pell Realty Group will be happy to assist you with your real estate transactions.
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