Many business owners of real estate businesses are very good at selling and leasing properties, but may have never bought or sold a business. Its not the same.
As with properties, there is a system to selling businesses, and often the earlier we get called in the better the outcome for the seller.
If owners can successfully sell their business that’s great and congratulations to them. But costly (very costly) mistakes can be made. Here’s four (4) big mistakes made from a transaction we eventually settled in NSW a few weeks back.
Mistake No 1: Deciding to Sell or Not ?
This is an absolute key issue. Sellers need to ask themselves honestly “Do I really want to sell the business and am I prepared to listen, and commit to the process” ?
Comments like ‘Lets put it out there and see what happens”, or ‘I’ll sell if I get a certain price” are sure signs of a non-committed seller.
Mistake No 2: Get a Business Valuation or Market Appraisal
This is linked to the comment above ‘I’ll sell if I get a certain price”. Sellers need to listen and take advice from people who know what they are talking about – and sometimes the sellers opinion on price is short of the mark and we get them more than they hoped for. As a rent roll broker I only list what I believe I can sell, otherwise I’m often wasting my time with an overpriced seller and buyers looking for better value.
Mistake No 3: Be Ready and Prepared To Sell
Most sellers think their rent rolls are in great shape and buyers will be lining up to buy it. That may well be true, but we need to ensure that’s the case and not wait for the buyer’s due diligence audit to rip us apart on things like up to date management agreements, smoke alarm compliance, entry/exit reports, arrears, legal disputes, and vacancy rates to name but a few. Nasty surprises reduce business value and often kills deals altogether – being ready for sale happens at the very start of the process, not the end.
Mistake No 4: Appoint a Broker who knows what they are doing
As I mentioned earlier if a seller can successfully sell their business, then more power to them. In the case of the deal in NSW, the seller marketed the business (unsuccessfully) to most of the potential targets before calling us in to help. This did a number of things that impacted on the business including:
– all confidentiality was gone, everyone in town knew it was for sale
– other agents started attacking the rent roll telling landlords they were being sold which resulted in lost managements
– two property managers resigned and went elsewhere fearing they were about to loose their jobs
All four (4) of these mistakes happened in the NSW transaction referred to above, and cost the seller at least $155,000 on the eventual sale price – and all could have been avoided.
The keys to selling a rent roll or business are committing to the process, agreeing on market value, getting organized, and working with people who know what they are doing.