A good number of established and successful business owners own the buildings they operate out of. When they’re ready to sell, they also have to make decisions about selling the real estate along with the company. Here’s the advice I give them.
First and foremost, stay flexible. If you’re absolutely set on selling the business and real estate together in a single transaction, I’ll usually pass on the deal. Being open to only one deal structure will limit your buyer pool and possibly your own earnings from the sale.
Buyers who are new to the market may not be sure that the current location is the best fit for them in the near term – or the long term. They may have plans for consolidation, so they’ll want to take time to evaluate which of several properties is the best one for them to retain.
They may have plans for expansion, which requires a deeper analysis: does this property fit our needs over the long term? Is there enough office space? Parking space? Storage space? It makes sense in either consolidation or growth scenarios to lease for a year or so with the option to buy while the new owner gets a feel for the company’s operations and cash flow and makes some important decisions.
A new buyer is already taking a big risk by acquiring a new company, so a seller who makes it easy for them to choose whether – and how – to purchase the property will be more attractive. Buying the real estate can easily double the cost of acquiring the business, and a savvy buyer may anticipate that the first year or so may not meet the projected revenue models. They might want to keep a deal simpler so a setback or unexpected change in the market isn’t disastrous.
Leasing the building for a period instead of selling it outright can also benefit the seller. You’ll already be paying capital gains tax on the sale of the business; your financial advisor can help you decide whether pushing the sale of the real estate out another year or two might have significant tax benefits for you. Then too, by leasing, you’ll be setting up a passive revenue stream in addition to realizing the cash profit from the sale.
I always advise sellers to make it easy for someone to spend money with you. There are almost always several options to maximize the value of your business if I can help you figure out what kind of deal makes sense for your company.
The first step is to get a confidential and complimentary opinion of value HERE.
About the author: Patrick Lange
Patrick Lange is an experienced HVAC-specific business broker with Business Modification Group based in Horseshoe Beach, Florida. He has a unique background in financial planning and has even owned an HVAC business himself. This makes him well-suited to working with some of the most successful HVAC business owners in the country. Specializing in companies with 1-10 million dollars in revenue, he maintains a network of buyers and sellers in the industry. He has sold more HVAC businesses than any other broker in the United States over the last three years and is currently the President of the Business Brokers of Florida (North Florida District.)