Tuesday, February 09, 2010

Business Brokerage

Did you know that a business broker does not need a special license to act in this profession?

In fact, many real estate agents double as business brokers.

Today, I had the pleasure of meeting with 2 of my favorite agents from ReMax Signature, Natalia D'Arrigo and Meredith Kurz and a potential seller. This was a unique experience for us all as we were able to collaborate between broker, attorney, and client before anyone was retained. This way, the client is not hiring individuals, but instead a team (while we have nothing in our contracts that bind us to each other and we all have a duty of loyalty only to the client and would work independently of each other).

With respect to real estate agents selling businesses, its important to mention that such agents should not use the same sales techniques with a business as a piece of real estate. Specifically, if you promote the availability of a business in open, the business may be put out of business. Be sure to use trade publications where consumers won't find the business for sale.

Also, an interesting topic that we discussed at our meeting was that if you sell a book of business, you will likely have to sign a non-compete. While that seems to be a "duh" moment for an attorney, it appears that clients don't often think about that and intend to sell their book and then just compete in the next town.

Do you all think real estate agents should work as business brokers as well, or should a separate license and industry emerge?

2 comments:

  1. About 1/3rd of the US mandates Business Broker licenses. At minimum New York should require a body of certification courses before you hang up your shingle.

    Commercial Real Estate agents broker lease space and property sales and are comfortable with assessing a building location, traffic counts, and average Lease Space rate. Their discreet clients often require the public and/or employees remain unaware of a pending sale or lease. Most of the tools and skills required for business brokerage are already in their toolbox.

    I work exclusively with clients who coordinate their business transaction with their attorney, avoiding a myriad of financial and logistical nightmares.
    Meredith C Kurz

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  2. Meredith do you know if there is a push for NY to require such a body of certification?

    I wholeheartedly agree with your post and feel that it’s dangerous for unqualified people to hold out their shingle. Yet, I also agree that many of the tools that are used in commercial real estate translate into business brokerage. The only additional toolset would be a working knowledge of the business field in which you are selling. Namely, a broker should know if it’s a cash business? If it’s a seasonal business? If it’s a service or product business? Who the players are in the business? If employee retention is necessary and available? What traditional fixed costs are? The importance of location to that sector and many more topics in order to provide the requisite advice to the seller and to identify a viable purchaser. It’s often seen that sellers will hold paper on a business transaction, so identifying a purchaser who is likely to succeed is both important to the seller and to your reputation as a broker.

    In such, the Lieb at Law Real Estate School will look into offering a designation to agents who take a number of courses in business brokerage. I always say that if something isn't available that is necessary, we should create it.

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