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Tips and Articles for Entrepreneurs: Selling or Buying

What's the Difference between a Business Broker and Real Estate Broker?

Answer: Residential and commercial real estate brokers sell the physical space, while business brokers sell the business inside.

While there are some common traits, neither are better or worse, they are only different areas of focus.

That may be all you want to know, but read on for more interesting tidbits:

  • Confidentiality. Both may utilize a listing service, but the business broker must keep the identity of the seller confidential in public as not to disrupt employees or customers who are still active with the business.

  • Compliance. Both operate with fiduciary responsibilities and fall under professional codes of conduct and principles monitored by industry associations and government bodies. Business brokers also have special filings for business sales transactions.

  • Approach to pricing. Business brokers help clients establish a probable selling price by evaluating financials and the earning potential of the business for the next owner, while commercial real estate brokers are not typically trained in this sort of assessment.

  • Finding buyers. When Buyers look to buy a business, most do not generally go to a real estate broker to find listings (but some will do so on occasion). Business Brokers generally reach out to buyers in groups, associations, personal networks, or through specialized web site listings. Business Brokers generally work as an ambassador between the buyer and seller who get to know each other and work together. Real estate transactions typically do not connect the buyer and seller together.

  • Research sources. Real estate brokers rely on industry sales, comparable properties while business brokers reference industry-specific standards around establishing a fair and attractive asking price.

  • Compensation. Both are fee-based and are usually paid for a successful sale. Some brokers have a retainer fee. Paulson Exchange operates with a finders fee, not a commission. Compared to real estate, is more common for Business Brokers to represent both sides of the sale than in real estate since business brokers are connecting both parties around a short-term partnership until the business is fully transitioned.

  • After the sale. Most real estate brokers have limited responsibility after the sale while business brokers often work together with the Buyer to help get their new business set up and running, sometimes working with Sellers to help find their next venture.

If you haven't heard about a business broker before, you're not alone, there are only around 3,000 full-time small business brokers in the US. 

I hope that helps.

Kris FuehrComment