Vendors who wish to sell their commercial property must understand where the true value of their asset lies and choose an agent who can effectively market and deliver the best results, an industry veteran has said.
Raine & Horne Commercial and Business Sales proprietor, Simon Winter, told SPI that commercial property sellers often overestimate the value buyers place on the physical building, overlooking the real strengths of their business.
Winter, who has over 25 years of industry experience, said that when selling a combined business and property, the marketing campaign often focuses too heavily on the site, when the real key lies in the business.
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“The critical mistake is that vendors think the key component to the transaction is really the property,” Winter said.
“The key component is the business.”
“The property becomes an add-on sale, not the cornerstone of the transaction.”
He said that when selling a commercial property, vendors should highlight the business’s strengths by creating an engaging listing focusing on what makes the venture an appealing investment.
“Even though the business is often a much smaller component than the value of the property, nobody will buy a business and property together unless they want to buy the business first.”
“If somebody wants to buy the business and they are sufficiently funded, they will buy the property as well,” he said.
While vendors are skilled at running their businesses, Winter said they were often misinformed about the true value of their venture, emphasising the need to hire the right specialised agent.
To ensure the best results, Winter stressed that sellers should choose a listing agent who not only has property market appraisal skills but also understands how to price a business.
“If an agent wants to get involved in the combined sale of property and business, they better understand how to and be competent at valuing businesses and understand risk and return.”
He said that while business owners often relied on accountants to gauge the value of their businesses, they often struggled to assess the risk.
“When you want to know what your house is worth, you don’t ask a builder.”
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“You ask someone who understands market dynamics, such as a real estate agent.”
Winter added that evaluating risk is a skill learned through experience, and that commercial agents who couldn’t do it were “dead in the water”, encouraging sellers to ask questions and look at the agents’ past results before listing their asset.
“Even competent and experienced business agents still struggle with that concept of risk.”
“If understanding and determining risk were easy, everybody would do it.”
According to Winter, evaluating risk can be challenging when managing a listing, as the inability to compare similar sales can hinder the process.
He said it was difficult to determine the market value of a combined asset, as its value is often driven by factors such as vendor motivation and buyer circumstances.
“Comparable transactions are easily accessible for commercial and residential properties, but for business sales, there is nothing available,” he said.
“That’s where business sales become exceptionally difficult.”