Should You Call a Realtor to Sell Your Business?

 “If I’m ready to sell my business, should I call my realtor?”

It’s a fair question—but the short answer is no, and here’s why. https://youtu.be/s9HkiHiiEB0 

Realtors Sell Buildings, Not Businesses

Let’s look at the facts. Realtors specialize in real estate—they help people buy and sell property like homes, condos, office buildings, or commercial real estate. And while your business might include real estate, most don’t.

In fact, when I was a full-time business broker, I sold 36 businesses over three years—and only three of those included real estate. Most businesses are leased spaces, operated from laptops, or based out of people’s basements.

Yet time and time again, I talk to people who assume a real estate agent is the go-to pro for selling a business. So let’s break it down.

What Real Estate and Businesses Actually Have in Common (Hint: Not Much)

Here’s a simple comparison:
Real estate typically involves things like:

• Land
  
  

• Roofs
  
  

• Walls
  
  

• Foundations
  
  

• Doors
  
  

Businesses, on the other hand, involve:

• Employees
  
  

• Receivables & payables
  
  

• Inventory
  
  

• Operational systems
  
  

• Customer relationships
  
  

Totally different ball games. Selling a business isn’t about the structure—it’s about cash flow, intangibles, and risk. It’s part finance, part operations, part psychology.

So why the confusion?

The Licensing Problem: Where This Misunderstanding Comes From

I live in New Brunswick, Canada, where (believe it or not) business brokers are legally required to hold a real estate license. This comes from outdated laws that imagined every small business as a corner store with a storefront.

Because of this, a lot of real estate agents think they’re qualified to sell businesses just because they hold a license. They’re not. In fact, they often don’t know what they don’t know.

Let’s talk about the Dunning-Kruger Effect for a second.

The Confidence Curve: Why Some Realtors Think They Can Sell Businesses

The Dunning-Kruger Effect shows how people with low knowledge of a topic can often feel very confident, simply because they don’t realize how deep the subject goes.

So, your average home-selling real estate agent? High confidence, low actual understanding of business sales. I’ve had bankers call me in disbelief after seeing someone try to buy a convenience store using a home purchase agreement.

As they learn more, some of these agents realize how much they don’t know—and their confidence drops. That’s when a few of them either:

• Step away and refer clients to professionals (good call), or
  
  

• Level up their skills to become real business brokers (rare but respectable).
  
  

Who Should Help You Sell a Business?

✅ Business brokers specialize in valuing, marketing, and negotiating business sales.
✅ M&A advisors handle larger or more complex deals.
✅ In some cases, commercial realtors can be helpful—especially if real estate is a major component of the sale.

In fact, my best referral partners were commercial real estate agents—they understood enough to know business sales weren’t their game and would refer those clients to me.

What If Your Business Includes Real Estate?

Sometimes, a business owner wants to sell both the business and the building. Here’s how I’ve handled those situations:

1. Separate the two: Sell the business first, offer the building as optional (to lease or buy).
   
   

2. If the buyer wants just the business? Great.
   
   

3. If the buyer also wants the property? Bring in a commercial real estate agent.
   
   

Now you’ve sold the business and helped an investor acquire a leased property with a stable tenant—win-win.

Final Thoughts: Don’t Make the Mistake of Hiring the Wrong Pro

If you’re serious about selling your business, start with someone who understands businesses, not buildings. You wouldn’t call a dentist to fix your car—so why would you ask a realtor to sell your company?

Need help getting started?
📘 Check out my book How to Sell My Own Business
📄 Or grab my book: 12 Things to Do Before You Consider Selling Your Business

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Cheers, and see you next time!

David C. Barnett

7 Costly Mistakes When Buying a Business

 

***New Video Alert!

Today, I run down a list of mistakes I see people do when buying a business and let you know how to avoid most of them.

These are not the bits of advice that you’ll hear from most online ‘buy a business’ content.

Watch this week’s video here: https://youtu.be/b_KLvF_j11c 

Cheers

See you over on YouTube

David C Barnett

LIVE- Dustin Williamson Regrets in mergers and acquisitions

Regrets in M&A deals

New Livestream guest- Fractional CFO Dustin Williamson

I’m happy to have Dustin join me on a live broadcast.

He has years of experience in the world of business in finance roles. 

Tune in and as we’ll be discussing regrets that often creep up in mergers and acquisitions and we’ll also talk a bit about planning for deals in cyclical industries given his experience in the Oil & Gas sector.

This is a ‘must see event’ for anyone who foresees a deal in their future as there will be lessons for everyone in this conversation.

Be sure to join live so that you can ask questions, replay will be available.

Set yourself a reminder on YouTube here: https://youtube.com/live/Jt8d68SzJMo 

We’ll be going live Monday April 21, 2025 at 1 PM Atlantic Time and 12 Noon Eastern Time

See you there!

David C Barnett

 

Buying a Piece of a Business: What's Different?

When you're buying a part of a business, the numbers you get—financials, revenues, expenses—reflect the entire operation, not just the segment you're interested in. https://youtu.be/zrKQWzxN58w 

So:

1. You don’t have clean, ready-made financials for the slice you're buying.
   
   

2. You need to reconstruct what that slice would look like if it stood on its own.
   
   

Steps to Evaluate a Partial Acquisition

1. Start with Sales
Pull out the revenue attributable to the part of the business you're considering buying.

2. Estimate Cost of Goods Sold (COGS)
Determine whether you can get the same supplier discounts as the full business currently does. If the existing business got volume discounts, your COGS might actually be higher.

3. Forecast Overheads
This is where synergies get lost. Admin costs like payroll, accounting, or purchasing may have been shared. Now you’ll need your own setup, so costs go up.

4. Build a New, Hypothetical Income Statement
Using all the info above, you create a “what-if” income statement as if this were a standalone business.

5. Apply Valuation Techniques
Once you've got projected net income or cash flow, you:

• Use a capitalization rate (e.g. 3x earnings), or
  
  

• Use discounted cash flow (DCF) by projecting future cash flows and discounting them.
  

Friction with the Seller

Here’s the kicker:
 

What it's worth to you may not match what the seller thinks it's worth.

Why? Because:

• You may lose efficiency (higher overheads).
  
  

• You might not be able to access the same discounts or resources.
  
  

• You’re probably taking on more risk.
  
  

So your version of the business will likely be less profitable, which should lower its valuation from your point of view.

Sign up for my email list at DavidCBarnettList.com to receive exclusive content and 7 FREE gifts.

Cheers, and see you next time!

David C. Barnett

How FIRE can help you buy your 1st business

 

***New Video Alert!

I was invited to the EconoMe conference in Cincinnati last month. 

It was fun -and- I learned how to get rich and retire early.

The same principles can help people buy a better business more quickly and under better terms.

Want to learn more about it?

Watch this week’s video here: https://youtu.be/1l3dKWGFptM 

Cheers

See you over on YouTube

David C Barnett

Live Q&A with David C Barnett

 Today's live stream I answer your live business questions and dive into trending topics—from Canadian election impacts on small business to financing deals, late-paying customers, debt refinancing, and seller financing strategies.

What Is Weighted Average Cost of Capital (WACC) — and Why It Matters When Buying a Small Business

Today, we’re diving into a super important topic: the Weighted Average Cost of Capital, or WACC. If you're looking to buy a small business, understanding WACC helps you figure out whether it's a good idea to put your money—or the bank’s money—into the deal. https://youtu.be/vTsIwe_If88

So... What Is WACC?

The Weighted Average Cost of Capital is essentially a way to determine how much of a return you require on the money invested in a business.

This includes:

• Money you borrow (like a bank loan)
  
  

• Money you invest yourself (your equity)
  
  

Each type of capital comes with a cost:

• Banks want interest on their loans.
  
  

• You (the buyer) should want a return on your own capital—because your money could be earned elsewhere.
  
  

Setting the Stage: A Simple Balance Sheet

Let’s take a quick look at a basic balance sheet.

On the liabilities and equity side:

• Trade payables (short-term debts like accounts payable) are usually not included in WACC.
  
  

• What is included:
  
  

• Interest-bearing debt (long-term loans)
  
  

• Equity, which includes:
  
  

• Owner's contributions (even if they’re listed as loans on paper)
  
  

• Share capital (often nominal in small businesses)
  
  

• Retained earnings (profits from prior years left in the company)
  

For simplicity, let’s assume:

• $50,000 in long-term debt
  
  

• $50,000 in owner's equity
  

That gives us a 50/50 split between debt and equity—something many banks like to see.

Calculating WACC — The Real Math

Let’s say the bank is lending at 6% interest, and you (the buyer) want a 45% return on your invested equity.

Step-by-step:

• 50% of the capital is debt → 0.5 × 6% = 3%
  
  

• 50% of the capital is equity → 0.5 × 45% = 22.5%
  
  

• Add those together: 3% + 22.5% = 25.5% WACC
  

So, your Weighted Average Cost of Capital is 25.5%.

That means you’d need the business to generate a return of at least 25.5% just to make your investment worthwhile—not to mention profitable.

But What If You Use More of Your Own Money?

Let’s say:

• You reduce the debt to $25,000
  
  

• Increase equity to $75,000
  

Now the math changes:

• 25% debt → 0.25 × 6% = 1.5%
  
  

• 75% equity → 0.75 × 45% = 33.75%
  
  

• Add them: 1.5% + 33.75% = 35.25% WACC
  

👉 So the more of your own money you put in, the higher your required return becomes.

Key Insight:

That accountant telling my client, “Just put in more of your own money,” missed the point. More equity = higher required return = tougher investment to justify.

It’s also a good reminder why vendor financing is so important in small business deals. Banks might not fund the whole purchase price, and you don’t want to sink too much of your own money in either.

Final Thoughts

If you’re buying a small business, never forget that your own capital has a cost too—even if nobody sends you an interest invoice every month. And don’t fall for the advice that says “just put in more of your own money” if the deal isn’t producing enough return. That only makes things worse unless you’re willing to accept a lower rate of return.

I hope this helped demystify WACC a bit. I’ll be referencing it more in upcoming videos and posts, so now you’re in the loop!

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Cheers, and see you next time!

David C. Barnett