Preparing Your Business and Real Estate for Sale 

By Jake Hubbell, Accredited Land Consultant – (this is original content, not AI enhanced). 

Think of selling your business like you would a used car. Give it a nice wash, wax, vacuum, and pull out all the receipts from maintenance you’ve done throughout the years. Maybe even buy the Carfax to be able to provide to a buyer. It’s just logic that even with a desirable car or truck, you’ll probably get more money for one that’s shiny, looks well taken care of, and has maintenance history to prove to a buyer it’s been looked after.

It’s the same concept with your real estate and your business, except no matter how shiny or beautiful the real estate looks, the books are going to determine the real value that a buyer perceives and is willing to pay for it.

The single most expensive mistake most sellers make happens years before they ever list — and it’s hiding in their bookkeeping. More on that below.

What Actually Determines Value when Selling a Business with Real Estate 

Real estate is worth what a buyer is willing to pay for it. Whenever you purchase real estate, you are the highest bidder on that property, and it can be a little scary.

Businesses are less emotional, and worth what the books can prove for value. Their value comes from systems, recurring income, brand name, marketing, and most importantly, accurate accounting. It all comes down to one simple relationship:

• Land + Improvements + Income = Value

There are three ways to value real estate:

• Comparable Sales
• Replacement Cost
• Income Model — our gold standard

Why Your Financials Matter Most

We are going to keep this basic and avoid additional confusion. There are multiple income multipliers used for different types of businesses. Several websites give varying multipliers for different businesses. This section is to illustrate that if you are going to get ready to sell a business, start on the accounting side FIRST.

The amount, or net profit, you report and pay taxes on is what will dictate what your business is worth at the end of the day. We all get it — you get paid in cash, why report it on your taxes and pay up to 33% on it when you don’t have to? Because every $1 you do not report, you give up $5 of value on the sale. For a real estate based business, for every $1 of Net Operating Income (NOI) not reported, you’re giving up $10 of value (assumed on a 10% CAP rate).

Most rural businesses that require some kind of management and attention are going to be at least 8% to 20% CAP rates. The higher the return required, the higher the risk for the business. Lower CAP rates are for easy, secure investments. You can think of commercial real estate buildings as lower (5–6%) or even 4% investments depending on the level of management in place and length of leases with tenants.

Depending on the business, value can be assigned by Capitalization rate analysis, a 3x NOI valuation, a 5x NOI valuation, or Internal Rate of Return valuation. Fixed assets, inventory, and real estate assets will also tie into this.

The bottom line: quit pocketing the cash! REPORT CASH and PAY TAXES. Value = NOI / CAP rate.

For example, let’s say you’re running a $1M per year business. You don’t want to pay Uncle Sam on taxes, so you write off a new 2026 King Ranch, write off a vacation or two (hey, we talked business while we were on the beach, didn’t we?), some other asset write-offs, and you report $50,000 that year in NOI that you’ll pay taxes on. $50,000 / .10 = $500,000 value on the business. If we’re using a 3x multiplier to establish value, that’s only a $150,000 business.

Say you are planning to sell in two to three years. You don’t splurge on write-offs for high-trim-level pickups, you report your cash income, and you run the business efficiently to prove financials to a buyer, and your NOI that you pay taxes on is $100,000. $100,000 / .10 = $1M value on the business. Or now it’s $300,000 in value with a 3x multiplier.

Buyers will pay on the value of reported income Every. Single. Day. Of. The. Week. They will NOT pay you on what you verbally tell them off the cuff that you make in cash every year. It’s not documented.

How to Get Your Business and Property Ready to Sell

We’re going to go through some advice on how to get your business with a real estate component ready for sale. The first steps are physical and digital. Finish up loose ends with your projects on-site. Keep the grounds maintained and in presentable shape, because your buyer may be one of the customers that comes through your business.

The most important aspect of getting the business ready to sell is on the accounting and permitting side. Sloppy books will cost you more money than anything else. Keep running your business like you are going to keep it for 5+ years. A lot of times we get the call to list a business and property when the ownership has essentially thrown in the towel and is coasting in for a landing. If you had strong financials 3 years ago, but the past two years it’s been decreasing, no buyer is going to pay you a premium for that business. Run the business like your retirement depends on it, and once it’s sold, then you can relax.

Strong financials are key. Loren and Gary always ask for at least 3 years of profit and loss statements and tax returns. You have to prove to the buyer what you make, and the way you prove it is by showing what you paid taxes on. Next, assemble any insurance claims, permits, asset and inventory lists, pay off any outstanding debts, and assemble your lists of websites and logins, places you market, customer lists, and any contracts or leases needed to run the business.

What’s Included in the Sale

As a general rule of thumb, if the business can’t operate without the asset, consider the asset included in that business value. In certain situations inventory produced can be negotiated, but for the most part, if your assets, employees, management, and inventory produced are necessary to the Net Operating Income, they come included in the price.

Adding the Real Estate: Land Plus Business Value

When we’re talking real estate, and properties like RV Parks, Guest Ranches, Orchards, Vineyards, Wineries, Stables, Wedding Event Centers, Off-Road Parks, Gun Ranges, and more, now is where we talk about added value with the business.

Depending on the property, the calculation of value typically comes from “what would a private party that wants to use it for themself pay for it” plus what can be assigned to the business for value. If it’s a $1M equestrian property in the mountains adjacent to public land that has the outfitting permit for horseback riding, and it does $100,000 a year in net income, it’s a safe bet to say it could be a $300,000 business. And that includes the necessary tack, horses, trailers, hay, etc. Total list price: $1,300,000.

Don’t forget, buyers like to see the expansion potential of a business. What can it do moving forward? Can an RV park add more slips, cabins, or campsites? Can you increase bookings, production, and pricing moving forward? That’s a big component of our Kebler Corner property — the ability to add over 20+ more RV slips and campsites to the location with plans in place.

Why Some Businesses Are Worth 5x and Others 1x

Barrier to entry matters. Difficult businesses on unique properties — like outfitting businesses, wineries, and guest ranches — can be worth up to 5x income plus real estate. 

Less complex businesses, like a landscaping company, could be 1x income at best. You can go to a farm auction and pick up weed whackers, mowers, shovels and rakes, and a trailer to pull it for 25 cents on the dollar. It’s all equipment and no real estate involved.

Determine Your Type of Sale

Do you own the real estate outright? Can you offer owner financing? Are you able to help with the transition of the business to the new owner?

In most cases, younger folks that want to buy a business don’t have a lot of money to put down, but they have time and energy. You can get paid substantially more for a business if you’re in the position to offer owner financing to the new buyer. The adage is “You can have price, or you can have terms, but you can’t have BOTH.”

If you’re willing to carry a note, there are significant benefits to it. You can support the next generation of business owners, negotiate a higher sales price by offering owner carry, earn almost all interest in the first few years of the carry, offset capital gains, and if the situation is right, even have a job assisting with the transition to the new buyer.

If you want a quick, easy close, you’d better have management in place, your books in shape, and the ability to walk away from the business quickly when a cash buyer comes along. We typically see these scenarios when a larger company absorbs an asset class they specialize in — typically in RV parks, guest ranches, that sort of stuff. But this buyer is going to negotiate with you, use the leverage of cash and a quick close, and replace you on day 1.

Lastly, you may get a buyer that is looking to purchase utilizing SBA or another source of commercial lending. Have fun. You’ll wish you could have just seller-carried and gotten your price. You will have sophisticated lenders and underwriters crawling through at least the last three years of your books, analyzing every move you’ve made, every expense, every profit, to find cracks in your business. They’ll appraise the real estate, appraise the business, and the whole process can take significantly longer to close. Not to mention, after the expert underwriters go through your books, they’ll come back with what they really think it’s worth — and that number can be different than where you started.

A Closer Look at Seller Carry

For the most part, the public doesn’t understand amortization schedules. You take out a 30-year loan on $100k at 8%, you’re going to pay the majority of all the interest in the first half of the term, and actually pay down the balance in the second half. When you’re the owner and acting as the bank, you typically only carry the note for 3 to 5 years, then a balloon payment is made by the borrower after that time frame to pay you the balance owed.

Let’s use a $100,000 business value as an example. You’re owner-carrying at an 8% rate. The borrower will make payments to you for 5 years, based on a 15-year schedule, then the “balloon” is at the end of 5 years, and they pay you the balance of what they owe. (See the amortization calculator.)

Here’s how it breaks down:

On that $100,000 you carry, over 5 years you make $36,000 in interest, and they pay off $21,233 of what they owe. At the end of 5 years, the balance of $78,767 is paid to you.

Net net: $136,000 to you.

And the higher the seller-financed amount, the more you make.

Final Thoughts

Value is paid for efficiency, organization, and proof of income. If your property has big real estate assets, do you have your surveys, septic tank permits, water well reports, property inspection, appraisal, water rights, county permits, etc.? Does your business have 3+ years of P&Ls, tax returns, inventory and asset lists, business permits, website and marketing logins, Standard Operating Procedures handbooks, and employees?

I hope this article gives the guidance you may be looking for if you’re thinking of selling your business. Preparation is key — and don’t try to sell a disorganized, sinking ship.

When you need advice or want to talk to a real estate business broker, call us:

Gary Hubbell, ALC  —  970-872-3322  —  grandviewranch@gmail.com

Loren Williams, ALC  —  970-314-0324  —  loren.williams.co@gmail.com

Jake Hubbell, ALC (Author)  —  970-250-9396  —  jakedhubbell@gmail.com