Why You Should Always Sell Your Business and Your Property Separately

The Most Common Trap in Business Sales

Many owners of small and medium-sized businesses in Germany also own the associated property — the workshop, the office building, the production facility. Often paid off over decades, this real estate represents a substantial asset. When it comes time to sell the business, it seems logical to simply sell everything together as a package: the business and the property in a single transaction.

It sounds simple, but in most cases it is an expensive mistake. Businesses and real estate are fundamentally different asset classes — with different valuation methods, different buyer pools, and different market cycles. Bundling them together almost always means leaving money on the table.

Two Different Worlds of Valuation

A business is typically valued based on its earning power. The most common method for SMEs is the multiples approach: a normalised earnings figure such as EBIT (earnings before interest and taxes) or EBITDA is multiplied by an industry-specific factor. For a typical trade business or service provider in the DACH region, these multiples usually range between 3x and 6x EBIT.

Real estate, on the other hand, is valued completely differently. What matters here is location, condition, rental potential, and the local property market. The standard approaches are the income method (based on achievable rental income), the cost method (based on construction costs minus depreciation), and the comparison method (based on sale prices of similar properties in the area).

The problem with a package sale: when the property is embedded in the business, it gets valued through the business multiple — essentially through the earning power of the operations. This often means the actual market value of the property is not properly reflected. Particularly in recent years, when property prices in many German regions have risen far faster than business profits, the real estate can be massively undervalued in a combined assessment.

A simple example: your trade business generates a normalised EBIT of 150,000 euros. With an industry multiple of 4x, that gives a business value of 600,000 euros. But your commercial property — perhaps a workshop with office space in a good location — has an actual market value of 500,000 euros. In a package sale, this property value gets absorbed into the business value and often disappears. With a separate assessment, you arrive at a total value of 600,000 plus 500,000 euros — a significantly better outcome.

Different Buyers, Different Interests

Another crucial point: the buyers for businesses and the buyers for real estate are often not the same people — and they have completely different interests and financing capabilities.

An entrepreneur or successor looking to take over your business is interested in the customer base, employees, market position, and earning power. Financing a business acquisition is already a significant challenge for many buyers. If a property is added on top, the total price often rises to a level the buyer simply cannot finance. The result: the buyer walks away, or you have to make substantial price concessions — a so-called package discount.

Conversely, there are property investors who are exclusively interested in the real estate — as a capital investment with stable rental income. These buyers have no interest in the operating business, but often bring a high willingness to pay for the property itself.

By separating the two, you can target both buyer groups specifically and maximise your negotiating position.

The Elegant Solution: Sell and Lease Back

A particularly interesting option that becomes available through separation is the sale-and-lease-back. You sell the property to an investor and simultaneously lease it back on a long-term basis. The new owner receives stable rental income; you receive the full market value of the property as liquidity.

For the business sale, this offers a double advantage: first, the business becomes asset-light — free of property burden — which makes it significantly more attractive and easier to finance for buyers. Second, you can claim the rental costs in the business, which may offer tax benefits.

The business buyer also benefits: they need to raise less capital, have a long-term lease for the location, and can focus their resources on the actual operations. Many buyers today expressly prefer this setup because it increases location flexibility and keeps the overall investment manageable.

Tip: if you want a long-term commitment, you can include a purchase option in the lease agreement. The business buyer can then acquire the property at a later date — when financing allows and they have established themselves in the business.

Mind the Different Market Cycles

Business values and property values do not move in parallel. The property market follows its own cycles, influenced by interest rate trends, regional demand, and regulation. The business market, meanwhile, is driven by industry conditions, succession pressure, and buyer interest.

It is quite possible that the property market in your region is currently strong while the business market in your industry is weak — or vice versa. With separate sales, you can optimise the timing for each transaction. Perhaps you sell the property now while prices are high, and the business in a year when the industry outlook has improved.

A package sale removes this flexibility and forces you to transfer both assets at the same time to the same buyer.

The Tax Dimension

There are also good tax reasons to consider business and property separately. A common structure in Germany is the Betriebsaufspaltung (operational split): the property is held by a holding entity (often a GbR or the entrepreneur personally) and leased to the operating company (typically a GmbH).

Important: when selling the operating company, the Betriebsaufspaltung can end, which may trigger the recognition of hidden reserves in the property. This means you could owe taxes on the property's appreciation even though you have not actually sold it. This tax trap can be avoided through forward-looking planning — but only if you think and act separately from the outset.

This article cannot and should not replace professional tax advice. Be sure to consult a tax advisor with experience in business sales before taking any concrete steps.

What Should You Do Now?

If you are considering selling your business and also own commercial property, your first step should be to obtain separate valuations. Have your business valued based on its earning power — as if it were operating from rented premises. And have the property appraised separately by a qualified surveyor.

You may be surprised how often the sum of the individual values significantly exceeds what a package sale would have achieved.

Separating the business from the property is not bureaucratic overhead — it is a strategic lever that gives you more buyers, better prices, and greater flexibility. Those who bundle everything together leave money on the table.

At Sequi, we help you design the optimal sales process for your individual situation — including the question of whether and how your property should be separated from the business. Use our free valuation tool for an initial estimate of your business value, or contact us directly.