When you own the building.

If you own your building, you own two assets, and they have two different values. A large share of dry cleaner owners do. Understanding how the two are valued separately is worth more to most owners than anything else on this site.

Two assets, two values

The business is priced off what it earns. The building is priced off what it produces as real estate, on a capitalization rate, the way any commercial property is. Adding them together and calling it one number gets both wrong. Pricing them separately is how you find out what each is actually worth, and it often turns out the building is the larger of the two.

Why the business carries rent either way

Here is the line owners miss. If you own the building, you may have stopped charging the business rent years ago, or you may charge a figure you set a decade ago and never revisited. Either way the profit and loss statement shows earnings that include free or cheap occupancy.

Any buyer who does not also own the building has to pay rent. So does a buyer who does, because the space has a cost whether or not a check changes hands. Market rent goes back into the calculation before anything is multiplied. That is not a buyer trick. It is the only way to see what the operation produces on its own.

What that does to the number on paper

Restoring market rent lowers the earnings, and lower earnings lower the price of the business. Owners see that and feel value is being taken from them. It is not being taken. It is being moved. The rent that comes out of the business is the income that makes the building worth what it is worth. The value reappears on the other side, and in most cases the two together come to more than the blended number an owner started with.

How the building gets valued

As an income property, on the rent a real tenant would pay, at a capitalization rate appropriate to the market and the building. A special purpose plant with a boiler, solvent equipment, and venting re-lets more slowly than a generic retail bay, and the rent comp should reflect that rather than pretend otherwise.

Selling one, both, or neither

All three happen. Some owners sell the business and keep the building, becoming the landlord to the new operator on a market lease, which turns a business they ran into income they do not have to work for. Some sell both and are done. Some sell the business and lease the building for a term, with the real estate to follow later. What matters is that the choice is yours to make with real numbers in front of you, rather than one you back into.

How we look at it

We value the business and the real estate separately and show both. If you would rather keep the building, that works. If you would rather sell both, that works too. A first conversation is confidential and commits you to nothing, and what a dry cleaner is worth covers the business side.