You are selling your business. Great! You've decided to use a business broker. Even better. A professional business broker will guide you through the entire process --> analysis and pricing, development of a custom marketing strategy, buyer search and qualification, deal structuring, and negotiation and of course, closing.
What Does a Business Broker Charge?
The truth is, it depends on the details of the business being sold. In general, the cost will be anywhere from 8-12% of the total sales price paid at closing. The range of the percentage depends mostly on the business size. If you are looking at a larger deal (in the multi-million dollar range), a typical structure for the transaction is a modified Lehman Formula: 10% on the first million, 8% on the second million, 6% on the third million and 4% per million thereafter.
There are, at times, upfront fees ranging from $2,500 to $20,000. These upfront fees, and whether or not they are assessed, depend on the business being sold, the sales price and the business broker. If upfront fees are a part of your deal be sure the reasoning behind them is thoroughly explained to you.
There is one very important thing to be aware of when you are researching business brokers -- make sure the broker is part of a professional business brokerage association or has a merger and acquisition organization affiliation. You will come across some commercial brokers asking for fees in the 4-7% range. This may sound attractive but there is a reason the fees are so cheap. These people do not have adequate resources or a network to get a business transaction done properly. There may also be an issue with confidentiality. From personal experiences, our firm has seen commercial brokers that do not use non-disclosure agreements. That could be very dangerous for you and your business in the process of a sale.
If you are interested in learning more about how a business broker can support you, schedule a consultation today!
Al Fialkovich is Managing Director at Transworld Business Advisors of Denver. After acquiring and selling two of his own businesses, Al was inspired to help other small business owners navigate the challenges involved in selling their companies. His focus on running seamless transactions, constant honest communication, and maintaining relationships with clients has earned Al multiple awards for Transworld.