What Does a Business Broker Charge?
Understand the fees involved with selling your company using a Denver Business Broker.
A professional business broker is the right expert professional to guide you through the entire process of selling your company including analysis and pricing, development of a custom marketing strategy, buyer search and qualification, deal structuring, and negotiation and closing activities. But what does a business broker charge for selling a business?
The fee to sell a company depends on the business being sold. Typically, the commission 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 and its complexity. For larger business sale transactions (in the multi-million dollar range), the commission structure 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.
A broker’s commission fees are outlined in advance of the sale in the marketing agreement (service contract) executed by the business owner and the brokerage firm. This contract will also include a minimum commission fee, the length of the business listing representation, typically one year to start, and other legal terms associated with the sale.
In addition to a business broker’s commission, there can be an upfront fee associated with a business sale ranging from $2,000 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.
So to recap, what does a business broker charge in Colorado?
- An upfront retainer may be assessed depending on the business.
- An agreed upon percentage of the total sales price to be assessed as a commission fee after the business is sold.
There is one very important thing to consider when you’re researching business brokers - make sure the broker is part of a professional business brokerage association or has a merger and acquisition organization affiliation. For Colorado business brokers these associations will include at least the Colorado Association of Business Intermediaries and the International Business Brokers Association.
Why Work With a Professional Business Broker?
It is not uncommon to find commercial brokers or real estate agents asking for fees in the 4-7% range. This may sound attractive but there is a reason the fees are so low. These professionals are not trained in business brokerage, and they do not have adequate resources or a network to get a business transaction closed properly. Not working with a professional business broker may also cause issues with keeping the confidentiality of a business sale. It is best to work with a business intermediary who has the expert knowledge and training to sell a company to ensure the business is not damaged during the course of the sale process.
To learn more about how a Colorado business broker can support business owners with the sale of their company, schedule a consultation with one of our brokers today or visit the sell a business section of our website.
Al Fialkovich is Managing Director at Transworld Business Advisors - Rocky Mountain. After acquiring and selling many 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 through the Denver Business Journal, International Business Brokers Association, Colorado Business Magazine, Transworld Business Advisors, and Inc. Magazine.