What Does a Business Broker Charge? Understanding the Ins and Outs
Understand the fees involved with selling your company using a Denver Business Broker.
Updated: April 10, 2023
As a business owner, you likely put in effort and time to ensure the success of your business venture. However, when it comes to selling or buying a business, it can be a challenging process. This is where a business broker comes in. A business broker will help you navigate the process and will take the time to understand your business needs. If you're considering working with a business broker, then the first thing that may come to mind is what's the cost. Therefore, in this article, we'll highlight what a business broker charges, letting business owners know what to expect and helping to make informed decisions.
1. Commission Fees
One significant aspect of what a business broker charges are commission fees. Commission fees vary depending on several factors such as the business type, market value, and industry standards. In most cases, business brokers charge around 10%-15% of the business's sale price.
Therefore, it's essential to negotiate the commission fees you'll be charged to ensure you get the best value for your money.
Fees are often part of the package when working with a business broker. Engagement fees are typically charged upfront to secure the broker’s services, and you can expect a quality brokerage firm to charge an engagement fee. Fees can be paid periodically throughout the process as an agreement between both parties that they will continue to honor their commitment to the transaction. Fees associated with working with a business broker can vary depending on the type and complexity of the project. Still, buyers and sellers must understand them before entering into agreements with their brokers. Knowing what fees you can expect ahead of time will help ensure that you get the best possible service and results from your brokerage experience.
3. Professional Associations
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.
Business brokers can belong to professional associations such as the International Business Brokers Association (IBBA) or National Association of Realtors (NAR). These associations offer business brokers training, certification, and access to industry updates.
Some business brokers may charge extra fees for their association membership, which can range between $500-$2000. For Colorado business brokers these associations will include at least the Colorado Association of Business Intermediaries and the International Business Brokers Association.
4. Why Work With a Professional Business Broker?
Now that you know what a business broker charges, it's essential to consider why finding a professional business broker is essential.
Firstly, a professional business broker can provide you with valuable market insights and resources ensuring you get the best value for your business.
Secondly, they take the time to understand your business needs and assist in finding the best match for your business. Finally, a professional business broker can help navigate the sale process, helping you avoid costly mistakes and ensuring accountability.
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.
In conclusion, hiring a business broker is an excellent way to ease the process of buying or selling a business. Knowing what to expect in terms of fees and charges will ensure that you make informed decisions.
Alongside this, you will more easily negotiate with a business broker and get value for your money. At the end of the day, a professional business broker should be considered an investment in the successful sale of your business.
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 - Colorado. 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.
Along with his business partner and wife, Jessica Fialkovich, Al co-founded the Denver-based branch of Transworld Business Advisors in 2013. Since then, Transworld - Rocky Mountain has quickly become Colorado’s largest business brokerage firm and has remained a top five Transworld office worldwide, year-over-year.
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.