If you are thinking of selling your business, you may be pondering whether paying a professional business broker is worth it.
Finding the right business broker, it turns out, is valuable. Not only do brokers provide expertise to the sale process, but they significantly improve your ability to attract prospects, negotiate and close the deal.
The cost of hiring a business broker could take away from the end price you as a seller wish to collect, but will inevitably save you time, stress, and money to meet your goals more efficiently.
Commission Fees
First, a broker will have an agreed-upon commission fee, which will depend on the business size and complexity.
A typical broker commission is 10-12% of the total sale at closing. Some go as high as 14%.
Michigan Business Broker, for example, charges a 10% commission after the business is sold, 6% for strictly real estate sales.
For larger business sale transactions, the commission structure is usually a modified Lehman Formula: 10% on the first million, 8% on the second million, 6% on the third million, and 4% per million thereafter.
Retainers and Upfront Fees
In addition to a business broker’s commission, there may be an upfront fee associated with a business.
This is a red flag.
No retainer fees should be involved and is not common practice. Brokers should only make money after the sale is finished.
Anyone who takes some type of money upfront doesn’t really have skin in the game to get your business sold.
Commercial Brokers
It may be attractive to hire commercial brokers or real estate agents for business sales who are asking for fees in the 4-7% range.
However, there is a reason these fees are so low.
These professionals are not trained in business brokerage, and they do not have adequate resources to close a business transaction properly.
Benefits Outweigh Costs
Working with a professional business broker will earn you the most when selling your business in the end.
Not only can a broker help meet your goals, but the right broker will take care of legal and transactional details in a way that will not cause you additional stress, time, or money.
Some of the many benefits of hiring a professional broker include:
- Weeding out prospects who don’t have proof of funds or a confidentiality agreement signed
- Providing costly marketing tools
- Keeping the confidentiality of a business sale in a way that won’t scare current employees, management, or operational staff
- Providing expert knowledge and training to ensure the business is not damaged during the sale process
- Marketing for increased visibility and chances of finding the best fit
- Setting realistic asking prices, and contacting potential buyers on your behalf
As a seller, professional brokers are valuable because they will save you time not having to deal with every prospect, will save you money in marketing, and will alleviate the stress of weeding out bad prospects.
Michigan Business Broker offers this experience and connections to deliver the best results to sellers. For a free consultation, please fill out the Confidential Inquiry Form.