Imagine owning a successful business that has no trouble meeting your target sales metrics. It also fully satisfies the needs of your audience.
There will likely come a time when selling the company is an enticing option. This is especially true if your business is one of the 35% that survived to the 10-year mark.
Working with a business broker is one of the best ways to sell your company, but not everyone understands what they can expect to pay. So, how much do business brokers charge? Let’s explore the key information you need to know about how business brokers make money.
Who Pays for a Business Broker?
The answer to “who pays the business broker” is the seller in most cases. This is because the seller is the one who needs their services the most.
For example, if you were buying a business, it likely wouldn’t take long to find a seller. The inverse isn’t always true. It can sometimes take months or even years to find a buyer for your business.
In some situations, the buyer could agree to pay some or all of the broker fees. Ensure you discuss this with your broker before signing agreements. Doing so will help ensure you don’t encounter financial surprises.
What Are Typical Business Broker Fees?
In general, business brokers will charge between 10% and 20% of the total sale price. The fee is paid at the closing of the sale.
As previously mentioned, it’s sometimes possible the buyer will pay a percentage of the broker fees. This is often the result of negotiation, such as including extra benefits for the buyer during the sale.
To clarify, the seller might sell the company as-is and allow the buyer to keep the equipment in the facility if they pay some of the broker fees. Regardless, you should always anticipate paying at least 20% of the sale price when looking for a broker. This will ensure you can’t afford their services if you can’t find a cheaper option.
How Is a Business Broker Paid?
Depending on the business broker services you work with, your payment terms could vary. Many brokers require payment to be a lump sum.
Some are a bit more flexible and allow their clients to make monthly payments. It’s best to find a broker who can meet your financial needs. Not everyone has the money to handle their obligations upfront.
This is especially true if the amount you get from the sale needs to go toward other obligations. For instance, let’s assume you sold your business for $500,000, and the broker charges a 10% fee. You’d need to pay them $50,000 during closing if they wanted all the money at once.
However, let’s also assume you have $200,000 in tax obligations to settle. It wouldn’t be feasible to pay the entire broker fee at once. Working with a professional who can accommodate your needs can make this situation much easier to handle.
How Much Do Business Brokers Charge?
As we went over before, brokers will charge between 10% and 20% of the total sale price. The amount you pay is directly influenced by the amount you sell your business for.
However, it can also vary depending on many factors. For example, brokers who’ve been in the industry longer will often charge more in commission fees.
This is because they can provide much faster service. The structure of the deal also plays a large role.
If you’re only selling a single business, a broker could charge a low commission fee compared to if you sold multiple businesses. To clarify, the length of the transaction plays a large role in what you can expect to budget for. It’s worth noting that some brokers are negotiable.
If you’re able to make compelling points on why they should charge less, they might listen. Prioritize brokers who are willing to have open and honest conversations about your budget. This will help them better understand your needs and increase the likelihood they negotiate with you.
Finding a Business Broker
While finding a business broker might seem overwhelming at first, it’s easier than most people anticipate. The first attribute to consider is their reputation.
Research online to see what other people have to say about the experiences they have. Were they satisfied with their overall results? Did they have outstanding issues they didn’t resolve?
The answers to questions like these will help you narrow down your search. Of course, you should always research the broker’s commission fee.
Doing so helps you budget accurately for their services. Do they seem enthusiastic about helping you?
The last thing you want to do is hire a broker who doesn’t seem to care about finding a buyer for your company. In most scenarios, this will only serve to waste your time. It also carries the risk of you getting less money than you should for your business.
For instance, assume you hired a broker who wanted to find a buyer as quickly as possible. They might pressure you into settling for an amount far less than what your company is worth.
Are they easy to communicate with? To get the best results, you’ll need to find someone who is easy to get in touch with and willing to talk about your needs. If you find it hard to contact them, chances are you won’t meet your goals.
Industry experience is another important factor to look out for. In general, brokers who have been in the industry for at least a decade are the most reliable.
They understand the many nuances of business transactions and know how to overcome common pitfalls. Keep this in mind when moving forward.
Don’t Overlook Business Brokers
Working with the right business broker can streamline how quickly you’re able to sell your business. Just ensure you keep the answer to “How much do business brokers charge” in mind so you can make the best decision for your situation.
Gulfstream Mergers & Acquisitions prides itself on helping entrepreneurs find buyers for their companies as quickly as possible. Our decades of combined experience ensure our clients make the ideal choice. You’ll learn more about what we have to offer when you get in touch with us today.