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How much do brokers charge to sell a business?

How much do brokers charge to sell a business? I don't have to sell my business, I just want to sell it so that I can have more family time. I have a bottom line $$$ amount that I need to get out of it. So, with that in mind, how does the broker get paid? Do they mark up my asking price? Do they get a flat rate or a percentage? What about the buyer's side? Do I need to pay their agent?

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Answers (13)
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Aug 20, 2016
Mel Vaz
Vested Business Brokers
Co-Founder
Suffolk County, NY

Here is NY, fees range from 10% - 12%. Look for a broker who is willing to offer a non-exclusive listing agreement so you may still try to sell on your own.

Jun 16, 2016
Rabothata Masilo
Rabothata Masilo Loan Service
Business/Home Loan
Bay County, FL

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Jun 15, 2016
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A good broker is like a unicorn. Most do little prep work before they list a business, instead acting as conduits for business owner data that many times is inaccurate and/or false. Yes, on occasion you'll find a broker that truly adds value and earns their commission but many are one step above or below an average used car salesman. If you have any selling/financing experience and can communicate effectively in written or verbal form you can certainly sell your own business and save the 10%. Brokers are necessary for business owners who lack any of the above skills/traits.

Jun 14, 2016
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The BAF Group LLC
MD

To flatly state that you do not need a Broker, as one writer did, is flatly irresponsible! There are some instances, and some business Owners that do not need Brokers; however, this is something that should be decided on a case-by-case basis. I have seen many people who have sold without Brokers, who have regretted it later, in terms of pricing, negotiation and terms application, and who would have benefited far more by using a Business Broker for their transactions. (In truth, there are some who have regretted using BAD Brokers, for their business sales; you need to be careful, either way.) Ms. Hernandez, since you are in the Salon business, do you recommend that all people cut their own hair? If you needed surgery, would you recommend that all people take out their own appendices? Please, do not listen to irresponsible advice from people who have - to others, right here in this Community - provided information that does not even address the specifics of the questions asked.

Sep 17, 2013
Armin Laidre
ExitAdviser.com
Fast-track Your Business Sale
NV

You do not need any broker. Check the 12-step schedule (below) and go ahead with the sale process.

Sep 16, 2013
William Bruce, ABI
William Bruce Business Sales & Acquisiti
Baldwin County, AL
Premium Broker

Here's an article about business brokers and how they work including commissions.

William Bruce, President
American Business Brokers Association

Sep 7, 2013
Julie A. Barnes, CPA
Small Business Exchange, Inc.
Travis County, TX

Hi Melissa,

I echo both Michael and Don's comments. It is readily apparent that some contributors are simply trashing their legitimate and, in my opinion, more professional competitors. I encourage you to visit all of the websites provided by those who have answered your question.

By the way, I happen to charge 8% because my business is relatively young and I'm cultivating clientele.

Thanks and Good Luck
Julie A. Barnes, CPA
President, SBX, Inc.
http://www.AustinBusinessesForSaleBlog.com

Jun 6, 2010
Michael Hamlar
Hamlar Enterprises, LLC
Roanoke City County, VA

Melissa,

The average is 10% to 12% according to the Business Brokerage Press (2010). The reasoning for that percentage is due to the amount time and efforts brokers put into the sale. I can only speak for our company. If you break it down and the average sale is 7-9 months if not longer in this economy the percentage often breaks down to less than minimum wage per hour. This business is 24/7 365 days a year. Most inquiries come over the weekend. At first glance the percentage may seem high but if you factor in all the work brokers do like taking on bad leads and bad calls instead of business owner having to add stress to the process, marketing, advertising, valuating the business, research on the business and industry and etc the fee is well deserved. Again, I can only speak for our company.

In regards to pricing that depends on the agreement with the broker and should be established before the listing is accepted.

If you have any questions or need further advice please do not hesitate to contact us. I am a multiple business owner and I have experienced both sides of the business.

Regards,

Michael Lawrence Hamlar
President & CEO

Hamlar Enterprises, LLC
Hamlar Business Broker
P.O. Box 3336
Roanoke, VA 24015
Phone & Fax 1.800.682.1950
Email: mike@hamlarenterprises.com
Skype: MHamlar

Jun 6, 2010
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The BAF Group LLC
MD

The previous writer apparently is working solely for the benefit of his/her own questionable program. He/she demonstrates an obvious bias, negatively expressed, along with a complete and profound ingorance of the brokerage process and Federal Law. Yes, there are people who think their Broker was overpaid. There are many more who think they paid for excellent service and tremendous value. The same complaints and positive statements are made all the time about doctors, attorneys, accountants, plumbers, electricians, Salon Operators... You name it.

Julie Barnes made an excellent series of comments, in answer to your question. I also provided a serious response. Both addressed your questions in positive, legally correct and legitimate ways.

Jun 1, 2010
Buy-a- Company

Seems no broker wants to answer the question. The answer is 10%, typically, which is WAY too much, especially in today's Internet age of farming for prospects. You can negotiate that down to about 6%, which is still too much. Never met a seller yet who, after the process was over, didn't think the broker was way overpaid, based on services rendered.

Should the broker really get 10% of your life's work? Should they really get half of the 20% down payment? When you discover that all they did was to match up 2 people they found on the internet, you will share in the frustration of most sellers.

Jun 1, 2010
Julie A. Barnes, CPA
Small Business Exchange, Inc.
Travis County, TX

Just as there are folks who manage to sell their own homes, there are certainly business owners who have succeeded in selling their own enterprises. Whether it is worth the time, energy and heartburn is obviously up to every individual seller but some of the critical issues you should address before considering this option are:

.The value of a home is infinitely easier to determine than a business. Similar homes in a location can be used as a baseline. How do you value a business? There are a myriad of ways to valuate larger businesses but small to medium sized enterprises simply do not fit any particular mold in most cases. In fact, the majority of small businesses are valued at the price that they eventually fetch. Cash flow, owner's benefits, net income before taxes, and the Fair Market Value of existing FF&E (Furniture, Fixtures, and Equipment) help to determine a "ball park" but the market determines the final Sales Price. Your best bet is to insure that there is a sufficiently open market among many potential buyers. SBX provides that market.

.Screening a buyer can be uncomfortable for FSBO's (For Sale by Owner) sellers - as well as the buyer. Working through a business broker gives you a professional buffer - we regularly interview and screen potential buyers so that you only meet with those folks who might reasonably be expected to make an offer.

.Do you have the time to communicate and/or meet with every interested party? As experienced business brokers, we already know that every listing will generate a flood of inquiries over time - usually upwards of 30 - 50 (depending upon the listing) but only 1 or 2 of these eventually result in an offer. Our job at SBX is to meet with each of these individuals until we find a buyer. .Do you have the sales/marketing/accounting skills to prepare a professional package for your business? SBX prepares a professional package for every one of its clients, including website presence, a financial package that includes a cash flow analysis, owner's benefit analysis, and an income tax return vs. financial statement reconciliation (whenever possible). This package is not only provided to registered buyers, but explained to them in great detail.

.Many buyers seeking to avoid brokerage fees are bargain hunters. It's human nature. Just as the FSBO seller is hoping to shave selling expenses, many of their potential buyers are hoping to do the same. In many cases, any savings earned by not retaining a business broker evaporate in the negotiation process.

.What is your time worth? In an effort to avoid paying a brokerage commission, many FSBO sellers actually spend much more in terms of business disruption, lost opportunities, and their own compensation rates while working with potential buyers, vetting those buyers, researching, negotiating, and closing.

For more information about how to buy, sell, or evaluate a business, please visit: http://www.AustinBusinessesForSaleBlog.com

May 31, 2010
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The BAF Group LLC
MD

The amount paid to Business Brokers is always negotiated between the Seller and the Broker. Most charge a straight percentage of the sale price, paid at settlement. Some charge up-front fees, some do not. It is not an easy question to answer, for that reason. And state-by-state, region-by-region, there are differences in the local commission culture.

The Broker's commission is normally higher than commissions charged by Real Estate Agents, because a Business Broker works in different ways. The biggest difference that causes the higher commission rates is in the nature of the confidential way the Broker must work. We cannot, for example, simply but a sign in front of your business, or place the business in a multiple list system where other Brokers can easily identify your business, and drop by with Buyers, almost at any time. There is no lock box with a key, allowing other Brokers to come in and show the place in your absense. Selling a business is not like selling a house. With a house, it is the physical setting that is important; with a business, it is showing financial records and explaining the nuances of your business that is most important, which means your Broker is always involved, in a very personal way.

Because of the confidentiality that the vast majority of businesses require, the Broker canno be a passive promoter of your business. He/she must take every call, sift through every prospective Buyer and inject him/herself into every potential contact. Compared to a Residential Real Estate Agent, each transaction is incredibely more time consuming, and no responsible Business Broker can adequately represent his/her Sellers if he/she takes on too many listings at any one time. (By the way, I am NOT criticizing Residential Real Estate Agents. The difference is not a question of which is better or more intelligent; it is simply a matter of different skils and the methods of promotion that each employs.)

The Broker can work with you to determine the price that you can anticipate. He/she should work with your Accountant to make certain the Broker understands all of the financial circumstances that surround your business. Your bottom line may be over or under the price that can be anticipated. I am working with one Seller that said he would accept no less than $3 million; it has taken me a year to get him to understand that the business was worth no more than $2 million. In another situation, the Seller initially told me he wanted $250k for his business, and he would be happy; we got him three times that amount!

Most small businesses have pricing that is based on Cash Flow. The Broker that represents you is paid out of what you accept. If a Buyer's Agent is paid out of that commission, it does not affect your bottom line - it comes from a split with your Broker. But be away that most Brokers do not share their commissions, which is something that I personally believe works against you! You should clarify that with any Broker you interview.

And you should interview them. Try to get referrals from other business Sellers who have been satisfied with their Brokers. If you don't like the answers you are getting, if you do not believe the Broker is being responsive, DON'T SIGN A LISTING WITH THEM! If they are not treating you well before you sign the listing, they will certainly not be any better after the fact!

I hope this helps. Good luck.

May 31, 2010

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