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How much does a seller typically offer in a broker's commission on a business?

Is a commmision structure on a business different from a commission offered to a broker on a piece of real estate??

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The commissions business brokers charge are outrageous. They bear no relationship to the services provided or the competence of the broker. Most brokers will not share their commission with buyer brokers, prolonging time on market and reducing the pool of potential buyers and therefore the price. You are better off selling without listing with a business broker

May 23, 2009
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The BAF Group LLC
MD

Realtors AND Buisness Brokers are free to negotiate their commissions. In fact, fixing commission rates in Real Estate is normally found to be illegal, in several ways, depending upon how it is approached. Most Business Brokers are, or should be Real Estate Agents, because many businesses are sold with the Property.

Rates vary with area, with types of businesses and types of transactions. Some Brokers will charge commissions on Inventory in a retail business; others do not. Some charge up-front fees; others do not. In large transactions, there is normally a graduated fee schedule, where a certain percentage is charged on the first million dollars as an example, then reduced rates for each successive million dollars of price. The only way to tell for certain is to ask several Brokers to give you a quote of the commission they would charge you, and the services they render for those fees.

Also check when the commissions are to be paid: Some charge when the contract for sale is signed, others collect at the settlement table. Ask whether they cooperate with other Brokers and share commissions. Most Business Brokers do not, and I believe this is a terrible disservice to the Sellers. As a Business Broker, it is one of my pet peeves. We share almost all commissions with responsible Brokers; if we do not, we limit the speed of the transaction and the competition that can keep the price at the highest, marketable price, for the Seller. That is a terrible disservice to the Seller. EVERYTHING is negotiable. If you are the Seller, and you are paying the commission, YOU are the Boss! Don't forget that.

May 18, 2009
Julie A. Barnes, CPA
Small Business Exchange, Inc.
Travis County, TX

Hi Kim,

Unlike Realtors, Business Brokers are free to negotiate their commissions (at least in Texas). Having said that, commission are typically dependent upon the size and complexity of the transaction. That is, a business broker who is orchestrating a merger & acquisition involving over $1 million (and usually higher) will charge a higher commission of upwards of 15%. Their fee structure is usually tiered - that is, a certain percentage up to some prescribed amount and generally scaled down from there.

For smaller businesses with sales prices of under $1 million, the commission rates can vary greatly - in Central Texas, I've seen everywhere from 8% to 12% but I admit that I have not performed an exhaustive study (I would welcome feedback from other brokers in this neck of the woods). This rate also depends upon upfront fees - in which case, you would expect to pay a little less in commissions.

I encourage you to check out my blog: http://www.AustinBusinessesForSaleBlog.com to learn more about the buying, selling, and valuation process - as well as information about financing and accounting that might assist you in the selling process.

Good Luck!
Julie A. Barnes, CPA
President, SBX Inc.

May 18, 2009

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