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How much will I have to pay a broker to sell my business?

I'm trying to figure out if I should use a broker. I'm sure cost isn't the only factor, but it is a big one. Thanks.

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Answers (5)
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Grover Rutter Mergers, Acquisitions & Va
"We Bring Business Sellers and Buyers Together Confidentially"
Hancock County, OH

When selling one's business, confidentiality is priceless! Confidentiality is one of the main reasons to use a broker. An experienced broker/intermediary can market your business in such a manner that prevents your employees, customers, vendors and competitors from knowing your business is for sale. In addition, your broker will be able to keep the "tire kickers" from wasting your valuable time. While your business if for sale, you need to be concentrating on the most important thing: running your business. Business owners who try to sell their own business often don't realize the amount of time involved in successfully getting a deal done. And, they often don't realize the damage they can do to their businesses if their "deals" fall through. Many brokers and intermediaries only get paid at the time a successful sale is completed. For larger businesses (selling in the $3 million and up range), some intermediaries charge retainers that can range from $5,000 to $50,000 in addition to a percentage of the sales price. Commission rates for businesses selling for $1 million or less can range from 10% to 12%. For sales prices in excess of $1 million, the commission rate may trend downward. In short, an experienced business intermediary will generally put more dollars in the seller's pocket, even after commissions.

Apr 3, 2009
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Strategic Endeavors LLC
PA

Ken's numbers seem reasonable, but if you get the right broker, he/she will more than pay for his/her fee by getting you the best deal. Don't make the decision based on the broker that quotes the lowest fee or the broker that tells you your business is worth the most. Ask them how they are going to explain the value and price to the buyer. If they can't explain it to you, how are they going to sell the buyer? Talk is cheap but values of businesses are highly intangible and skill, knowledge, and ability will have an impact on the final result.

Apr 3, 2009
Fayaz Karim, MBA, CA
Asset Valuations, Business Searches
Consultant
Orange County, CA

Great answers below, esp Ken.
An experienced broker will help you avoid seller mistakes and assist the buyer in safely buying a business, for a win win. He is a transaction specialist, so let him do his job. You will sel one or two businesses in your lifetime; he does it for a living every day. Would you handle your own divorce? I hope you said no...........

Apr 3, 2009
Andrew Cagnetta
Transworld Business Brokers, LLC.
FL
Premium Broker

Ken handled this question very well. Remember in the end you want to incentivize your broker (and the brokers they may cobroke with) to sell YOUR business. In this economy, you need a broker more than ever!

Mar 24, 2009
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VR Business Brokers/Vanguard Resource Gr
CA
Premium Broker

Brokerage commisions vary by geography, experience of the broker, and the way the total brokers compensation is constructed. Typically commissions for main street businesess range between 10-12% for those transactions under $1,000,000. For transactions over $1MM, it is common to see a declining % for each million thereafter. Also, most professional brokers will have a minimum commission. This minimum commission amount will also vary depending on what size of transactions the broker typically works with. Remember that it takes as much if not more effort to sell a $30k beauty salon as it does a $150k sandwhich franchise.

Some brokers may charge fees for valuations and/or packaging or preparing a confidential business review. When considering brokers compensation, you need to consider both the up front costs as well as the commission or "success fees."

But remember, a top notch professional with all the professional designations knows the value of their time and services. You do not choose a heart surgeon because of price and you should not choose a business broker because of their commission schedule. A good business broker will be worth every penny of his compensation.

Mar 20, 2009

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