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What kind of prices does a "broker" charge to sell a business? How effective are they?

We are thinking of trying to sell our plastic extrusion factory-I didn't know how much a broker charges and are they very effective at getting your business sold.

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Answers (5)
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I would second what Steven wrote. If you are capable of doing it on your own, you are much better off doing so. Be sure you have a good attorney and accountant to advise you. Be realistic about the price.

I might be interested in your business, depending on the specifics.

As to what Steven said about asking a broker to show up at an odd hour, far from his office, I think it's abusive. If they agree to it, it shows desperation and that's not what I'm looking for in someone I hire.

May 23, 2009
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Vested Business Brokers
Senior Business Broker
Suffolk County, NY

I would not worry about the commission upfront. I would be more concerned with the quality of broker you hire. If you go to Goldman Sacs you go for the reputation and results not the commission. You need to interview a few brokers see what they can do for you, see how knowledgable they are in your business field. If you find the right broker you will probably get more for your business than you thought and commission will be a non issue. I would be happy to speak with you. You can find me under brokers on our website.

May 12, 2009
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Vested Business Brokers
Business Broker
New York County, NY

Hello Denise:
The direct answer to your question is based on value. Value comes from net profit and industry comparison. If you have a mulimillion dollar company in a resession proof industry we would consider a lower percentage then a $150,000 company in a store front type of business. Our job as brokers is to market and present buyers with good information about your company. In the end it is up to the buyer and seller to make a deal. If you list with us I promise to bring you qualified pre-screened buyers. Please contact me and I would be happy to give you a free phone consultation of the value and commission pertaining to your situation.

May 11, 2009
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The BAF Group LLC
MD

There are good Brokers and bad Brokers; good Mechanics and bad Mechanics; good Attorneys and bad Attorneys. We answer or at least return calls seven days-per-week. I don't know another brokerage in the area that does that. And don't let size be part of your consideration. Some of the biggest firms only do things that are "cookie cutter" types of deals. For example, they may only do Conveneince Stores and Gas Stations. They may put the listings on a wall in their offices. Then they bring a gas Station Buyer in, show him the wall and say, "Which one do you want?" They may be effective for those kinds of mass production sales efforts, but if you have a small manufacturing company, they won't do you any good. It is dangerous to simplify and stereotype Brokers as lazy or ineffective; many are exceptional, extremely skilled and well versed in their line. I would ask about whether the Broker has actually run a business before. Some have not, and they really don't understand what it is to read a P&L statement or the issues either a Seller or Buyer contends with in buying and selling a business, even though the Broker deals with such people all of the time. People that say they don't like to deal with a Broker may have biases that have nothing to do with Brokers. On the other hand, some Brokers refer to Attorneys as "deal killers". We have not had that experience - although, certainly we have had our share of difficulties with Attorneys. But that is rare. In fact, most of our listings come from Attorneys and Accountants; so we are not all horrible people, and some of us are damned good, if I do say so, myself! The issues you have to answer are: What are your own skills? Would you do your own appendectomy? How much time d you have to do what a Broker could do for you? Do you have the networking capabilities to get the business sold at its maximum price? Can you help the Buyer with financing? Is your pricing where it ought to be? How are you going to field and answer inquiries in a confidential manner? Why would you discard the Broker because he is not available twenty hours a day, every day of the week, then decide that you can only answer the phone when you are not in the office, because your employees might overhear you? Good Brokers provide a professional, skilled methodology and can obtain top prices for you; in so doing, they can pay for their own commissions in the premium price they can obtain for you, in many cases.

May 7, 2009
Steven St
World Business Partners, Inc
Los Angeles County, CA

A broker's commission can run anywhere from 5- 30% depending on the type of broker you use. Most fall in the 10% for business brokers, but there are some who charge more or less.

The quality of service varies greatly. Be very careful about which broker you hire. I have been dealing with brokers for more than 10 years and, unfortunately, most are lazy, uncreative and does more harm than good in most deals.

That being said, unless you have the skills to sell a business yourself then you are going to need a broker. When I'm in the market to sell a business and I'm in a market where I do not know a good broker then a call several brokers to give me their pitch. I then schedule to meet with them at odd times during the day, like before 7 a.m. or after 10 p.m. on a Sunday and meet at places that are far away from where they work or live. I usually have a lot of brokers who want to reschedule or pick a different time or day, but the one who doesn't and shows up ready to work is the one I want because you want a broker who is willing to work and do whatever they have to do to get your business.

You also want to make sure they market and can sell your business.

Also do not ask for references. Ask for the names and contact numbers of their last four closings. This will give you an idea of how the most recent buyers and sellers felt about their work. Anyone can pull out three good references, you want what they have done lately.

What you can do on your part is make your business as marketable as possible. Have really good numbers and a clean business that looks like its been run professionally.

Personally, I don't like using brokers and avoid it when I can but if you have too then make sure you get the best one you can for your area.

Hope this helps.

May 6, 2009

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