Is a Business Broker Worth the Cost?
Is it worth paying a business broker ten percent to sell your small business?
Yes.
We get this question a lot, and almost always the answer is yes. Seems counter to what we do here, right? Afterall, at BizBuySell we have built the largest marketplace of businesses for sale. We provide a conduit for owners to find buyers, resources to help establish business value, and a library of resources (and books) on how the process works. So why do we routinely suggest owners hire a broker who will take a 10% “success fee” off the top of the sale?
The short answer: selling a business well is hard.
While listing your business on our site is straightforward, preparing your business for sale, pricing it appropriately, vetting qualified buyers, analyzing offers, countering, managing due diligence, and negotiating terms is not. At the same time, you have to keep your business operating at peak performance during the process to maintain its highest value.
No amount of internet research will make you as effective as someone who does exactly this for a living. Rookies are liable to fail to prepare adequately, undersell their business, agree to terrible financing terms, decline the best offer, or make any number of unforeseeable mistakes.
A good business broker has learned the trade through experience and has gone through the process enough to be able to identify the pitfalls and prepare for them. You’re paying for that experience.
And while 10% seems high, it’s a function of a niche, low-volume industry where the difference between a well-managed sale and a poorly managed sale can be a sizeable portion of the sales price – or all of it, when sales never happen. That kind of price variability doesn’t happen in higher volume industries like real estate brokerage, where prices are well established and rarely move more than a few percentage points in a season.
That’s why real estate brokers get 6% and business brokers get 8-12%. They each bring a different level of value, take on much different levels of risk, and bring owners much different levels of potential return.
Now, can business owners sell well without a broker? Of course. Generally, the smaller the business, the less a broker can bring to the table. So, owners of smaller main street businesses may be better off selling on their own. Or if you've already lined up a buyer, you may be able to hire a broker to manage the negotiations and transaction for a reduced fee.
If you want to learn more about selling your business, and how to leverage business brokers to get the deal done, see our Learning Center page on Working With a Business Broker.