How Much is a Business Brokers Commission?
Typically, a business brokers commission is between 5-10% of the business sale price. This varies depending on the expected price of the business and the amount of work the broker predicts is involved in the sale. A broker will normally want to earn a minimum of $15,000 sales commission, though it can be $100,000+ if selling a multi million-dollar company.
Business Brokers are the professionals who focus on the buying and selling of businesses and franchises. You are paying for their expert knowledge, skills and contacts in the business sales environment. In order to engage their services you sign a contract to sell your business. Their payment is in terms of a commission rate that is paid once settlement has occurred. Usually, a broker has an exclusive agreement with the seller, so they are entitled to commission if the business is sold under the contracted period (typically 3-6 months in a business sale).
Are marketing costs included in commissions?
Generally speaking, no. In order for your business to be seen and potential buyers to make contact, the broker has to promote your business. This involves some expenses, though it should be less expensive then real estate as there are no open homes, flyers, expensive photography etc. Every brokerage operates a bit differently, some expect an upfront marketing fee, others have some marketing included in their services for choosing them. Others, may already have an interested buyer and you may not need any marketing. You will need to speak to some reputable brokers to assess their packages.
How is the commission earnt?
A business broker is there to assist you from start to finish of the business sale. The broker is normally involved in the following functions:
- Valuation of the business.
- Prepare a memorandum or document outlining the business for potential buyers.
- Creating and distributing the marketing documents.
- Screening potential buyers to see whether they are genuine and have the necessary finances to purchase the business.
- Liaising between the buyer and seller in negotiations.
- Closing the deal and finalising the sale.
You will need a team surrounding you when selling your business. A solicitor is also required to prepare the contract of sale, and an accountant to help organise your financials. Be sure to seek professional advice when selling your business.