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Be a Smart Business Seller

Congratulations!  You have built your small business into a very successful enterprise over the years, and now it’s time to sell it and enjoy the fruits of your labor.  Perhaps you are dreaming of retiring next to a mountain stream with a fishing pole in your hand, or you may have other business ventures in your blood that you plan to finance with the proceeds from the sale of your current venture.  No matter what the reason, you can’t move forward until a buyer is found and a check is burning a hole in your pocket.  You probably sought out professional help when it came time to start your business – using the knowledge of your attorney, accountant, banker, and so on – so why not engage the services of a professional to help on the other end of the transaction?

The Business Broker

Just as people are trained to sell home real estate, there are professionals out there who have worked for many years in the area of marketing businesses for sale.  These folks are business brokers in every sense of the word, in that they act in the seller’s best interests (unless specifically hired as a buyer-broker, as defined in some states), know how to screen out unqualified buyers, and understand the complexities of all the paperwork that goes into such a sale.  For their time and trouble they will be paid a percentage of the sale price, which will be outlined below.  It is important to find the right broker – one who understands your business and its benefits to a prospective buyer, and someone with whom you can work confidently.  After all, once the decision has been made to sell, your primary goal should be to work as hard as possible to keep the business running smoothly and profitably.  Any departure from that task could negatively affect the value of the business.

What Should I Expect To Pay?

Commission rates paid to a business broker can differ widely depending upon a number of variables, such as the overall economic climate, the type of business you’re selling, the sales price you have in mind, and the sort of connections and other skills the business broker brings to the table.  A good rule of thumb, however, is to expect to pay a fee of between 10 percent and 15 percent of the final sale price of the business. Sometimes this total in divided into separate categories, with a “success” fee of X percent on the value of the business itself, and Y percent on the real estate portion.  Business brokers may ask you to do this because, in some states, commissions on real estate transactions are taxed at a different (lower) rate.  There are often concessions – one way or the other – for businesses priced in very small or very large dollars.  Let’s say your home fix it business is worth $50,000.  A business broker would probably ask for a flat-rate payment rather than fitting the commission into a predetermined percentage. Under these circumstances, be prepared to fork over as much as $8,000 to $10,000.  At the other end, a business worth in the millions of dollars will qualify for a commission discount.  It’s not unusual to see a sliding scale employed here – for example, 10 percent on the first million, eight percent on the second million, six on the third, and so on.  One would hardly expect to see the commission rate dip below four percent, though, no matter how big the transaction.

Choosing the Right Business Broker

As with any other major purchase in your life, price should not be the overriding concern when selecting a business broker.  Especially in major metropolitan areas with lots of companies changing hands, there is plenty of competition among the broker population.  This usually means the commission rates are fairly standard.  After all, if most of the service stations in town were pricing a gallon of gas around $2.59, you would have to be something awfully special to get away with charging $3.19 a gallon.  Here are some dos and don’ts to keep in mind when seeking out a business broker to help you sell your business:

• Do give a broker an exclusive agreement, but make it for a limited time rather than open-ended.
• Don’t pay a large upfront fee, and avoid paying one at all if possible.
• Do locate someone who has had experience in dealing with the type of business you’re selling.
• Don’t hire a broker until you have checked with at least three references, and more is better.
• Do include a provision that removes the need to pay your broker a fee if you end up selling the business on your own.
• Don’t sign any papers until you have your company’s legal counsel review them.

Good luck.  Now, let’s sell that business!

Looking to sell a business? Did you know you can sell your business for FREE at GlobalBX?  Sell your business today, or view our Business Broker Directory!