Getting the Help of Business Brokers: What Happens to Business Broking Commission and Fees?

When a business owner decides to sell his business or when a buyer wants to know what business is the best one to acquire in the market, it’s most likely that they will engage the help of a business broker...

Selling and transferring ownership of a business is a complicated process and involves many steps. This can even take months to complete. There are even costs and fees to consider during the business sale process. Getting the help of a business broker can surely provide you with many benefits, however, you should also be aware of the business broking commission and fees in getting their service.

When a business owner decides to sell his business or when a buyer wants to know what business is the best one to acquire in the market, it’s most likely that they will engage the help of a business broker.

Business brokers act as a mediator between the seller and the buyer of the business. It’s their responsibility to make the negotiation as smooth sailing as possible. So, if you’re a business owner, a business broker can guide you with your business sale by giving you information about the business pricing and processes. If you’re looking in the market to buy a business, business brokers can help you find the best suitable one for you based on your location and preferences.

Here are some ways on how business brokers can help you:

  1. Pre-screening method – Because of their experience, business brokers can see bad risks for their clients. They can turn down businesses that they are asked to sell because of certain factors like being overpriced or business being a bit fishy. So, having a knowledgeable broker on your side can save you from having bad business investments.
  2. Highlight your interests – People who are looking to buy a business may see only those that are currently on-trend. They might overlook other factors that are essential in choosing which business to buy. A good business broker will evaluate first your skills and interest and then help you in selecting the business for you. They can open new possibilities for you, new discoveries that you haven’t given thought of or you haven’t considered before.
  3. Negotiating deals – This is the most vital role of any business broker. Both the seller and the buyer would want the business sale process to be simple and hassle-free. With business brokers handling the process, both parties can focus on their own duties and goals.
  4. Handling paperwork – Working with an experienced business broker can reduce the chances of business buyers and sellers, overlooking some crucial steps in the business sale process. Business brokers have knowledge on updated information on laws and taxes. They also have business strategies that can help avoid problems that might hinder the business sale.

Selling or buying a business is a major decision that one can take in his life. It involves various factors to consider and complex processes. This can be overwhelming and can cause huge losses when done without enough knowledge and the right tools.

DDDC Business Advisory has experience and a well-trained team that can help you with your business sale process.

What are Business Broking Commission and Fees?

It’s not enough that you know the process of getting the help of a business broker. You must also be aware of their business broking commission and fees to keep both sides on the same page.

Business brokers are professionals and experts on buying and selling of businesses and even franchises. You’re paying them for their skills and knowledge in the world of business sales. Upon signing a contract with them, you get their service to sell your business. Their payment is commission based and is generally paid when the transaction has settled.

Business broking commission and fees are based on a number of factors:

  1. Difficulty of selling your business – this means the amount of work and time needed to complete the business sale process.
  2. Whether they already have a potential buyer – less time will be required if they will already have a buyer lined up.
  3. Their experience – of course, the higher their expertise, you can expect a higher fee for their service.
  4. Their marketing systems – a business broker who has a solid strategy can provide you a trouble-free process and can speed up the transaction.

So, what exactly are the business broking commission and fees when doing a business sale?

Commission or Success Fee

The common charge for business broking commission and fee is between 8% to 12% of the final business selling price. Of course, as we said before, the structured fee varies depending on the size and value of the business, the type of services they offer and also the amount of work required to sell it.

Retainer

Aside from the commission fee, there will also be an upfront amount to pay, again depending on the business being sold, business selling price and the business broker. If retainers are part of your deal, be sure to completely understand the reason for being charged for this.

Other fees

These fees could be related to administration and marketing fees. It is important to be clear with the business brokers not only about the commission fees but also about what services are offered and included in your contract. In order for your business to be seen and have potential buyers, business brokers need to advertise. Some business brokers already include marketing fees in their commission fee while others do not charge it, especially when they already have a buyers list.

Remember not to choose your business broker based on the amount of their commission fee. Others might offer you a lower amount, but involve risky methods and might even end up not having a business sale at all. Selling a business is a complex process. Finding the right buyer requires expertise and skills.

For some business owners, hearing about business broking commission and fees might push them to try selling their business on their own. This is understandable, however, though it is a fact that there will be a need for extra fees, getting a business broker can give you a more effective way to sell your business and a higher business selling price.

DDDC team will guide you from the beginning to the end of your business sale process. We offer a reasonable and fair approach in selling your business.

Sources:

[1] Business Broker. (n.d.).

[2] Lovie, V. (2021, September 9). How Much is a Business Brokers Commission?. BSale.

[3] Magister, H. (2021, October 29). Business Broker Fees and Other Business Sale Expenses. Exit Promise.

[4] Gagnon, R. (2021, June 2). What is a Business Broker and What Do they do?. We Sell Restaurants.

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