Business brokers are highly demanded experts that can help you sell your company. They assist with every step of the selling process, from market research to price negotiations. While some business owners prefer to sell the company on their own, a big percentage opts for professional assistance.
Finding a good business broker isn’t always easy. True experts tend to be busy and charge high fees. However, hiring a qualified business broker has an impressive ROI. They can help you sell a business quickly and negotiate the most appealing prices.
So why are business broker fees so high? Let’s take a closer look.
What is the Size of a Typical Brokerage Fee?
When it comes to selling a small business, the average fee charged by the business broker is about 10% of the final sale price. The client usually has to pay an upfront fee of about $2,000 to cover expenses for valuing, marketing, and selling the company.
According to Orlando Business Broker, if a broker asks for a higher upfront fee, it should raise a red flag. Typically, brokers receive the majority of the payment after the deal goes through.
Large companies are harder to sell. A broker has to do more work to value the company, assist the business owner in preparation for the sale, marketing costs, and more. So you can expect the upfront fees to be higher. They can range anywhere from $3,000 to $25,000 and beyond.
The total commission for large and mid-size businesses can be lower than for small businesses. It varies between 3% and 10%.
In case a company owner plans to do some of the sales-related work on their own, they can pay the business broker an hourly fee for consultations. If a business owner has experience selling a business, they may not need a full range of services provided by the broker.
The Difference between Brokers and Their Fees
When searching for a business broker, you may come across several companies with different fees. The first impulse is to choose the one with the lowest fee. However, it doesn’t always mean that you can get the expected services.
Fees vary from broker to broker depending on the following factors:
· The size of the business they represent
· The type of the business they represent
· Range of services
· Time on the market
If a fee seems too high, you can always look for an alternative. In large cities, the number of business brokers is impressive. You are bound to find several suitable candidates to choose from.
However, it’s imperative to understand that the average fee charged by respectable brokers doesn’t vary too much. You have to be ready to pay about 10% of the sale price.
Negotiating Business Broker Fee
Business broker fees aren’t set in stone. In some cases, it’s possible to negotiate a fee in order to save money. The best way to negotiate a fee is to research several companies in the area and capitalize on their competition. One broker may be ready to lower the fee slightly in order to keep you from going to the competitor.
When it comes to selling large businesses, each proposal is different. Before setting the fee, the broker needs to study the company and all nuances that come with selling it. At the evaluation stage, it’s easier to negotiate the fee than after the broker tenders the proposal.
The Takeaway: Why Are Business Broker Fees so High?
The size of fees charged by a business broker depends on many factors including the size of your business, the range of services, and the broker’s experience. While it’s possible to negotiate the fee, you aren’t likely to achieve a significant price decrease.
Brokers need to perform a huge variety of tasks to sell a business. They need to be experts in finances, marketing, legal issues, and negotiations. That’s why you need to be ready to pay a high fee.
While some business owners try to sell the company on their own in order to save money, they end up wasting their time and settling for a poor deal.