What commission do business brokers normally charge sellers?
It is common for business brokers to charge a commission between 5-10% of the final business selling price as well as an upfront fee for marketing or advertising.
The structure of fees varies from broker to broker and can be influenced by the value of the business being sold as well as the work required to sell the business.
Business brokers usually charge a commission with a higher percentage if they expect the business’s final selling price to be too low amount.
It may be possible to negotiate a lower commission rate If the selling price is at a high price point as a successful sale of a business valued at over a million could equate to $100,000s in commission for the business broker agency.
This commission payment is usually paid to the business broker once settlement as occurred, similar to the process in real estate.
It is common for sellers to sign on an exclusive agreement with the business broker which entitles the broker to commission if the business is sold during the contracted period, normally 3-6 months.
Are marketing costs included in the brokers’ commissions?
Marketing costs can be levied upfront as a marketing fee or included in the commission.
Some may not charge a marketing fee as they have a buyers list with someone interested in acquiring a business similar to yours.
The main expenses involved in marketing a business for sale would be listing it on business for sale platform such as businesstrade.com.au.
In any case, the marketing fees associated with selling a business are generally less expensive than selling real estate as there are no open homes, flyer drop campaigns nor expensive videography and photography required when selling a business.
What are the benefits of using a business broker?
Business brokers are specialists that regularly connect sellers to buyers and generally have access to a list of buyers that are seeking a specific business for sale.
You are paying for their expertise, experience, knowledge, and connections to help you sell your business successfully.
If you don’t understand the process of selling a business it is probably best to seek professional help as the process can be quite daunting.
How do business brokers earn their commission?
You have to organise everything without a business broker, including:
- Organising the valuation of the business
- Preparing a document outlining the business to interested buyers
- Creating marketing material and listing the business on listing platforms such as businesstrade.com.au
- Screening potential buyers to determine the genuine ones which have their finances in order to buy your business
- Negotiating with the interested buyers
- Closing and finalising the sale of your business
A business broker will help perform some of the functions above and will refer you to the right professionals when required, saving you the trouble of having to figure everything out yourself.
It is always best to speak to professionals when selling your business. As a general rule, speak to a solicitor for advice on legal and contract matters and an accountant for advice on valuing your business.