A business broker smiles while talking on a phone

Smart Strategies for Finding a Business Broker

When you’re selling a business, you might choose to work with a business broker, a professional with experience in marketing businesses, finding buyers, and navigating the entirety of the sales process. With the support, guidance, and expertise of a business broker, you can eliminate many of the stressors you’d face in selling your business alone.

 

Is it possible to sell my business without a broker?

Yes, some entrepreneurs choose to sell their businesses without a broker. Often, it’s the entrepreneurs who have experience selling businesses or own very simple operations who choose to go through this process alone. But there are other factors that could incite a business owner to sell on their own. These include:

  • Plans to sell to someone the business owner already knows
  • An ability to invest the time that’s required to prepare their business for sale, position it on a brokerage platform, and manage the inquiries they’ll receive from interested buyers
  • The desire for intimate involvement in every part of the sales process
  • Interest in saving on the costs of hiring a business broker, which can be substantial

 

How much will it cost to hire a business broker?

Fees can vary greatly. Some charge a 10-15% commission on the total price of the sale, while others require a non-refundable fee or retainer that’s based on the listing price of your business. Those fees often range from $10,000 to $50,000.

 

Are brokers worth the cost?

In many cases, yes. Brokers can guide you through every step of the sales process, from preparing your business and its financials for review to developing the marketing collateral and summary sheets that buyers will want to see from your business.

Some of the other tasks they’ll help you with include:

  • Valuating your business
  • Guiding you through the pre-approval process for acquisition financing, which will be important for many of your buyers
  • Listing your business on high-traffic brokerage sites and distributing your listing to targeted groups of buyers, investors, and industry figures who may show an interest in your business
  • Prescreening buyers to ensure that they’re qualified to both finance and run your business
  • Answering inquiries on your behalf
  • Receiving and negotiating offers
  • Offering advice and support through the buyer’s due diligence process, which is time granted to buyers to verify the information you’ve presented about your business
  • Providing guidance at the close of the sale to ensure a smooth transition

 

How can I find a business broker who’ll be committed to my sale?

Tap into our network of qualified brokers. We can connect you with a broker who is knowledgeable and experienced in small business transitions. Click the button below to get started:

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Before making a selection, speak with multiple brokers to learn about their strengths, skills, and sales processes. Ask them questions, like the following, to ensure that the broker you choose has the knowledge, skills, and drive to help you sell your business:

  • What is your experience in small business sales?
  • How many businesses have you sold in my industry?
  • What's your closing ratio?
  • How many businesses are you selling right now?
  • Do you have any industry certifications, such as IBBA or CBI, that are relevant to my sale?
  • What roles and responsibilities will you commit to performing throughout the sales process?
  • Do you have a support team in place?
  • How will you ensure that my business and personal information remain confidential?
  • How will you market my business and locate potential buyers?
  • Do you have a database of buyers? If so, how many buyers does it include?
  • How do you qualify buyers?
  • Do you have experience in leading price negotiations with potential buyers?
  • Will you require an exclusivity agreement?
  • Will you be willing to communicate with me through my preferred communication medium (i.e., phone, email, or in-person meetings)?
  • Can you refer me to experts for legal or financial issues that fall outside of your area of expertise?
  • Will you be able to guide me through some of the financial or operational moves I should make to boost the appeal of my business to potential buyers?
  • Are there any conflicts of interest for you or your firm in taking on my sale?
  • Can you provide references of people willing to share their experience of working with you?
  • Do you have a minimum commission requirement, regardless of the sale price of my business?
  • Are you open to negotiating a commission structure that ensures I receive the best price for my business?

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Assess what you learn from each broker, and choose one who can provide evidence of his or her successes, has good online reviews, and is willing to navigate your sale according to your terms.

 

Can I really negotiate a commission structure?

Often, yes. Many brokers will offer to take on your sale at their standard rate or fee, but you can request a modification to the fee schedule that ensures that the broker commits to getting you a great price for your business, regardless of its size. This is important because brokers often spend more time supporting big sales—sales that promise larger commissions—than smaller ones.

Some brokers will balk at this request, and they’ll tell you that they’ll work hard to get you the best price for your sale because their commission is tied to the final sales price.

But here's what you need to know: Many brokers prefer to sell quickly for any amount rather than holding off in hopes of attracting a larger offer. You'll see why in the following example:

Business owner Shawn is ready to sell his restaurant. He contacts a broker, Tom, who is interested in taking on the sale in exchange for a 10% commission on the final price of the sale. Tom’s valuation team estimates that Shawn’s restaurant is worth $225,000-$250,000, so Tom would stand to receive $22,500-$25,000 from the sale of the business.

Within days of listing, Tom fields an offer at the lower end of this valuation, $225,000. Tom realizes that he stands to earn $22,500 from the offer and that the effort he’d expend to attain an offer at the high end of the valuation would result in a commission boost of only $2,500. He decides he could use the time that he’d spend negotiating a better sales price to try to sell another business, which would provide him with a much larger payout than $2,500. He also worries about jeopardizing the $225,000 offer: If he makes a counteroffer that’s rejected, he could risk losing his commission altogether.

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In this example, the broker isn’t looking out for Shawn’s best interests because he isn’t motivated to do so. Instead, he’s inclined to receive quick compensation for minimal effort so that he can shift his attention to future sales.

There is a strategy you can use to make sure this doesn’t happen to you: Offer a commission structure that rewards your broker’s effort. Referring back to our example, let’s see how a better commission structure might influence the outcome:

Shawn believes that he can attain an offer of at least $210,000 without a broker’s help but knows that brokers add value, and he thinks Tom is capable of securing a much better offer for him, especially if he's committed to the sale. Shawn offers Tom exclusive rights to his sale with the following commission terms:

Sales price:

$200,000

$210,000

$225,000

$250,000

$260,000

$270,000

Tom’s commission rate:

3%

5%

8%

10%

11%

12%

Tom’s commission payment:

$6,000

$10,500

$18,000

$25,000

$28,600

$32,400

The sales price after commission:

$194,000

$199,500

$207,000

$225,000

$231,400

$237,600

 

The structure Shawn suggests will offer Tom a significantly higher payout for a sale at the high end of his valuation and a less attractive payout at the low end. This commission structure should motivate Tom to negotiate great offers for Shawn, helping both to earn much more from the sale.

 

Are there other ways to save on broker fees?

You might consider hiring a broker to assist you with a portion of the sales process (in exchange for a flat fee) rather than signing up for their full suite of services. For instance, you could retain a broker’s services to write a prospectus and marketing teaser for your business or to assess your business’s value and marketability while opting to handle the inquiries and negotiations on your own.

 

How should I proceed?

First, you’ll need to decide whether you’d like to hire a broker and how involved you want that person to be in the sale of your business. If you decide to proceed with a broker rather than selling your business on your own, take the following steps:

  1. Interview several brokers.
  2. Follow through on speaking with the references they provide.
  3. Select the broker who can provide evidence of his or her success and has a roster of satisfied sellers.
  4. Ask for a brokerage agreement and review it thoroughly with your attorney.
    Would you like to connect with an attorney? Click the Connect button below to get started:
  5. Negotiate the fees, marketing expenses, and other terms that don’t make sense for your business.
  6. Sign an amended agreement that includes your agreed-upon terms.

 

What’s next?

Next, you’ll meet with your broker’s team to help them gather information about your business and create the marketing collateral that’s needed to market it effectively. You can learn more about this step in our article, Ready to List Your Business? Presentation is Key.

 

Selling your business is a complicated process, but we have articles and advice that can help you with every action you need to take. Log into your owner’s portal for free, personalized guidance that will help you succeed with your sale.

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