Points to Keep in Mind When Paying Your Business Broker

Katie Fleming

Katie Fleming

Co-founder and COO of Owner Actions

There are strategies to keep in mind when paying your business broker.

Brokers play an important role in the sale of your business, and most are compensated when the work is complete. Here are some quick tips to keep in mind when paying your business broker.

 

Pay promptly.

Most brokers don’t earn other forms of compensation beyond sales fees. With this in mind, be sure to pay your broker promptly according to the terms you agreed to in your broker agreement.

In most cases, payment should be remitted within less than 30 days after completion of the sale.

 

Understand your payment obligations.

If your sale included terms like earnouts or stipulations that defer part of your payout, find out how your broker would like to handle payment.

Here are some standard practices. If the broker’s fee is a flat rate, you’ll likely be asked to pay the full amount right away. But, if your broker is claiming a percentage of your final sales price, you’ll need to take one of the following approaches:

  • Pay the agreed-upon percentage each time you receive an installment payment until you fulfill your obligation.
  • Pay the percentage of the sales price upfront, assuming you will recover the full sale amount.

 

Brokers often prefer the latter approach, though the first is usually easier for buyers to navigate. Check the broker agreement you signed to see if their preferred approach is specified. If not, contact your broker and work out a fair arrangement.

 

Reward your broker with referrals and positive reviews.

Brokers are well-compensated for the tasks they take on. After paying your business broker, you can show your gratitude for their guidance, support, and availability through your sale in two additional ways:

  • Tell others in your network about the positive experiences you had with your broker.
  • Leave favorable reviews for your broker on their business’s Facebook page and website or on Google.

 

In most cases, fees paid to a broker are tax-deductible. Work with your accountant to categorize this expense appropriately.

 

What’s next?

Log into your owner’s portal for more articles and advice on navigating your final tax bills, set up business records, and, if needed, closing your business entity.

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