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What are the Business Broker Fees when I sell my business?

“How much do you charge? Or, what are your business broker fees?” are common questions every broker receives and it’s the one question a good broker can’t possibly answer until they understand the business that they are selling.  

Would you be comfortable getting quotes from a builder to build your house without them having any idea what he (or she) is building?

How big is it, where is it located, and does it have a pool or no pool?

If a builder gave me a fee before knowing anything I would surely run the other way.  

But for some people, they expect a broker to answer that question before ever understanding the business.  

And as a broker, if broker fees are the only thing a vendor wants to know, then I politely say that I can’t help them.  

No one wants to be in a race to the bottom and that vendor doesn’t really want to sell their business professionally.  

All they want is to be validated and think they’re getting another bargain.  

Ironically that bargain will end up costing them hundreds of thousands of dollars.  

Keep reading and I’ll explain some of the reasons why.

What Are Your Fees?

My name is Mick Godwin and I am a professional and established business broker.  

I work with some of the best performing, award-winning brokers in the country at Benchmark Business Sales and we often get questions about our business broker fees before we even know a client’s full name.  

Sure, there are some industry averages we can point you to when it comes to commission. 

As the majority of vendors have never been involved with the sale of a business before, they can mistakingly make incorrect comparisons with selling real estate, which usually is around 2% – 3%.

For example, an average industry percentage fee is usually about 8% for under $1million and 6% for over $1million.  

Generally, there is a minimum fee, which can vary from $20,000 – $30,000.  

This is because the work involved is usually the same regardless if the business is selling for $100,000 or $500,000.

Why are business broker fees more expensive to sell than real estate fees

Below are some reasons (definitely not all) why business broker fees are higher than real estate fees; 

  1. Selling a business takes far longer than real estate, often six months or more.  
  2. There is far more expertise in successfully selling a business than real estate. For example, financial literacy and capital requirements to operate, operational or industry-specific knowledge and the strategic advantages some buyers might be after. 
  3. We don’t have the luxury of entering an address into some software and getting an appraised price that people will accept after 1 weekend of experience.
  4. There is a large portion of real estate buyers whose purchase decision is based heavily on emotional thinking rather than rational thinking; for example, they can see their kids running around the backyard.
  5. A business sale usually involves multiple accountants, solicitors, directors and other external parties that can influence decision making.   
  6. We help parties negotiate difficult clauses that have been introduced by an overzealous solicitor.
  7. We have a sales mindset for walking buyers down the sale funnel over a period of months and sometimes years.  
  8. We need to understand a business intimately to handle any objections that arise.
  9. There is a higher risk of buyers not receiving finance for business loans, reducing the buyer pool.

How to find the right business broker

When talking to a broker about selling your business, look for those brokers who want to learn about your business.  

A good broker facilitates conversations in a way where they are always asking questions to learn more about both seller and buyer motives.  

There aren’t too many guarantees when it comes to a successful sale that achieves the highest price, with the least hassle and in good time, but one thing is for sure; successful sales aren’t done by the cheapest broker.  In fact, you’ll find that no sale at all is normally achieved by the broker who discounts their value to get your business.  

To summarise, Benjamin Franklin famously wrote, “the bitterness of poor quality remains long after the sweetness of low price is forgotten”.  Which very much applies to poor quality service.

If you would like to know more about what’s involved with selling your business, then call or email me directly on the details below.  I’ll be happy to help you become clear on what your next step is to successfully exit your business.

Mick Godwin

0416638154

Email – mick@mickgodwin.com.au

Benchmark Business Sales and Valuations

1300 366 521

www.benchmarkbusiness.com.au

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