For many business owners, one of their most important and impactful life changes is selling their business. For business owners in the U.S., finding business brokers to help them find and close potential sales is common practice.
However, the most frequent first-time inquiries ask, “How much do brokers charge to sell a business?” This is a variable figure. Because it depends on the business. Fees are a function of the business’s size, complexity, and the broker’s level of expertise.
This guide provides an overview of the most important things to consider in relation to broker fees, the industry standards for commissions, and upfront as well as post-sale costs and expenses.
How Do Business Brokers Work?
Business brokers are intermediaries between the purchase and sale parties. They help prepare a business to be sold, identify potential buyers, and facilitate negotiations. They also draft and complete the financial and legal documents to close the sale. A high-quality business broker can expedite and simplify the sale. They tend to have buyer networks to help them sell a business efficiently and effectively.
For first-time owners, understanding how to sell my business from preparation to closing helps clarify where brokers add value and how their fees fit into the overall process.
There is no legal requirement to use a business broker. Some sellers can do it independently. However, an experienced business broker can help a seller to obtain a higher price for the business and, most importantly, minimize the significant stress involved in the process.
Typical Fees for Business Brokerage in the United States
Most brokers charge an industry-standard commission of between 8% to 12% of the sale price of a business. For businesses that sell for above $1 million, the percentage that the broker gets in commissions drops significantly.
As an example, a broker selling a business for $500,000, with a broker commission of 10%, would mean a commission of $50,000. But business brokers generally only get paid when a business sells. Brokers charge retainer fees less often. Though some brokers may charge retainers that cover marketing or a business’s initial assessment.
Since commissions are based on the final sale value, accurately determining the price of your company is critical. Understanding how to price a business for sale can help owners estimate both broker fees and net proceeds more realistically.
How Fees Are Calculated
Not all business brokers charge the same percentage for business sales. Some business brokers implement a tiered commission structure, in which commissions differ by the value of businesses sold.
Consider the following example in a tiered structure:
- First $500,000 – 10%
- Next $500,000 – 8%
- Above $1 Million – 5%
This commission structure incentivizes business brokers to sell high-value businesses, all while keeping the selling costs affordable for the business owner.
Factors That Affect Broker Fees
When selling a business, it’s natural to wonder how much business brokers will charge you. Knowing how these charges work can help you plan out your sale and understand the charges that you could incur.
Business Size
One of the primary contributors to the size of your business is how much is being sold. Businesses that are being sold for 1 million dollars or less typically incur higher commission charges, up to 12%. This is because these smaller-sized sales require the business broker to do the same work as they would need to do for a larger sale.
However, larger businesses typically pay a lower percentage than the 12% because the sale price is so much higher. These larger businesses will typically see percentages of 5–8%.
Industry Type
The other determining factor that affects how much the business is being sold for is how the business operates. Some businesses can be less complicated when selling, such as a service-based company. Others can be much more involved and time-consuming.
An example of this could be a restaurant or healthcare business. In situations where more work is needed, brokers will typically charge more to compensate for the time lost.
Broker Experience
While high-level brokers charge higher fees, they have advantages worth paying for. Experienced brokers have more contacts for potential buyers, stronger negotiating abilities, and a deeper history of completed sales. Their knowledge and experience often result in sales being completed more quickly and often at a higher sales price.
This can more than counterbalance the higher commission. Selecting a broker based on experience rather than fee structures can result in a lower overall cost.
Complexity of Sale
The more complex the sales proposition, the higher the fees. Businesses that have more than one location, complex financials, and/or high value require more work and effort in order to prepare for a sale and to close the deal.
In order to offset the extra time incurred, the fees will typically need to be higher, and these fees are a direct reflection of the time incurred.
How to Reduce Costs on Broker Fees
Even with a broker, you can still save a few dollars. Some suggestions include
- The first is to negotiate fees. Some brokers can drop their fees depending on your business’s attractiveness.
- The second is to compare brokers. Don’t choose your broker after one interview. Speak to several of them and consider their experience, track record, and fees.
- Then, prepare your business. Make financial statements, business records, and other outstanding items to ease the sales process.
- Finally, use a retainer. Don’t pay high initial fees unless your broker has a strong sales record.
The Pros and Cons of Selling A Business Without A Broker
Some business owners sell their business without the help of a broker. Although this saves the business owner the expense of a broker’s commission, doing so entails a number of risks.
Without the assistance of a broker, the owner has to do their own marketing, negotiating, and legal paperwork. Many first-time sellers miscalculate the amount of time it actually takes to sell a business.
Frequently Asked Questions
Q. What is the average broker fee to sell a business?
For small businesses under 1 million dollars, the average fee is 8 to 12 percent of the sales price.
Q. Are broker fees always the same?
Fees are negotiable and, in a lot of cases, adjustable, again, depending on the business’s worth and sales price.
Q. Do I have to pay broker fees before the business is sold?
Most brokers only charge once the business has sold. Some may use a small retainer, which is meant to cover marketing and business evaluations.
Q. Are there additional fees when selling a business?
Yes. There are always going to be other legal, accounting, valuation, and marketing fees.
Q. Can I sell my business without a broker?
Yes, but you run the risk of selling it for less money, and it takes a longer period of time.
