There are many costs associated with selling a business. These can be the costs of settlement of the business, such as legal fees, workers entitlements, adjustments to rates and taxes and payout of any leases. Other costs to consider are any capital gains which may arise from the business sale, or the cost of a professional valuation. But for most businesses, the major cost is the Business Brokers fees.
From the point of view of the Business Broker, they would prefer a combination of upfront fees and commission. These upfront fees can range from $2,500 to $15,000. From a sellers point of view, this signals that you are serious about selling your business, and it more than covers the cost of marketing and the time invested in selling your business. However, as a seller, do you want to pay upfront non refundable fees to a firm that requires an upfront fee to justify investing time and money into marketing your business?
When Business Brokers are paid a commission only on the sale of your business, they are more likely to only take on assignments when they feel confident that they can sell the business. If you are being asked to pay an upfront fee, then you don’t know if the Brokers are more interested in taking the listing to get the upfront fee or whether they feel confident that they can sell your business.
Commissions paid on the successful sale of a business also vary with Business Brokers. Some Business Broking franchise operations charge up to 15% of the sale price. Individual Brokers charge between 4% and 10% of the final sale price. This is usually on a sliding scale. The higher the cost of the business, the smaller the commission percentage. For the average small to medium enterprise, the commission is usually 6%.