How Much Does A Business Broker Charge In 2024?

Selling your business on your own is a challenging task. But when hiring a business broker the first question that crosses anyone’s mind is: How much does a business broker charge in 2024?

How Much Does A Business Broker 
Charge

Hiring a business broker comes with many pros and cons. A business brokerage will come with expertise, knowledge, and insight that will ensure that you get the right value for your business.

But not all business brokers are created equally and some can be really expensive. For this reason, before hiring a business broker, you must understand how much it costs to hire one.

So, keep reading to get all the answers, from what a business broker does to how much they charge.


What Is A Business Broker?

What Is A Business Broker

A business broker is a person who assists in the buying and selling of the business. They work with the business owners to assess the true value of the business and help in finding a potential buyer.

A business broker can also be referred to as a business intermediary or business advisor. A business broker will also help the seller negotiate the terms and agreement of the purchase and advise them throughout the process until the deal gets finalized.

Therefore, a business broker plays a significant role in helping the owners determine the true value of the business and sell it at a fair price.


What Are The Tasks Of A Business Broker?

The tasks of a business broker include a multitude of responsibilities other than just selling the business. These responsibilities include:

  1. Business Assessment & Valuation: The business broker will use your business’s operation and financial details to prepare the marketing documents and business valuation. This gives out a Broker’s Opinion of value, also known as the “Most Probable Selling Price.
  2. Deal Structure: A business broker plays a crucial role in structuring the deal that satisfies all the parties, contingencies and other vital components.
  3. Conduct Business Meetings: Brokers assist in conducting the meeting between the seller and the buyer, allowing a streamlined exchange of information.
  4. Buyer Analysis: Business brokers evaluate and identify potential buyers and analyze their financial capabilities and the alignment of the buyer with your business objective.
  5. Due Diligence: The business broker will conduct an extensive review of all the documents. They help you plan the meeting with the attorneys and accountants to conduct any due diligence.

Why Do You Need To Hire A Business Broker?


How Much Does A Business Broker Charge?

Typically, business brokers charge between 10%-20% of the total sale price as their fee for the services.

Then, this fee is collected at the closing of the sale and is often split between the seller and the buyer.

For instance, if your company sells for $100,000, then you’ll have to pay $10,000-$20,000 in broker fees. This fee is typically nonrefundable and you can also negotiate it depending on the circumstances.

In some cases, rather than charging the commissions, some business brokers will also charge you on an hourly basis or a fixed fee for their services.

The hourly rate typically ranges between $50-$300 per hour, depending on the experience of the business broker and the geographic location.

Additionally, some business brokers will also offer a package deal, which is charged regardless of how long it takes to sell the business.


What Are The Different Types Of Fees Charged By A Business Broker?

What Are The Different Types Of Fees Charged By A Business Broker

Now that you have a basic idea of the fee structure of a business broker let’s move on to understanding the different types of fees that they charge:

  1. Listing Fees: This fee is associated with placing the business for sale on brokerage platforms. These upfront fees often offset the expenses of marketing and promoting the business.
  2. Valuation Fees: This fee is charged for conducting a thorough business valuation. It is correlated with the initial assessment of business valuation.
  3. Success Fees: This fee is solely payable on the successful sale of the business. This fee acts as an additional incentive, motivating the brokers to streamline the process further.
  4. Retainer Fees: This is a non-refundable sum that is paid to secure the broker’s services. This fee is eventually deducted from the commission after completion of the deal.

How Do Business Brokers Determine What To Charge?

The answer to how business brokers determine what to charge varies from broker to broker. However, there are some common factors that help the business broker to determine the fees.

The first one is the structure of the deal. For example, an M&A officer charges lower fees for simple transactions like the sale of a single business. Whereas deals like company mergers are more complex and come with higher fees.

Another factor that helps in determining the broker’s fees is the stage of the business. Business brokers charge higher fees for conducting an initial assessment of the business and developing a marketing strategy.

These two factors are just among the important ones that influence the business broker’s fees. Other than this, here are some questions you should ask your broker to determine how much they charge includes:

  • How long have you been in the selling business?
  • How many businesses have you sold in the industry you are working in?
  • What is your success rate?
  • How long did it take to close your recent transaction?

How Does The Size Of The Business Impact The Business Broker Charges?

The business broker’s commission often varies depending on many factors. However, the most significant factor that impacts the commission of a business broker is the size of the business.

Most businesses fall under three revenue categories:

  • Main Street Business- Up to $1 million
  • Lower Middle Market (MidStreet)- $1 million to $50 million
  • Middle Market Mergers & Acquisitions- $25 million and greater

Each category has a different pricing model and can be negotiated.

1. Main Street Business

Main Street Business brokers usually sell businesses that have a revenue of $1 million or less. These are the least complex transactions and are usually handled by those brokers who do not charge any upfront or retention fees.

The Main Street business brokers usually charge between 10-12% on the value of the business and 6% on any associated real estate. Other brokers may also charge a commission fee ranging from $10,000-$20,000.

2. Lower Middle Market

The businesses that have revenue of more than $1 million but less than $50 million are considered as Lower Middle Market.

Experienced business brokerage firms often sell these types of businesses and charge a commission ranging between $35,000 to $50,000.

These types of business brokers usually use two methods to charge their clients: The Double Lehman Scale and a flat commission.

The Double Lehman Scale method originated from The Lehman Brothers and is frequently used by many business brokers. The charges to a client are made in stages in this method:

  • 10% on the first million, plus
  • 8% on the second million, plus
  • 6% on the third million, plus
  • 4% on the fourth million, plus
  • 2% on the remaining amount

On the other hand, in a flat commission method, the broker firm might simply charge a flat commission of 4%-20% on the total sale price of the business.

3. Middle Market Mergers & Acquisitions

These types of business brokers usually handle businesses whose revenue is more than $25 million. If your business is at this level, then you can either hire a middle market advisor, an M&A firm, or an investment banker.

In the middle market, the retainers are commonly charged between $5,000 to $15,000 upfront or in monthly payments.

Whereas middle market advisors and investment banks can charge a flat fee anywhere from 1%-4% with a variation of The Lehman Brothers method.


Important Tips To Remember

Here are some important tips to keep in mind:

  1. Compare The Brokers And Their Fees: Don’t rush in this process. Compare the brokers and their fee structures, and then decide to hire a business broker whose value aligns with your objective.
  2. Negotiate: Remember the business broker fees are not set in stone. So, you can negotiate the fees to get a more amicable price.
  3. Transparency: Scrutinize the legal documents carefully, and in case of any doubt, seek legal counsel to ensure understanding of the terms.

Conclusion

Hiring a business broker can be a valuable asset when selling your business. However, having an understanding of how much does a business broker charges is pivotal.

Business owners should carefully consider all their options before hiring a business broker to ensure that they get the best value for their business.


FAQs

Who pays for the business broker fees?

In most cases, the seller is responsible for paying the broker’s fees, but sometimes, the buyer also agrees to pay the amount. For this reason it is important to discuss it with the broker before entering any agreement.

Do all brokers charge commission?

Not all brokers charge a commission. Some business brokers also charge a flat fee or hourly rate or offer any package deal. The type of fee charged can depend on the broker’s business model and the services provided.

Can I negotiate the business brokrage fee?

This is a common notion among people that the business brokerage fees are set in stone. However, there is always room for negotiation, but the first step is to understand the pricing structure of the business broker.

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