Selling
A Business Without A Business Broker
Selling A Business
Do
You Need A Business Broker?
There
are two benefits a business broker can provide the business
seller. First, they can locate potential buyers while maintaining
the seller's confidentiality. And second, a business broker
will pre-qualify these potential business buyers so the seller
saves time by not having to deal with tire kickers.
The
big negative of dealing with a business broker is his fee, which
averages 10-12% of the sale price. This fee is charged to the
seller. There is also a minimum broker fee so a very small business
will pay a flat amount, typically $8-$10,000, instead of the
commission. For a business worth $50,000 this minimum fee actually
works out to be a higher percentage than the 10-15% industry
norm.
These
fees are the reason most business owners choose to sell their
business themselves and rely on their lawyers and accountants
for the professional assistance they need.
In some
states business brokers must also hold a real estate license.
In these states it's common to find real estate agents that
do business brokering as a sideline. If you deal with a broker
who is also a real estate agent, make sure that being a business
broker is more than just his part-time business.
If you
decide to use a business broker you'll be asked to sign a broker
agreement which will detail the broker's fees. If possible,
have your agreement with the broker include the following clauses:
Timing
of Payments - Have it written into the broker agreement
that the broker's fee will be paid at the time you receive the
purchase price - not at the time the sale is closed. This way,
if you finance a portion of the sale price over a period of
years, you pay the business broker as you get the money, not
all up front.
Length
Of Broker Agreement - Your listing agreement should be for
a limited time. If the broker locates the buyer within that
time he gets paid. Be careful of lengthy agreements that lock
you in with one business broker for more than 6 months. If he
doesn't produce, you want to be able to try other avenues. A
6 month business broker agreement is the longest you should
allow. However, because selling a business can be a lengthy
process, 3 months is usually too little time for the broker
to find the right buyer. Try to settle on something between
3 and 6 months. If after six months, you haven't closed the
deal but you think the broker has done a good job, you're always
free to extend the agreement. But you want to be free to decide
on an extension 6 months from now, not today.
Broker's
Guarantee - Include a clause stating that if you find the
buyer, you don't have to pay the broker's commission. Without
this clause, the broker is usually paid no matter who locates
the buyer. Before signing any listing agreement with a business
broker it is best to have your attorney review it to make sure
your interests are protected.
More Articles On Selling Your Small
Business:
3
Questions You Must Ask Before You Sell Your Small Business
What
Small Business Buyers Want
Selling
A Small Business - Why Confidentiality Is Important
Selling
A Small Business - Your 4 Keys to Success
How
To Choose A Business Appraiser
You
can save yourself the business broker commission by using TheBizSeller.com.
We attract serious business buyers, pre-screen each prospect
and refer those business buyers who meet your standards directly
to you.
How
To Sell A Business Without A Business Broker
