Is the business brokers commission the most important aspect of the transaction for you, the vendor?
Will you sign up with the broker who has the lowest commission?
Why is the commission important ?
Do you fix the commission or set a percentage?
What about those business brokers charging No Commission, how does that work?
All very good questions aren’t they? Well as a business broker who only gets paid IF the business sells, it is hugely important for me that’s for sure.
In Victoria, legislation requires that Estate Agents inform the vendor that their commissions are negotiable BEFORE they sign the listing authority.
So, where to from here? Firstly, I would avoid any business brokers out there selling a DIY method and advertising “No Commission”. How then do they get paid? No doubt you would pay for it in “upfront fees” or “listing fees” or more commonly they would advertise it for you across a number of sites and pass on any leads, all of which you would pay for. No “real”, sorry I mean “professional”, business broker would work on your business for free so they would be getting paid somehow. I would suggest you have no chance of selling your business with them so best avoid it and appoint a “real” ( ooops sorry there’s that word again) I meant to say “professional” business broker.
Look, commission is important. It is agreed to before the business is listed and it needs to be. That is because invariably the vendor may not achieve the price he was hoping for, that’s not the broker’s fault. In many cases, the broker has worked harder than ever to get that result which is probably the best result possible, and certainly without hesitation I would suggest more than the vendor ever would have got by doing it themselves.
There is an insane amount of work in selling a business. So much more than the vendor would ever know. It is not just putting an ad on websites and waiting for the buyers to line up, certainly not. The work doesn’t stop until the business settles and even than there is effort required afterwards. A “professional” broker knows this and charges for it.
In general, I find commissions are around the 8% to 10% range currently. Some are more, some obviously are less. As a business broker, it is not my fault if you have a $50,000 takeaway. There is more work for me in selling that than a $500,000 business. I am always surprised that often I receive calls from business owners and the first thing they ask me over the phone is “whats your commission if I let you sell my business”? I can tell you now, they are the ones I avoid taking.
How can any “professional” broker tell you what his fee would be when he hasn’t met the vendor’s, hasn’t even been to or seen the business he is supposed to be selling, hasn’t seen how prepared the vendors are to sell in terms of business information which is reliable and accurate, doesn’t know anything about how the business operates, why it is for sale, how will it be marketed, just to start with.
It is very hard to sell a business, trust me on that. I do it for a living. So stack the odds in your favour. Choose a business broker who you relate well to, has experience in your industry, is energetic and enthusiastic, wont just stick your business on a website and hope it sells, has industry qualifications and education, is part of the Australian Institute of Business Brokers, is a Certified Practicing Business Broker, are they a Registered Business Valuer? I can tell you now I am in the middle of the Registered Business Valuer Course and it has cost me many thousands of dollars, time away from home and business and I am still not done. This course, experience and knowledge is significant so you wont find me doing a No Commission sales pitch when you want to sell your business.
Make the commission something both of you are happy with. Work it out together, it is important to both parties, not just the vendor. Vendors often find out the hard way, you get what you pay for. If one agent charges nothing, another 3% and another 8%, then there is significant difference in the result you will get.
As brokers we can’t sell every business, that’s just the way it is. But if the business is properly prepared for sale, the broker has prepared an information memorandum, the marketing strategy is set, the vendor is genuinely committed to sell then the chances are it will sell. The commission, at the end of the day I find, with my “genuine vendors” is never an issue.
I am available for a confidential discussion on the business sales process so if you are thinking of selling, or after some advice, feel free to call.
Brian 0417 303 196