Consider an Appropriate Broker to Sell the Business

Real estate brokers will list your business, put a saleable price on it and shepherd you through the process. However, a real estate agent, with extensive expertise in valuing commercial property, is better suited to determine the likely sales price than one with experience selling only residential listings. If you decide to use a broker, be certain to confirm the agent has a recent history of successful sales of small businesses.

The business brokerage industry recognized the need to update member skills by offering courses that lead to a Certified Business Intermediary (CBI) designation. You can learn more about this certification from the International Business Brokers Association’s website. The CBI is a new designation held by brokers in BC. Pacific Business Brokers Inc. is a partner in the production of these modules and has several brokers with the CBI designation.

The broker adds confidentiality, experience, and expertise to the sale process. An initial evaluation fee is charged based on the expected selling prices. For example for a business with a value up to $2 million the fee may be $3,000 while a business between $2 and $5 million would be closer to $9,500. Once the sale is completed, the broker will collect fees on a sliding scale based on the actual selling price:

First $1 million 12%
Second $1 million 10%
Third $1 million 8%
Forth $1 million 6%

In total, a selling price just below $4 million would be in the range of 9%.

It is important, however, to seek the advice of a professional as various factors are taken into consideration when determining fees. These percentages are simply a general guideline.

As an estimate, legal fees would be in the range of $4,000 to $10,000 with accounting fees being less (A. Reale, personal communication, February 12, 2015).

The value that the broker brings to the seller includes:

  • Qualifying the buyer.
  • Maintaining confidentiality of the seller.
  • Coordinating the information flow from seller to buyer.
  • Allowing the seller to continue to focus on the daily operation of the business.

Finding a suitable purchaser while not alerting employees, customers or suppliers is difficult. That is where the value of the broker begins. Brokers are a logical place for a buyer to start the search for a suitable business. Once the broker qualifies the buyer’s financial resources and business experience, a search of existing listings may determine a match. Working without a broker risks confidentiality and reduces your chance of finding a suitable buyer (Brown).

Without a broker, the owner must collect the business records, organize the business information, and run the business. The danger is that the business will not receive the focus needed and could deteriorate while the owner looks for a buyer. The broker takes on the work of selling which allows the owner to focus on the business.