One of the most common questions asked by those considering selling their business is “How do business brokers get paid?” As an experienced business broker, I can provide some insight into this important question.

How do business brokers get paid?

Like real estate agents, business brokers are paid a commission, or “success fee” as it’s called in broker parlance. The typical range is 10-15% of the sale price. If you own the real estate your business operates from and want to sell it, we’ve seen commission rates anywhere from 4% to 6%. At this level, Main Street brokers charge anywhere in the range of 10% to 12% on the value of the business and an additional 6% on any associated real estate. Most brokers charge a commission based on a percentage of the sale price, typically between 10 and 20 percent. Some brokers may be willing to negotiate a lower fee, depending on various factors. We start at 10% – the midpoint of the industry range – for the first million dollars in transaction value and then step down for each succeeding million dollars. For example, for transactions up to $5 million, the commission rate is 8%.

I have heard of some brokers charging 12% and others readily dropping a few points in order to get a deal, but most hold firm at 10%. If another broker is quoting a lower rate, ask yourself why they are doing so. As I commented earlier, the standard practice for commissions is 10% with reductions as the sales price of the business increases. There are no fast rules as to when, how, or why a broker will lower their commission rate, but it’s worth asking.

When considering selling your business, it is important to thoroughly understand how business brokers get paid. Knowing the industry rates for commissions will help you find the right broker for your needs and get the best price for your business. Atlantabusinesses.com is a great resource for answers to your questions about business brokers and about selling a business in Atlanta.

What advantages does hiring a business broker offer?

A Business Broker assists in finding potential opportunities to fit both parties, and facilitates communications and negotiations between the buyer and seller throughout the sales process. This makes the sale process easier, faster and less stressful for both sides.

What are the duties of a brokerage business?

A brokerage company is essentially an intermediary between buyers and sellers, helping to carry out a transaction. Full-service brokerages usually charge an annual fee or charge per transaction, while online brokers may offer free stock trading but require a fee for extra services.

What is the method of payment for brokerage firms?

Full-service brokers are paid commissions for the transactions they conduct on behalf of their customers. However, they also come with a higher cost due to the research, education, and advice they provide. It is important to note that full-service brokers are also in the business of sales.

How much does it cost to acquire a broker?

Most brokers typically use the “Double Lehman” or “Modern Lehman” formula, or some version of it, to determine their commission rate. For businesses valued under $1 million, the fee is usually between 8% and 12%. For those with a price tag between $1 million and $5 million, the commission rate is usually lower.