The best way to solve future problems is to address the issue before a problem arises. Having a conversation with your business broker before signing the commission agreement can save you time‚ money and heartache down the road. The following are items you need to discuss with your business broker or investment banker concerning the commission before signing the commission agreement:
- What is the commission for the business sale? Every transaction is different and every broker will charge a different percentage based upon the potential sale price and difficulty of the deal. Once the business broker has an understanding of your transaction‚ he or she should be able to tell you what the sales commission will be. In certain instances‚ you and the broker may agree on a fixed number for the commission
- Is the real estate you are selling included in that percentage? This issue comes up if you are selling real estate along with your business. You should have a specific conversation with your business broker about whether or not the value of the real estate will be part of the commission for the transaction. The customary commission percentages for brokers vary between real property and business assets and you should have a clear understanding of the commission structure prior to signing the binder.
- Are there any other fixed costs/expenses associated with the business sale? In most circumstances‚ the agreed upon percentage or fixed commissions will cover all of the fees associated with the business broker. However‚ there are sometimes certain costs or expenses incurred by the business broker that will be tacked onto the commission amounts. Knowing what these expenses are before you get the bill at closing is important to alleviating issues before it is too late.
- Who will pay for the marketing of the business? In some instances‚ the business broker will require that you pay for any advertising costs associated with the sale of the business. These expenses can sometimes add up depending on the level of advertising associated with the sale. Again‚ you want to know exactly what your commission bill will be so that there are no surprises.
- Is this agreement exclusive? Most arrangements with business brokers will be exclusive‚ meaning that you will not be able to engage other brokers to sell your business at the same time. If you have any ideas of utilizing multiple brokers simultaneously‚ or trying to sell the business on your own while you have engaged the services of a business broker‚ you are going to want to have this question answered before signing the agreement with him or her.
- How long will this agreement remain in effect? Since most engagements with business brokers are exclusive‚ you will want to know how long the exclusive arrangement will last. If you are unsure whether or not the business broker will do an effective job of promoting the sale of your business‚ you will want to know how long you will have to wait before you can look for another broker.
Asking these questions and discussing these issues with your business broker will ensure that you and your business broker or investment banker are on the same page. Once all of these issues are discussed‚ you will want to make sure that you have everything agreed upon in writing. For more information on business broker commissions and other important information about selling your business‚ you can request a complimentary copy of ENDWISE: the guide to selling your business with peace of mind by clicking on the icon below.