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How a Business Broker Gets Paid and What to Ask Before You Sign

Fees worry most owners, and St. Louis Business Brokers Gateway would rather you understand them than guess.

Here is how broker agreements usually work.

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Quick takeaways

  1. A success fee paid at closing is the usual arrangement, and it comes out of your proceeds.
  2. Use one broker under an exclusive agreement, since splitting the job can mean two commissions.
  3. Agreements longer than a year deserve questions.
  4. Taxes on a sale usually cost more than the commission.

The usual structure

Most brokers earn a success fee at closing, paid from the sale proceeds. Ask for the fee in writing before you sign, and ask what other costs, such as marketing, might come up.

Attorney and CPA fees and debt payoff also come out of proceeds, so plan around the net, not the headline price.

Exclusive agreements

Brokers normally ask for an exclusive right to sell. Splitting the job among several can mean you owe more than one commission. An agreement under a year is typical, and five years is a warning sign.

Questions to ask

  • How many years have you sold companies, and is it your full time work?
  • How do you market beyond listing websites?
  • What is your fee, and what is your closing rate and how do you count it?
  • Who will actually handle my sale?

Who does the work

Ask who will actually handle your sale, how often they will update you and how they handle buyer calls. A broker with a good process keeps documents in one secure online folder instead of emailing returns around.

Credentials

A Certified Business Intermediary designation, awarded through the industry association, shows training and experience. It is one useful signal among several.

Is the fee worth it?

Think of it as insurance. Without a broker, the sale may not close in the time you want, or at the multiple you want, or it may fall apart in review. Taxes on a sale also usually cost more than the commission.

Selling alone is possible, but confidentiality is harder and a single buyer weakens your hand.

Watch for these

Be careful with large upfront fees before any work is done, and with tail clauses that let a broker claim a fee on buyers you found yourself. Ask your attorney to read the agreement.

Next steps

Before you list, read how long a sale takes. Then see what your company is worth and compare what you hear.

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