Sell Your Business: Pros and Cons of Using a Broker

Selling a business is a significant decision, and one of the biggest questions owners face is whether to sell with a business broker or go it alone. Choosing to work with a broker can simplify the process, connect you with qualified buyers, and can lead to a higher sale price. However, for some owners, the cost of business broker fees and the loss of control can be concerns.

In this article, we’ll break down the pros and cons of using a broker to sell your business, outline what a broker brings to the table, and guide you in making the best choice for a smooth, successful sale. Whether you’re considering a DIY business sale or looking for support, understanding these options can help you maximize your outcome.

The Basics: Selling by Owner vs. Selling with a Broker

You’re in full control when you sell your business on your own. You decide who to contact, whether to use a listing site, how to negotiate, and how much information to disclose. You can avoid broker fees, which typically range from 8% to 10% of the final sale price. Brokers often have minimum commissions, usually between $10,000 and $15,000.

Selling by owner can work well for owners who understand their business’s value, industry trends, and negotiation tactics. However, it also comes with time demands and the need to navigate complex details.

A broker, on the other hand, is often professional and motivated to help you through the entire sale process. This can yield a higher sale price in less time.

They handle many responsibilities, from the initial value of the business, responding to potential buyers, to managing negotiations. Brokers bring expertise, networks, and strategies that can help maximize the value of your sale. However, brokers come with their own considerations of fees, contracts, and sometimes being inflexible.

The Business Case for Using a Broker

So, why might an owner consider hiring a broker? It’s all about return on investment. Here are a few ways a broker can make a difference in your sale.

  1. Higher Selling Price Potential
    Brokers can secure offers 10-15% higher than owners can achieve independently. They know how to present your business, help negotiate top offers, and reach a wide network of qualified buyers through listing sites. The goal is to close for a higher price to offset their fees.
  2. Time Savings
    Selling a business takes a lot of time. A broker limits the demands of researching potential buyers, setting up meetings, negotiating, and organizing paperwork. For owners focused on maintaining the business during the sale or on retirement, this time savings can be invaluable.
  3. Error Reduction and Due Diligence
    Brokers have a better understanding of the financial, legal, and operational details that need to be in place before a sale. This experience reduces the risk of errors that could jeopardize the sale or expose you to legal issues down the road.
  4. Access to Market Insights
    Brokers have a deeper understand of market trends and timing. They can guide you on when and how to sell based on what’s happening in the industry, which can positively impact your sale price and the ROI of using a broker.

What to Consider Before Signing a Broker Contract

Hiring a broker is a big commitment, so it’s important to understand what’s in the contract before signing. Here are the key points to review:

  1. Fee Structure
    Brokers are typically paid through a commission on the final sale price, but some may add monthly or quarterly marketing or consulting fees. Be clear on what you’ll owe, both upfront and at closing. If a broker asks for a substantial retainer, ask them to justify it based on their sales approach.
  2. Contract Length
    Contracts generally last 6 to 12 months. This timeframe allows brokers sufficient time to market the business, identify potential buyers, and facilitate negotiations.

Avoid signing long contracts (e.g., 18 months or more) without a clear reason, as they could lock you in with limited options if things don’t work out. Also understand the provisions or auto renewal terms for extension.

  1. Exclusivity Clauses
    Many brokers require exclusivity, meaning they’ll be your only sales representative during the contract period. While common, this clause means you can’t explore other broker options or independent buyers until the contract ends, so make sure it’s right for you.
  2. Broker’s Track Record
    Ask for the broker’s history of sales in your industry and market. Request case studies or client testimonials that showcase successful sales of businesses similar to yours, as these provide insight into their expertise.
  3. Termination Clauses
    Check the termination clause to see what happens if you’re not satisfied with the broker’s services. Avoid contracts with penalties for early termination or make sure the penalties are fair and clear.

It’s essential for business owners to review and understand the terms of the broker agreement, including its duration and any provisions for termination or extension, before signing.

Worried About Broker Commissions? Here’s How We Can Help

For most business owners, broker fees are a big concern. That’s why we offer resources and services to make the process easier and more transparent. Here’s how we can support you:

  1. Alternative Support for DIY Sellers
    If you choose to sell on your own, we will support you by outlining the requirements for non-disclosure, due diligence, and legal and financial documentation. You’ll have our review process without the pressure of signing a broker contract.
  2. Selling Options
    If we determine that your business is not a good fit for us, we will help you understand the pros and cons of working with brokers, along with how brokers can potentially provide value. This way, you’re well-informed and ready to make a choice that feels right.
  3. Flexible Commission Models
    Brokers may be open to negotiating commission structures based on the final sale price or offering performance-based incentives. We can help you identify brokers willing to offer a flexible, performance-driven commission model, which means you only pay more if you get more.
  4. Trusted Broker Partnerships
    We work closely with a select group of reputable brokers who have a track record of fair fees, transparency, and successful sales. If you’re unsure about hiring a broker, we’ll connect you with professionals who’ve earned our trust and are committed to providing high-value service.

Ready to Get Started?

If you’re considering selling your business but feel uncertain about whether to work with a broker, we’re here to help. At Expanders, Inc., we believe in giving business owners the knowledge, tools, and trusted partnerships to make the right choice for their unique situations. Complete the seller details form or contact us today to explore your options and see how we can support your transition and welcome your employees. We will talk with you whether you’re going solo or want to find a good broker. It’s your business, and we’re here to help you make the most of it.