The type of business broker you choose can affect your experience as well as the success of your business sale. Each type of business broker offers a different set of services and brings a unique set of skills and focus to the table. It is important to understand the differences between each type so that you can make the most informed decision possible when choosing your brokerage.
What are The Different Types of Business Brokers?
There are four primary types of business brokers. The business broker type you choose affects your experience, ability to reach your sales goals, and how much you pay for the broker’s services. Notably, the four different types of brokers we discuss in this review are:
- Full-service business brokers
- Limited-service business brokers
- Online business brokers
- Real estate brokers (who offer business brokerage services)
Full-Service Business Brokers
A full-service business broker offers a complete set of services and assists sellers through the entire sales journey. This means they are there with you from the time you begin planning your exit strategy until you have completed the training procedures with the buyer. More specifically, the typical services for full-service business brokers are:
- Business valuation
- Exit strategy planning
- Document preparation
- Marketing (finding potential buyers)
- Due diligence guidance
- Closing and transition assistance
Due to the extent of their services and the time commitment they provide for sellers, business brokers usually take a higher commission or charge more upfront than other types of business brokers. However, they are the most likely to secure the highest sale price. So, in many cases, they more than pay for themselves, in addition to making the much simpler and easier for the seller (and the buyer).
Limited-Service Business Brokers
A limited-service business broker only assists the seller (or the buyer) in certain areas. For instance, a limited-service business broker may only help with the negotiation of deals, and they may not be involved with the valuation, planning, due diligence, or closing processes. This might be a good option if a seller feels they have a strong internal team of attorneys and CPA professionals who can help them navigate the rest of the sales processes, but they would like assistance from an experienced business broker for finding a business to buy and assisting with negotiations.
For buyers, a limited-service business broker may be a good option if you only need help in certain areas. For instance, a buyer may hire one if they only need help finding businesses and do not need assistance with the rest of the sale process. Of course, the primary advantage to a limited-service business broker is that they may be more affordable. They may either take a small portion of the sale (for sellers), or they may charge upfront fees.
Online Business Brokers
An online business broker may only help you list your company online. They may not dive too much into the specifics of your company and may not even provide a valuation. In fact, in many cases, they may not even meet with you in person. Additionally, they may only list your business on public websites, compromising the confidentiality of the sale. This is often all that is needed for small eCommerce businesses, but it is not a good idea to work with an online business broker if you are an established (non-eCommerce) company.
Real Estate Brokers
Many real estate brokers also offer business brokerage services. We strongly advise against working with a real estate broker if you are selling your business. The primary advantage they offer is the ability to ensure a smooth process if you include real estate in the sale. However, they are not as well-trained or as knowledgeable when it comes to finding business buyers, negotiating business deals, and handling the legal aspects of selling and buying a business.
What are The Different Fees for Business Brokers?
There are two ways in which a business broker is paid. The first is via upfront fees. These are pre-established fees that you will pay no matter the performance of the broker. The second is commission fees, also called success fees. These are fees that you pay only after the broker successfully sells your company. In this case, you are not typically paying out of pocket. Instead, the broker only takes a percentage of the final sale price. If a success fee sounds more appealing and honest, it is because it is. We recommend avoiding upfront fees as much as possible as it disincentivizes the broker to work hard for you and deliver results.
Of course, a full-service broker is likely to have the highest upfront fees and/or take the highest commission, although they are also the most likely to deliver the results you desire. A limited-service business broker takes less, but you may have to personally do much more of the leg work for the deal. This is the same for online brokers, who usually take less but also are far less involved. The fees for a real estate broker who provides business brokerage services are usually the same as a full-service broker, although you are not getting the same expertise when you choose a real estate professional to value and sell your company.
Sigma Mergers and Acquisitions is a Full-Service Business Brokerage
We strongly recommend a full-service business broker. This is the best way to ensure you are able to reach your sales goals in a stress-free manner. Sigma Mergers and Acquisitions has helped hundreds of sellers through the journey, and it is our pleasure to work on our clients’ behalf to ensure their financial and non-financial goals are reached. Contact us today for a free business valuation.