The 7% Solution
Never any up-front fees or costs. Run if somebody ever asks you for upfront fees. None of the established guys do that. Business brokerage is entirely success based. We only get paid from the proceeds of the transaction.
More importantly, I only get paid for selling the business. I do not get paid for selling the inventory or other items your accountant has recorded in the current account.
And there is no exclusive listing or listing period. I either perform or you fire me just like you can fire your accountant or lawyer. Business brokerage is not real estate sales.
My fees are for discovery. If a buyer comes from your dentist or barber then it has nothing to do with me and I will bow out gracefully unless you would like me to stay on during the negotiations. That is your call.
My fee to find a buyer
The business is priced without debt or current assets. Business brokers do this because payables and receivables change change every day as business happens. We can make good guesses but it has to be finalized on the close.
My fees are 7% of what we negotiate with the buyer for the business not including inventory, other current assets nor any adjustments for debt.
Like your accountant or stockbroker, I will rely on your honest intentions and will not ask you to sign an exclusive marketing agreement with me.
(This year has been about the first time I’ve seen people ask for an exclusive listing to find a buyer for firms priced under $2,000,000 or so. I’ve been told it’s comfort demanded by their bankers who have advanced them monies to get over a dry spot.
That’s scary. Is their advice for your benefit or their banker? Stay with the bigger brokers who run their business like your accountant does and do not need bankers to stay in business.)
My minimum fee is $10,000.
How I earn my fee
I earn my fee by putting you together with your buyer.
I do not earn a fee unless we complete a transaction and cheques and keys change hands.
Your expectations of me
Honesty and Integrity
Knowledge of the process
A rifle approach searching for strategic buyers
A shotgun approach attracting general buyers
Qualifying potential buyers as to time, talent and treasure
Status reports and regular discussions
Regular contact (remembering that I’m an old stock broker living on the phones instead of endless meetings or pressing-the-flesh.)
Limit other professional fees by coordinating the drafting of commercial terms into a letter of intent acceptable to both the seller and the buyer.
My role will be limited once the deal is in the hands of your professional advisors. Our letter of intent will be sent to the buyer’s lawyer for crafting into a purchase agreement, both accountants, if required to verify financial numbers, and finally to your lawyer for review and approval.
My expectations of you
Honesty and Integrity
Full disclosure of the firm’s position
Full disclosure of changes to the firm’s position
Confidentiality instructions including people I should not contact
Allow me to manage the search process for a buyer
Assistance in building a contact list of potential strategic buyers
Timely provision of information requested by qualified buyers
Meeting potential buyers at the appropriate time to discuss the firm’s operations.
Here is a link to a Draft Seller Commission Agreement we will sign.
I can also act for a buyer looking to purchase under the same general terms. Approaching a seller saying the buyer will pay all of my fees can get a buyer to the decision makers much faster. My fees will be the same as if I were acting for the buyer.
Most of the searches on the Businesses Wanted page are buyer brokerage