Hiring a business broker or mergers and acquisitions advisor to locate a buyer and facilitate the sale of your business is worth the cost.
Most sellers consider an advisor a cost. I consider them an asset. While you pay a fee to enjoy the beneifts of their service, the cost is dwarfed by the benefits. Most business brokers or M&A advisors charge for their services as a percentage of the completed deal value. So, the higher the purchase price, the greater the dollar amount earned by both the seller and the intermediary. But, the benefits are not equal! The greater benefit is always to the seller!
Let’s take a closer look. In an effort to keep the calculations simple, let’s assume the business broker or M&A advisor is charging you 10% of the total deal value in return for their service. Let’s also assume that the proposed selling price for your business is $1M. The business broker or M&A advisor will earn $100,000. However, if their advice, guidance, experience, and negotiating skills result in a purchase price of $1.1M instead of the expected $1M, their fee rises to $110,000. You take home the additional $90,000. So, after fees you are taking home $990,000. The goal was $1M. The economic cost of the advisor was really only $10,000!
I think it’s very reasonable to assume that someone whose life work is devoted to assisting clients in buying and selling business should be able to achieve a 10% higher purchase price than what could have been achieved by a first time seller going at it alone. Especially when that seller has a business to run that requires their time and attention. If you’re worried about selling, who’s worried about the customers, the employees, and the vendors?
When you stop and consider business brokerage and M&A Advisor fees realitve to the cash they return, it’s one of the best investments you can make for your business.
