Difference between Biz Brokers and M&A Advisors
If you Google “business brokers” you are going to get many responses. I know. I did it. So how does a business owner make sense of all these different articles and negotiate a payment structure that is appropriate for their business sale situation? There are a few rules of thumb that will clean-up these muddy waters:
- Are you working with a biz brokers or a mergers and acquisitions advisors? There IS a difference. Biz brokers often are 1099’s working with a business brokerage firm. Because of this, they may have limited resources from which to advertise and market your business. Additionally, biz brokers often go for quantity over quality. They want to list as many businesses as possible in order to make an income. Due to this focus, brokers spend less adding value to the sale, problem-solving concerns and creating deal strategies. Mergers and acquisition advisors, on the other hand, frequently are part of a firm or group of individuals that work together to broker the best deals for their clients. Their resources are often plentiful and they are more selective in the businesses they choose to represent. Their goal is more individually focused on the successful sale of the businesses they work with rather than on the number of businesses they list. There is adequate space in the world of buying and selling businesses for both types merger & acquisitions advisors and business brokers, but knowing the difference is important in determining the cost for services and scope of work. Business brokers, because of their transaction approach and the limited time they’ll spend trying to prepare and review each business they represent, will often charge no fee to list your business for sale and begin marketing it and will charge their full success fee (commission-based) upon the sale of your business. In contrast, a mergers and acquisitions advisor will almost always charge an up-front or “retainer” fee to begin work on selling your business. Such fees go towards the labor-intensive process of preparing your business for sale, analyzing your business against the competition, advertising it, marketing it, etc. In addition to this retainer, a mergers and acquisitions advisor will also charge a success fee to be collected once the business sells. It is up to the two parties to determine what the success fees will be.
- How big is your business? For businesses that are valued between $100,000 and $1,000,000, you can expect the total commission paid to biz brokers or mergers and acquisitions advisors to be between 10% and 12%. Should you own a business that’s valued at more than $1, 000,000, expect to use some version of the double-Lehman formula, which is broken down as such:
· 10% commission on the first $1 million
· 8% commission on the next $1 million
· 6% commission on the next $1 million
· 4% on all additional amounts
American Fortune has taught clients how to sell or buy businesses, performed business valuation services, exit strategy planning services, mergers & acquisitions advisor services in the following areas of the USA: Columbus Ohio, Atlanta Georgia, Lexington Kentucky, Bowling Green Kentucky, Nashville Tennessee, Memphis Tennessee, Cincinnati Ohio, Dayton Ohio, Toledo Ohio, Los Angeles, Cleveland Ohio, Pittsburgh Pennsylvania, Baltimore, Maryland, Indianapolis Indiana, Chicago Illinois, Detroit Michigan, Flint Michigan, Tampa Florida, St. Louis Missouri, Kansas City Kansas, Des Moines Iowa, Minneapolis Minnesota, Louisville Kentucky, Oklahoma City, Oklahoma, Dallas Texas, Fort Worth Texas, Denver Colorado, San Francisco California, Salt Lake City Utah, Phoenix Arizona, Lexington Kentucky, Los Angeles California, San Diego California.