Should you use a business broker print Print

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If you have decided to sell your business, is it worthwhile using a business broker? This guide explains the role of a business broker, the advantages and disadvantages of using a broker, the costs involved and how to find a suitable broker for your business.

This article follows on from our guides Succession planning made simple, Preparing your business for sale or transition, and Options for selling your business.

What does a business broker do?

It goes without saying that the best brokers are those with a good understanding of business. There are multiple ways of valuing a business and a good business broker should be familiar with the different approaches and able to advise you which is the most workable and realistic approach for valuing your type of business.

What value can a broker add to the sale process?

  • Sales experience and a good current knowledge of the marketplace.
  • Ability to pre-qualify buyers, ensuring they have the financial means, skills and experience, saving you from time-wasting encounters.
  • Current knowledge of the market.
  • A pool of buyers.
  • Market-related advice on the value of your business.
  • Advice on how to groom, improve and structure your business to best effect.
  • Because the broker is not emotionally involved in the business he or she is better placed to view the process of negotiation objectively.


What are the costs?

Broker's commission

In New Zealand the commission charged by business brokers on the sale of a business typically ranges from 5% to 10%. Certain industries (for example hotels and motels) may have quite structured fees that are well-known to buyers and sellers alike. Others are up to the discretion of an individual broker, or may be negotiable.

There are other ways of selling your business, such as a management buy-out or through your accountant or lawyer, which willl have different costs.

Negotiable commissions

One broker advises that if the sale involves a freehold property (such as a factory or commercial premises) plus the business, the commission would vary. "My company would take a lower commission on the sale of the property (a relatively straightforward real estate deal) and a higher commission on the sale of the business itself, since this is a more complicated process".

He gives another example of a negotiable commission: "If the seller is committing say $3,000 to an agreed marketing plan for the business, then we would reduce our commission to reflect this commitment, for instance from 7% to 5%."

Marketing costs and a contract

Most business brokers will require you to sign a contract appointing them as sole agent for the sale. Marketing costs are a matter of negotiation, but most brokers will require you to share some or all of the marketing and advertising costs, which will vary depending on the nature of the business.

Establishing trust

Comments one broker: "One of the first steps for a seller and broker is to sit down and discuss the sale process. This basically involves establishing a tailored marketing plan - doing what's right for the particular business. For instance, does it need nationwide advertising, or should the intention to sell be kept confidential? These are important decisions for the owner and it's vital to get them right and establish a relationship of trust right from the start between seller and broker.

"The broker will expect a contract from the owner to sell the business, and the owner should expect a high level of commitment, expertise and professionalism from the broker. Most sellers only have one chance to get it right, so it's important to work through the details. If you fail to sell your house, you're still left with an intact house. But if you make a mess of selling your business you could be left with damaged relationships."

Raising false expectations

As in the case of some real estate agents, some business brokers could present an overly optimistic view of the value of your business is order to secure a contract to act for you. Bear this in mind if you visit several brokers before you commit to a contract. Ask the broker who gives you the highest valuation of your business to justify that valuation.

Also consider checking with your accountant; as they know the history of your business they should be able to provide an estimate of your business's worth. This would be a useful gauge to compare against a value determined by a business broker.

Case study: the sale that failed

Intending to retire, Bob and Joan wanted to sell their business by tender, a sale process that, as one broker comments, "has its downside." Bob and Joan wanted $300,000 for their business and their business broker told them they could well get this amount.

In the end the best bid they got was for $150,000, a figure they came gradually to accept was much closer to the real value of the business. Bob and Joan realised they couldn't afford to retire on half the sum they had anticipated, so decided to carry on with the business.

As selling by tender is a very public process, they now had some damaged relationships to repair, including their staff and others who now realised that the owners really wanted to be out of the business. A more realistic valuation of the business right at the start and a confidential approach to the sale process would have saved them from much unnecessary stress. In sum, better advice from their broker.


How do you find a good business broker?

  • Ask your business contacts first, including your accountant and lawyer.
  • Always get references from previous business owners the broker has dealt with and ask how well the broker marketed their businesses.
  • Speak to several brokers before committing yourself to a contract, to get an idea of the person(s) you're likely to work best with.


Points to look out for

  • They are experienced, well known and respected in the business sales industry.
  • They specialise in your industry.
  • They have a strong list of prospective buyers.
  • They ask lots of relevant questions about your business. This means they will be better informed when they speak to buyers.
  • They grasp the essentials of your business quickly.
  • They show strong people skills. (If you're not impressed with the way the broker deals with you, consider that the broker will be doing a lot of the negotiating).
  • They continue to give you attention and return your calls promptly.
  • They show initiative and creativity in helping you groom your business for sale and improve its value.
  • They have the organisation and structures in place to produce a tailored marketing and advertising plan to suit your business.
  • They can produce a confidentiality agreement to suit your particular business that all prospects must sign.
  • They show evidence of being creative in negotiating and resolving disputes and problems that might arise.


Preparation and questions to ask

Preparation before you visit a broker

Save both your time and the broker's time by taking with you all the facts and figures on your business. Our article Preparing your business for sale or transition gives you some guidance on how to prepare an effective business document.

The broker will use your document to prepare a summary (description and brief history, location, and brief financial information). You should check to make sure it reflects the business accurately since it is likely to be used in advertising the business.

Questions to ask:

  • How long does the broker think the sales process will take (average time for a business sale).
  • All the costs you are likely to incur by using the broker (marketing and commission).
  • Try to get some idea of their success rate in selling businesses similar to yours.
  • What method will they use to value your business? Is it based on assets plus goodwill, past sales, future cashflow/prospects, recent sales of similar businesses, a combination of these methods, or some other method? Ask them to explain and justify their approach. Note here that the broker is likely to be more objective than your accountant (who may have worked closely with the business for years) in assessing its true market value.



A specialist such as a business broker can play an important role in helping you sell your business and good brokers will earn their fees by adding more value to the sale process than their commission costs you. Choose your broker carefully and work with them to achieve the best result.


Your local library will have books on buying and selling businesses and the better business brokers should also be able to supply you with booklets or information on the process.

These articles will also help you:


Further information:

To talk to an ANZ Business Specialist:
Call 0800 269 249
Visit your nearest ANZ branch


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