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Fees and Expenses to Expect When Selling a Business

| April 16, 2022, 01:00 PM

Fees

Photo by Erik Mclean from Pexels

When you sell your business, you expect to make money—not spend it. But as the saying goes, you have to spend money to make money. The question is, how much?

The answer isn’t always clear. However, most brokers agree that a certain amount of due diligence is necessary when preparing a business for sale. That means retaining qualified professionals to look over your books, guide you through legal processes, and anticipate various fees associated with selling.

As a seller, you’ll soon discover some costs are avoidable, some are essential, and others are optional. The article below covers some of the more common ones. For a more detailed discussion regarding your specific situation, I encourage you to schedule a time to talk to us and I’d be more than happy to provide more specific advice.

Liquified Creative Annapolis

1. Brokerage Fees

Every business owner should know that brokers are investments worth making. Brokers protect sellers’ best interests, answer their questions, anticipate complications, and smooth the selling process. We can—and have—saved business owners hundreds of thousands of dollars.

Broker fees vary greatly. In choosing a broker, just be sure to consider their experience, their reputation, and their resources. The one that’s right for you will have all these things in abundance and be ready to put them to work for you.

Brokerage fees are the expenses that deliver the most bang for their buck. “Often our fee is negligible compared to the money we’re able to garner for the seller,” says Transworld CEO Andy Cagnetta.

However, I’d also like to point out that we only get paid for success. Meaning, there are no upfront costs and you never write a check to us (it’s taken directly out of the buyer’s check at closing). So, unless you bring value to you – meaning, find a buyer and successfully help you navigate the sale of your business – we work for free!

2. Professional Fees

This family of costs is closely related to legal obligations, liabilities, and risks.

Major influences include transaction complexity and structure: how easy or difficult will it be to sell your business? It depends on the current state of your operation, plus whatever it takes to bring it up to par.

For example, CPA fees related to bookkeeping fall under this umbrella. I also strongly encourage all of our buyers and sellers to obtain legal counsel to make sure the transaction is worded and handled exactly as it was negotiated.

Don’t have a CPA? Don’t have an attorney? No worries. I will be happy to introduce you to some of the best in Annapolis. While not an exhaustive list, I always do enjoy working with the following:

3. Hidden Costs

Brokerage fees you likely anticipated. Professional fees you might have anticipated. Hidden costs are—well, hidden. These are the expenses many business owners don’t consider when preparing to sell.

There are as many hidden fees in business transactions as there are businesses. I jest—but there are a lot, and they’re another reason I strongly recommend recruiting a broker. Some of the hidden fees I’ve seen, just a few, include:

  • Taxes, tax liens
  • Machinery/equipment appraisals
  • Employee severance & vacation time
  • Lease assigning issues & landlord negotiations
  • Additional CPA fees to prepare books & records
  • Prepayment penalties on leases or loans

Spotting hidden fees can be challenging because they come in so many shapes and sizes. Be on constant alert for openings that allow buyers, accountants, and lawyers to attempt re-trades or re-negotiations.

After all this, you may be wondering: are these expenses avoidable?

Perhaps. But to determine that, you’ll need a good broker—someone with the experience and resources needed to recognize avoidable costs. Brokers act as referees between the seller and other parties, protecting them and guiding them through complex proceedings.

Bottom line

Brokers cost money, but we also save sellers much more money. In addition to that, we save time, energy, and peace of mind which can be priceless.

Transworld knows that running your business is the most important thing you can do as an owner, especially during negotiations. Contact us or schedule an appointment to learn how we deliver the most value to sellers, every transaction.

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About the Author - Steve Palmer

Steve Palmer is the Principal Business Broker with Transworld Business Advisors of Annapolis, and currently lives with his wife, Erin, and daughter Isla Mae, in Harwood, MD. Transworld is the largest business brokerage franchise in the world and has conducted over 10,000 business sale transactions across dozens of industry verticals since its founding in 1979. If you are, or have ever considered, selling or buying a business, please reach out to Steve by email at [email protected] or by call or text at (410) 842-6063.

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