The short version
- The commission is normally paid at closing from the proceeds.
- Most agreements are exclusive, and splitting the job can mean two commissions.
- An agreement under a year is typical, and five years is a warning sign.
- Taxes on the sale usually cost more than the fee.
When the Fee Gets Paid
A success fee is typical. You pay it at closing out of the proceeds, along with attorney and CPA bills and any debt that must be paid off. Plan on the net, not the headline price.
Why Agreements Are Exclusive
Most brokers want one sole exclusive agreement. A broker who spends money marketing your business needs to know a second broker will not collect for the same buyer. Splitting the job can mean two commissions, depending on the wording.
How Long and How Much
Under a year is typical. A five year listing agreement is a warning sign. The broker should state the fee upfront, and a range is fine. Ask what is included, what is extra and what happens if you take the business off the market.
Questions to Ask a Broker
- How many years have you been brokering, and is it your full time work?
- How will you market beyond the big listing websites?
- What is your fee, and when is it earned?
- What share of your listings close, and how do you count that?
Is the Fee Worth It?
Nobody likes writing a big check. Still, without a broker the deal may not close in the time you want, at the multiple you want, or at all.
Taxes on the sale are usually a larger cost than the commission, so good planning matters more than bargaining the fee.
Reading the Fine Print
Look for the tail clause, which can let a broker collect for a buyer introduced during the contract even after it ends. Ask your attorney to review it. Also ask what costs the broker pays versus what you pay.
Next Steps
Read how a buyer looks at your profit in SDE versus EBITDA, then find your sale price and ask the broker these questions yourself.