How Much Does It Cost to Sell a Business?

Are you eager to sell your business and wonder how much you’ll get for the sale?

Before you get too far into the process, don’t forget that it costs to sell your business. If you want to stay legal, have a smooth transfer, and get the most our of your sale, you have options. They aren’t free, but they’re worth every cent you spend.

So, how much do you need to pay to get your business sold? In this blog, we’ll breakdown the cost, tell you what could go wrong if you don’t find help, and give you tips for who to hire.

How much does it cost to sell a business?

Basically, the cost could range up to 15% of the total sale price. However, the true cost of selling a business depends on these six primary things. 

Also factoring in the type of business, when to sell, and who you hire will change the amount you’ll spend. 

1. Broker or Investment Banker Commission 

One significant expense you’ll encounter when selling your business costs around 6% to 10%  of the final sale price paid to a broker or banker. This person evaluates your business, finds potential buyers, and handles negotiations for you. 

2. Financial Advisor

It’s important to contact your financial advisor as early as 12 months before you sell your business. When you do this, they can help you do things like find ways to reduce taxes, get your accounting in order, and think through your debt.

One of the biggest benefits of having a financial advisor is that they will conduct a thorough valuation of your business. Valuation means value estimate. It gives you a rough idea of what your business is worth. Your company accountant may also provide a rough estimate, especially if they have the certifications that allow them to do so. You may also ask a CPA for a referral.

If your business is worth seven figures, you’ll want to get a more specialized financial advisor. Their services can cost you more.

3. Accountant Fees

Accountants are essential in selling a business.

They help:

  • Give financial disclosures
  • Check taxes
  • Ensure the accuracy of financial documentation

On average, accountants charge $37 per hour, according to the Bureau of Labor Statistics (BLS).

4. Legal Fees 

You must involve a legal professional to ensure your business sale complies with the law. Also, here’s a little-known fact: specialized business lawyers can do a lot to expedite the sale and facilitate a smooth business transfer.

What do lawyers do for your sale?

  1. They draft and review contracts such as the non-disclosure agreement (NDA) and the letter of intent (LOI).
  2. They ensure that contracts are legally binding and will be followed properly.
  3. They check all the paperwork involved and ensure that everything is clear and follows the law.

The lawyer’s contribution is essential to a successful business sale. However, many lawyers charge hefty hourly fees, typically $550 or more per hour. Thankfully, some attorneys do charge flat fees.

Insider Tip:

When looking for an attorney to sell your business, look for one who specializes in business transitions and growth after the sale. Not all lawyers are the same, and some can offer you more advice and a smoother process than others. Make sure you search for a business lawyer. A great resource for this is the state’s bar association. Here, you can find lawyers practicing in your area. If you’re in Iowa, here’s a link to the Iowa State Bar Association website.

5. Business Sale Prep to Improve Curb Appeal

Last but not least, get more for your business by planning 3 to 12 months before you sell your business with the help of a specialist. We like to call this increasing a business’ “curb appeal”. A specialist will review your situation and find ways to increase the business value. They also help increase the  business assets and decrease your liabilities.

Financial advisors and business lawyers are a few specialists who can help you get your business looking more attractive to potential buyers.

How does a specialist help increase your business’ value? Here’s an example: if your business is said to be worth $500,000, you can either sell it for that amount, or you could talk to an expert first. An expert might suggest some improvement that would bring in 20% more customers, increasing the value of your business. This makes your business more attractive to someone looking to buy and increases how much the business is worth. You’ll undoubtedly be making more off the business sale than without the advice of a specialist.

Costs for this service vary widely depending on who you hire and the amount of work they propose.

6. Surprise Expenses

Certain fees may arise unexpectedly when you sell your business. They’re not typical to business sales, but sometimes these “surprise expenses” are add-ons you’ll need to purchase.

Surprise fees include the following:

  • The transfer fee 

It is paid to ensure that assets from your business are “transferred” to the new owner. These can include things like inventory, contracts, or licenses.

For example, if you own a custom purse shop on Etsy and want to sell your business along with the inventory, you should involve a lawyer. They will ensure a smooth and legal transfer of assets, contracts, and licenses. The cost of this service depends on what and how much is being transferred. .

  • Early Contract Termination Fees and Repayment Penalties 

An early contract termination fee is the price you have to pay when you end a contract before the period specified is complete. For example, these fees can be included in contracts, agreements, or obligations with third parties. Contract termination fees can make or break your decision to sell, if you aren’t careful. If you want to end a contract early, check for this fee first. A business lawyer will help you review your obligations to know if you’ll be paying early contract termination fees.

Also, if you decide to pay off a loan or debt before it’s due, you might have to pay a prepayment penalty. A prepayment fee ensures that the lender still gets the money they expected to earn in interest if you had followed the regular payment plan to its due date.

Talk with your business lawyer for help. They will help you not only identify these fees in your contracts, but also help you decide on the best way to handle them. Because sellers must carefully review loan agreements for prepayment fees and other detailed terms, hiring someone to help can save business owners hours of fine print reading and a lot of unnecessary stress.

The Importance of Hiring an Expert

Can’t you handle your business sale yourself, especially if selling to a relative or trusted employee? It can’t be that hard, can it? You might be wondering if hiring help to sell your business is necessary. Is it?

Yes, you need experts to do it right. Selling a business involves financial transactions, legal risks, and negotiations. The expenses are necessary to avoid major issues. 

Hiring experts help you avoid mistakes, identify potential buyers, understand market trends, and create effective marketing plans. Experts ensure a successful sale at the best price and a smooth transition for your business.

What Could Go Wrong if I Don’t Hire a Lawyer?

We see this all the time. Someone tries to sell their business without a lawyer, they make a mistake, and call us when they’re in trouble.

While it’s admirable to undertake a business sale independently, it

  1. Take longer
  2. Cost you more worry
  3. May end up in you making a mistake.

Instead, what would it be like if your business sale happened just the way you want without problems or lost time and money? It’s the expert’s job to make that happen.

So, what could go wrong?

This graph shows how businesses perform differently depending on whether they have legal help.

Without legal support, sales revenue and targets tend to decrease. But with legal assistance, businesses usually achieve better prices. This highlights the importance of legal guidance when selling a business.

Selling without help can lead to problems like surprises during due diligence, value fluctuations, and privacy leaks. Additionally, you may face lawsuits or reversal of the sale. Emotional decisions, such as handling lower offers or finding buyers, are also challenging. In today’s market, having a skilled professional is essential for a successful sale, helping you avoid common pitfalls.

Who Should I Hire?

Where should you start when looking for an expert? So many potential services are available to help during the sale, such as:

A CPA or Broker

A CPA or financial specialist is crucial for ensuring that all financial documents and records are in order. They give you valuable insights into the business’s value and potential tax implications. 

You can also hire a broker. However, while brokers can expedite the selling process by leveraging their network and experience in negotiations, be careful! Many unethical brokers prioritize money in their pocket over the interests of their clients. It’s important to research potential brokers, get referrals, and research track records before trusting a broker with your business sale.

Here’s a tip for finding a good CPA or broker to help you sell your business: talk with other business owners who have “been there, done that”. You can do that by asking for references on Facebook groups or local business support services where you live.

An Attorney

Attorneys make all the difference. Because they know the law and understand contract language, they make sure you’re protected and legal each step of the way.

Look for an attorney who:

  • Has good reviews
  • Offers transparent pricing and service descriptions
  • Does document drafting and review, and business and legal counsel
  • Helps transfer your business to new ownership smoothly
  • Minimizes the buyer’s profit loss risk (i.e. a potential lost sale for you)
  • Is honest and easy to communicate with

It’s a huge bonus if they also help you prep your business for an optimized sale.

Attorneys typically charge between $300 and $350 per hour for their services. This can add up fast! However, there are some attorneys, like Surge Business Law, who offer flat-fee prices. Look for these attorneys to help you know how much you’ll spend, and budget for it before hiring.

Transparent and Affordable Flat-Fee Service 

Many people are worried about the cost of hiring a lawyer when selling their business. They hesitate to talk to one because they think it will be too expensive.

Don’t be afraid of hiring us! We’re not afraid to give you our price upfront, and we don’t just give legal support, we give business advice. That means we’ll guide you through the whole process with clear and simple steps – just like our pricing.

We charge a flat fee of 0.8% of the business value for services, with a minimum of $1,800.

With Surge Business Law, you get:

  • Clear and simple pricing and communication
  • Help through the whole process – starting as early as 3-12 months before you plan to sell
  • One contact point to advise each next step
  • A smooth transfer of the business
  • Legal compliance
  • Peace of mind knowing it’s done right
  • An optimized process for the best deal

We aren’t like other lawyers.

Visit our website to learn more or call 515-994-0404. Plan to sell your business now to get the best deal.

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