The cost of selling a business can be substantial, but you need to consider it as an investment in the eventual sale price of your business.
A successful business sale with a high sale price is worth the additional cost of using specialist business advisers and other professional services to sell your business.
How much does it cost to sell a business
When selling your business through a business adviser, you can expect to pay anywhere between one per cent to ten per cent commission depending on the size of your business, as well as a monthly retainer which could range from $3,000 to $15,000 per month.
Other costs include:
- Accountant costs
- Legal fees
- Due diligence costs
- Data room services
The advantage of using a specialist business adviser to sell your business is they will generally be able to achieve a higher sale price than using a low-cost business broker, doing it yourself, or through a lawyer or accountant.
A good adviser can assist you with generating a higher price through:
- Assessing and optimising the time of year to sell
- Investigating all potential normalisations within the business
- Presenting favourable terms on working capital calculations
What impacts the cost of selling a business
Size is the biggest factor which will impact on the cost of selling a business. The larger and more complex your business is, the more you will need to pay for professional services when you sell it.
Accounting and legal expenses will increase with the size and complexity of your business sale. However, the fee your business adviser charges will likely be a smaller percentage of your sale price the larger your business is.
In many cases, the accounting cost of selling a business will be part of the ongoing accounting cost of running your business, rather than an additional cost. Some businesses may need additional accounting work while preparing for sale.
You will need lawyers to draft and review documents such as sale contracts and term sheets, and to negotiate legal documents with a potential buyer. For businesses worth $5 million to $100 million, this could cost anywhere from $35,000 to $100,000.
Due diligence costs
This is typically considered separately from regular accounting work. In some cases, you may need to conduct an audit of the past two years of your financial statements to provide additional comfort for potential buyers. This may cost around $30,000.
Depending on the nature of your business, there may be other incidental expenses involved in selling your business. These may include:
- Data room services to securely present information to potential buyers
- Transferring vehicles out of the business and repaying finance leases
- Legal due diligence (sometimes referred to as vendor due diligence) to provide additional comfort to a buyer
- Submitting regulatory documents
Your business adviser will be able to guide you through any additional fees and costs involved in selling your business and communicate the purpose of them.
There is only so much time in a day, and time that you spend working on your business sale could be spent working on your business. Working to improve and grow your business while preparing for sale will ultimately improve your sale price.
Your goal should be to delegate much of the work involved in selling your business so you can continue to focus on growing your business. If your business has a CFO, they will be invaluable in the process of selling your business, and much of the work should be delegated to them.
A specialist business advisory firm is also essential if you want to continue working on your business. Not only will your business adviser handle much of the work for you, but they will also have specialist experience in selling businesses, providing invaluable advice and strategic direction.
The benefits of expert business advisory
There is a great deal of things your business advisers can do for you when you are selling your business. At Nash Advisory, we have a unique and in-depth methodology for selling businesses. The result is that we get you a higher sale price.
We prepare your business
Getting your business into a saleable position takes the right kind of approach. We understand what buyers are looking for in a wide variety of industries, and we can make your business as attractive as possible to the buyers in your market.
We find the right buyer
Finding the right buyer for your business is essential for maximising your sale price. The right buyer will be willing to pay for your business because it will perfectly fit their needs. We conduct extensive research and actively approach buyers on your behalf.
We finalise the deal
Once we have located an ideal buyer, we handle the negotiations and due diligence. We ensure your interests are protected at every stage of the process.