Frequently Asked Questions...
The APMAA understands that prospective sellers have many
questions when deciding to utilize the services of a
business broker. To assist you we have compiled a list
of some of the most frequently asked questions regarding
listing agreements and brokerage services.
What services do Business Brokers/M&A Advisors perform?
Although services vary by firm, “typical” services
provided to a potential Seller might include the
Review your business with you (operations, financial,
sales & marketing, etc.) to help understand its true
Discuss you goals on a potential exit and the different
types of exit strategies
Develop a comprehensive Information Memorandum that
highlights your company’s unique strengths
Market the company professionally
and screen potential buyers
Provide negotiation & deal structuring advice
Maintain a confidential selling process
Provide overall deal management from initial discussion
Allow you to stay focused on running your business
How much do Advisory services usually cost?
Most intermediaries base their fees on a percentage of
the transaction value which aligns their goals with the
Sellers – to maximize value. Typically, the larger
the transaction, the smaller the percentage charged. In
addition to a success fee, more firms are starting to
utilize an up-front retainer fee to cover their initial
costs of working with clients. Fees vary from firm
to firm as do the specific services provided. The
APMAA encourages prospective clients to compare not only
fee structure but actual services performed. Since
every client is unique and services vary from each firm,
there is no “standard” fee and apples-to-apples
comparisons are difficult to make.
As in most situations, you get what you pay for and a
“bargain” fee might get you sub-par services. Ask
yourself this question, if you were going to get heart
surgery, would you want the best surgeon for your
condition or the cheapest? Choosing a professional M&A
Advisor on perhaps the biggest financial transaction of
your life should be no different.
Does the broker really need a one year agreement?
On average, it normally takes between nine and twelve
months to sell a business. The business broker
will be committing a large amount of time and effort and
wants to make sure that there is enough time to properly
structure a transaction and have a successful sale for
Shouldn’t I be able to cancel the contract at any time?
That depends on what type of contract you are signing.
If you are entering into a success fee based contract,
the business broker will be performing a substantial
amount of work prior to receiving any compensation.
It would be unreasonable to expect the business broker
to evaluate your business, prepare an Information
Memorandum, and provide any other services only to have
the client cancel the contract before they could expect
to receive compensation.
If you want a
cancellation clause put into the contract, you may want
to consider proposing a retainer fee to cover the cost
of the initial services and then an hourly rate to be
charged against any success fee. You should expect
the hourly rate for professional services to range from
$200 to $450 per hour depending on the level of
experience of the broker. Most clients would prefer to
“pay for performance” and compensate the broker on a
successful closing. A success fee based
arrangement aligns the broker’s goals with those of the
Why should I pay the broker if I find the buyer?
This is a common question with a simple answer:
you are paying the broker for much more than identifying
a buyer. The client should expect that the business
broker will evaluate the business, prepare a complete
Information Memorandum, market the business, screen
potential buyers, and manages the deal process in a
professional manner. No broker would provide the
client their best effort if they were concerned that
their work was being used by the client to conduct a
parallel sales process to avoid a fee. Additionally, the
broker will be providing the client crucial advice
throughout the entire sales process; including
evaluating offers (which are about much more than just a
Having an exclusive listing agreement
aligns the business brokers goals with those of client
so that the client can be assured they are receiving
unbiased advice as to which offer is truly the “best”.
For the broker, this type of agreement ensures that
they earn their fee on a successful sale of the company
and eliminates any fee disputes that could arise.
With exclusivity in place, the broker has more incentive
to work with the client toward a successful sale.
A seller should be wary of any broker willing to enter
into a non-exclusive agreement – these brokers are
typically just trying to collect listings rather than
assist in a full sales process.
Why can’t I just sell the
This is probably the biggest mistake most owners ever
think about making! It is tempting to “save” the
money you might pay a professional, but who will be
running your business during this crucial 9-12 month
period? As a business owner do you really have
both the time and expertise to take on such an important
challenge? Ask yourself how many business sales
you have been involved in. Is the sale of your own
business really the time to get on-the-job training?
It would almost be like asking a surgeon “I know I need
my appendix out, just tell me where to cut.” You
are not really paying the doctor because he knows where
to cut but because he knows how to make the entire
operation a success – and it’s not what you see on the
I have an attorney/accountant why do I need a mergers &
The primary purpose of attorneys is to draft appropriate
purchase & sale documents. A good attorney will
advise and protect a client legally within the framework
of a successfully negotiated transaction. The
American legal system trains attorneys in adversarial
negotiation tactics and the involvement of an attorney
too early in the process can strain otherwise productive
discussions. Additionally, few attorneys are
qualified to value a company and most have had little or
no practical business experience.
Accountants are best used to perform an audit, to help
interpret financial statements and to provide advice on
the tax consequences for the buyer and seller.
Accountants are trained to create historical financial
statements and review tax codes, both of which are
A good M&A Advisor will create value by showing buyers
what is not in your financial statements. Additionally,
they will help keep the selling process confidential and
give you insight to market trends.
I have other questions, where can I get answers?
Check out the other information resources, including
articles, on our web site. Additionally, we
encourage you to contact our members directly who are
always more than happy to answer questions. If you
prefer, you van email us at: