Fees for selling a business: the complete list

Fees for selling a business: the complete list

Share This Post

This article was originally posted on 15th of December 2020.

When you decide “I want to sell my business“, you don’t have to use any professionals at all.  You can do the legal, accounting, due diligence and everything else yourself. Indeed, a lot of people have tried.

You may also choose to use an a-la-carte approach with your business exit strategy – where you do some of the work yourself and get professional help for just some aspects.

Indeed, your approach will determine how much a business sale will cost you. And making sure you get the best value for your money can be difficult.

This is exactly what this post will help you with. We’ll list the different professionals you may need to employ and how much they are likely to cost. We’ll also outline the type of work they’ll be doing so you can consider if it’s something you might want to take on yourself.

With decades of experience in selling businesses as business brokers, we’ve experienced all sorts of situations and challenges. This will be a candid summary of the advice we give to our clients. We specialise in selling manufacturing, engineering and professional services businesses so our recommendations may be slightly skewed towards these sectors but even if you have a different type of business, we hope you’ll get plenty of value.

In short, by using professionals you get the best experience you can pay for, the deal moves much more smoothly and you are still able to focus on running your business in the meantime.

You have to ask yourself one simple question. “Do I have time to take on all of the sale aspects and have I got the expertise to complete them to a high standard?”

Looking for a handy checklist that will walk you through all that’s needed when preparing your business for sale? We’ve created one with all you need – and you can download it here.

Can you sell your business for free?

For a large proportion of business owners, selling their business is the most popular business exit strategy. And it is still a once in a lifetime occurrence. Something never done before and unlikely to be repeated.

The professionals we speak about in this article do what they do on a daily basis. They know how to plan and get things done quickly, in compliance with regulations and whilst providing you (their client) with the best advice possible.

On the other hand, you may want to navigate through the regulations, negotiations and paperwork and save on the professional fees. The post will help you find out what value you may get out of employing professionals.

From experience, some professionals are more essential to completing a business sale, while others are used on a case-by-case basis. We’ve divided these post to account for this distinction.

Essential fees for selling a business

Let’s start with listing the professionals that we consider essential for selling a business.

Business broker fees for selling a business

A business broker will provide services before, throughout and after the sale of your business. These include: realistic valuation and advice and coaching on how to increase it, finding buyers, support with collecting documents, support in meetings, deal negotiations and final transition support. To learn more about what you get by employing a business broker, see this post.

Let’s take a look at the fees charged.

There are a wide selection of broker services out there for you to choose from. Essentially, there are two common fee structures on offer.

The first type of broker will charge a marketing fee up front when taking on a new client. This can vary a lot depending on the size of your business, the potential complexity of the deal and the size and reputation of the business broker. This fee can start as low as £500 and go up to £40,000 for large finance firms acting as a transition agent.

Following the initial fee, there will also be a commission: a percentage of sale value paid on completion of the sale. The amount for this ranges from 3%-5% for many brokers.

The second type of broker will waive the instruction fees. But, because they take on greater risk and delay their compensation, they charge larger commissions. You can expect to pay up to 12% of the final value of the sale.

Essentially, you should expect all brokers to earn similar fees in total. How they structure that between instruction fees and completion fees may vary, but you should see some consistency across the total.

For most deals, the first option ends up as the more cost effective one. But of course, there may be situations where you would be leaning towards the second breakdown. This may be the case when the business is in financial difficulties and cashflow prevents it from paying an initial marketing fee. It could also be the preferred option for businesses in rapidly faltering sectors where there is less probability of finding a suitable buyer. We saw this situation when a number of independent financial advisors were affected by new data transparency regulations 2012. Not being compliant made many of these businesses essentially worthless and many chose to close down instead of implementing the changes. 

Business broker walks their client through the necessary documentation

Finally, as with all contracts, check the cancellation clauses before you sign. If it seems that a broker is doing something for less than cost, check the cancellation clauses of the contract. They may earn their money when you try to leave.

Find the hat that fits. If you are a smaller business, you won’t be paying thousands on sign up. If you are a multi-million sized business, you may think that cost is justified. Find the broker you trust to do the job you need doing in your price range.

At Uscita we use the first type of fee structure. Our instruction fees range from £750 – £5,000 depending on the complexity and the size of the business, with our completion commissions ranging from 3% – 5%.

Solicitor fees for selling a business

A solicitor will help you with any legal work required during the sales, e.g.:

  • Resolving property ownership and lease details,
  • Transferring intellectual property rights,
  • Conclude shareholdings.

There are different types of solicitors and choosing the right one will save you time and money by finalising complicated business aspects much more quickly. The solicitor you want to engage when selling your business is a commercial solicitor. The hourly rate may be higher, but it will pay off in the long term.

If your business is small and simple, you can often agree a fixed fee structure with your solicitor to give you some certainty over costs. The more complicated and generally the larger the business, the more complex the work. For this you can expect to pay on an hourly rate and the bill will be more.

For the average sales we handle the fees we see range from £8,000 – £25,000. These will go up and down depending on the specific combination of services you require.

Being up front with your solicitor at the point of quoting for the work will lead to a more accurate estimate for you on costs and fewer surprises when the bill arrives. The more preparation work you do will also help reduce this bill. Having documents filed and in order for shareholder agreements, website domain ownership, employee contracts, etc. means your solicitor spends less time chasing you for information. Time is money. 

Accountant fees for selling a business

When it comes to selling your business, you may expect your existing accounting firm to support you through the process. But this is a great time to evaluate their level of service and experience.

Do they simply produce your year end results without additional value added benefits? How long do they take to do this or to get back to you on other matters?

Don’t be afraid to switch firms to a more experienced or responsive firm if you have to.

The issue here is not knowledge and ability but more capacity to work to a tight timeframe – and we’ve seen the importance of this in our working lives time and time again.

Your accountant will need to produce interim trading figures through your sale process. Once an offer is agreed, accountants will be part of the due diligence process and will need to respond to some very specific questions. They also need to become your personal tax advisor so you don’t overpay or underpay the HMRC on the sale funds you receive. 

At the point of sale, accountants will be given a deadline to produce the final completion accounts for the business under your ownership. If they can’t, your buyer may well be looking to claw back some sale funds from you.

As a rough budget, what you pay for your accountant to produce your annual accounts will increase threefold. And as with solicitors, the more detail you can give them ahead of time, the more accurately they can quote you for the work you need done.

Optional fees for selling a business

We consider a business broker, solicitor and accountant to be essential during a business sale. There are also some professionals it would be wise to have contacted before you sell, depending on your specific sector, size and company structure. Here is what you should consider in your estomations.

HR fees for selling a business

Whether your sale is subject to TUPE or not, business buyers are increasingly aware of their responsibilities to employees.

They expect businesses to have contracts of employment in place and to have a staff handbook. If you’re not sure you’ve got maternity pay, holiday entitlement or disciplinary procedure right, seeking the advice of a HR professional before you sell is a good idea.

Get your documents in order and it becomes a tick in a buyers box when you do sell.

Employee signing a contract for the legality and business' records

Many HR companies have a menu of costs depending exactly on what work needs to be done. E.g. HR Dept are a nationwide franchise with a menu of different service options starting from around £95 pm. 

CEPC fees for selling a business

In certain circumstances, i.e. when you rent or sell your business premises, it is a legal requirement to hold a valid CEPC certificate (Commercial Energy Performance Certificate) when selling a business. The cost of this document has come down since its launch and should be below £500 for most premises.

The certificates are valid for 10 years, so we recommend that you get it done early. You can find a list of your local providers on the gov.uk website

Asbestos and Legionella reports fees for selling a business

If your business has responsibility for maintaining premises, your buyer will want to know they aren’t inheriting problems for the future. This is especially true for manufacturing businesses.

If you know your building has asbestos, get your report up to date. It’s a similar situation if you know your business is susceptible to legionella regulations.

Review your reports regularly as outdated reports can derail a sale.

Costs will vary but speak to someone for a quote. The cost for renewing compliance certificates will be much less than work to remove asbestos or upgrade water systems. Most companies will offer a free consultation in order to produce an accurate schedule of work.

Additional fees for selling a business: licences and permissions

Lack of important permissions can cause a sale to fall through. E.g. there has been a case of a brewery that operated for 23 years without the council permission – and they were unable to sell their business.

As a business you need to periodically check that your licences and permissions are correct. Businesses change and evolve to customer demand and you might end up providing something totally outside of your original licensing permissions.

Other than property permissions, there are waste removal licences, music licences, industry standards, ISO accreditation and so much more.

If a buyer finds things like this out of date, they won’t be impressed and may alter their offer as a result.

With such a variety of licences available, costs will vary greatly. Make sure you stay on the ball by doing regular reviews of your documentation.

Conclusion

With some professionals and documents, like the ones listed as optional in this post, costs can be absorbed into the overheads of the business ahead of a sale. The costs for your broker, solicitor and accountant will mostly come out of the sale proceeds when the deal completes.

To get ready for your exit, you can get a head-start by completing a checklist for selling a business – you can do it even before speaking to the professionals.

If you’d like to speak with us about our fees and services, drop an email or give us a call.

Share This Post

Free resource to maximise your business value

We will use your info to send you your guide and monthly email communication. You can unsubscribe at any time. To check our full privacy policy, click here.
Selling a Business Checklist