Darnley H.
President/Principal Consultant at Advansa International and Owner, Advansa International
I am a management consultant and have been approached by a client to prepare a business plan and valuation and help him sell the company--essentially a business broker role. What is a typical commission for a firm with about $5-10m in revenue?
The company is in the northeastern United States. The client is prepared to pay a small retainer upfront and a commission at closing.
Answers (9)
Depending on a lot of variables either a Double Lehman, a Single Lehman, or something negotiated in between. The fee structure needs to equate to the value provided.
Cliff P.
San Francisco Real Estate | Marin Real Estate | International Real Estate | Luxury Homes | Real Estate Consultant | LION
Typically, we see 10% business brokerage commissions.
Mark K.
MK Appraisal Group - Business Valuation
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Big revenue range.
I can speak a bit to the valuation portion of your question: my sense is that valuations provided by business brokers are more on the simple calculation estimate end - and they are not at all independent. Generally use highly-simplified software programs. They are not business valuations such as you would find from an experienced, accredited BV professional. They are tools to help close a transaction.
Wallace J.
Multimedia Producer, i3D Programmer, Acrobat 3D PDF, Android App, Virtual World & iTV Design, Kindle, Nook & Sony eBooks
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10%
Robert B.
Owner, E-Business Planet LLC
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8% to 10%
William T. C.
Facebook Marketing Expert with 1,100,000 Fans
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3 to 7% fee provided you help them to sell the company.
2% of the current revenue + 3% of the market valuation.
Jonathan P.
Finance professional
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Darnley
These are all good answers. It does depend on geography and industry. The harder to sell the more commission you should make. I have seen "consultants" charge a flat rate for the plan and then a portion of the sell price.
This seems wise, as you can write the best plan ever and the sale not close for no fault of your own.
Jeffrey B.
CEO/President, M&A Banker, Entrepreneur, SMB Wealth Creator
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I believe prior answers are all valuable, but I also believe you need to be focusing on an expected value range, not on the revenue range. If the EV is 1x Sales at the high point of your range then 10% is probably too high if you're competing to win the business. Conversely, if you take the mid-point and assume a 20% EBITDA margin and a 4x sale, for example only, the EV is only $6M, and now 8-10% is definitely not out of the question. You also need to consider some other variables in your pricing, some but not all of which include: 1) Are you going to offer the business plan and valuation for free and/or severely discounted in exchange for winning the sale role? If so, you're price went up, and vice versa. 2) Will the retainer be small and creditable against your success fee? Same result. 3) Is this a 3-month part-time sales job to 5 targeted buyers at a reasonable price or a difficult 12-month dedicated true-IB effort to maximize value and sell a small company? I'm not even getting into breakup fees, tails, etc. Since you're obviously an experienced financial executive but not a business broker per se, you should probably just go to your client directly and come up with something simple: $x flat for the plan/value, y% flat based largely on a combination of the EBITDA and your true role in identifying buyers, bringing them to the table, arranging financing, and closing the deal.
