Planning to Sell Your Business? Here's How to Build the Dream Team to Bag a Successful Sale
If you're aiming for a successful exit, it's important not to overlook these professional service fees for selling a business.
There is a notably high exit rate observed among small businesses around the world. In both Australia and the United Kingdom, nearly 60 per cent of small businesses fail in the first three years of their operations, while in the United States, 50 per cent fail in the first five years. On the other hand, enterprises that have successfully endured for years or decades face a new challenge: a growing number of baby boomer business owners are approaching retirement and planning to exit their businesses in the coming years.
Especially considering the current landscape, creating an exit strategy becomes even more crucial for minimising financial detriments. However, many business owners often hesitate to hire professionals to help them execute a business sale — likely stemming from concerns about the cost of these services and a belief that handling the sale independently would be feasible. Sadly, the truth of the matter is undertaking an exit on your own can be fraught with risks that may ultimately cost more in the long run.
A more reliable approach is to engage professional services that are essential for facilitating a successful exit. By covering the associated costs and making the investment, all legal, financial and strategic aspects can be meticulously handled by experts in their respective fields.
In this article, we will discuss why enlisting help from professional service providers is a step that you must not overlook.
3 reasons why enlisting professionals pays off
Selling a business is a complex dance with legal, financial, and strategic considerations, and navigating the process without an expert to guide you can be daunting and risky. Here are some reasons to actively seek professionals before officially putting your business up for sale:
They have the market knowledge and expertise.
Professionals like brokers, lawyers, accountants and M&A advisers possess in-depth knowledge of business sales, country-specific regulations and tax implications. They can guide you through the intricate process, saving you time, stress and potential legal or financial pitfalls. Their expertise enables you to comply with all relevant laws and make informed decisions that benefit your sale.
They can help you develop a watertight sales strategy.
Hiring professionals to handle your exit will likely make every step of your strategy easier to navigate, from valuation and marketing to negotiation and due diligence. Lawyers make sure contracts are ironclad to protect your interests. Brokers connect you with qualified buyers and manage the bidding process to maximise your return. Accountants make sure financial records are accurate and advise on tax minimisation strategies. Experienced advisers can anticipate and navigate potential roadblocks that may arise during negotiations, saving you valuable time and fostering a smoother transaction.
They bring valuable objectivity to the sales process.
Because of your emotional attachment to your business, you might undervalue it or overlook key aspects. Professionals can position your business for optimal buyer interest and identify areas to strengthen your market preparation pack or even a blind teaser. By enlisting their assistance, you not only safeguard your financial interests but also ensure a more efficient and successful business sale.
What are the fees for selling a business?
We’ve already established why engaging professional services is important for navigating the complexities of selling a business and improving your return on investment. Now comes the hard part: These services come at a cost.
Let's look at the main professional fees typically associated with selling a business.
Business broker fees
Business brokers are professionals who assist in the sales process of a business. They offer expertise in areas such as small business valuation, marketing and negotiations with potential buyers. The broker fee for selling a business in Australia, the UK or US typically ranges from 5 to 15 per cent of the final sale price, with variations based on the size and complexity of the deal.
M&A adviser fees
Beyond the core functionalities of a broker, corporate advisers can offer more strategic guidance throughout the sales process, often catering to mid-sized companies. While mostly supplementary, their services such as market analysis, buyer targeting, negotiation strategy development and post-sale transition assistance can aid in landing a higher sale price and an easier turnover. Engaging an adviser can be particularly beneficial for complex transactions or when the business owner lacks extensive experience in selling a business.
Advisers’ average commission for selling a business vary based on the scope of services required and the adviser's experience level. Some advisers charge an upfront fee based on an agreed-upon fixed percentage of the sale price (often within the 1 to 10 per cent range for an Australian business). On the other hand, others may work on a retainer basis, with monthly fees ranging from AUD 3,000 to 15,000. A separate success fee, which incentivises the M&A adviser to achieve the highest possible price for the seller, can also be expected.
In the UK, M&A advisers typically charge an engagement fee between £30,000 to £100,000 or more, depending on the size of the transaction and amount of upfront work required. US-based advisers may require a success fee of approximately 2 to 8 per cent.
Accountant fees
Accurate and up-to-date financial records are essential for attracting serious buyers and making the due diligence process smooth and problem-free. Business owners would be hard pressed to sell a business without this step, as most buyers expect a proper forensic review of the company's finances. Accountants are vital in keeping your financial records compliant and readily available for potential buyers. Their services may include preparing financial statements, tax returns, and other necessary documentation.
The charge out rates for accounting services in Australia can vary greatly depending on the complexity of the business and type of service you require. Most small business accountants charge between AUD 70 to 250 per hour, while tax accountant fees can go up to AUD 1,000. In the UK, smaller enterprises can expect to pay anywhere between £60 to £450 monthly for a comprehensive accounting service. Meanwhile, annual rates for US-based accounting practices can range from USD 1,000 to 5,000, with tax-specific services averaging around USD 146 to 457.
Legal fees
Legal counsel is indispensable for navigating a business sale. Lawyers draft and review contracts, handle negotiations and guide you through due diligence procedures. Working with a reputable lawyer can ensure your interests are protected throughout the sale and minimise the risk of legal complications.
Their fees can vary significantly based on the deal's complexity and the lawyer's experience level. For Australian businesses worth AUD 5 million to AUD 100 million, this could cost anywhere from AUD 35,000 to AUD 100,000. Meanwhile, larger or more intricate transactions could incur higher legal costs. On top of these are the due diligence costs, which are often around AUD 30,000.
For both UK and US, solicitors or lawyers typically charge a fixed fee based on an agreed-upon percentage of the sale value, with approximately 1 to 2 per cent for UK and 1 to 4 per cent for US.
Build a robust exit strategy with Stellar
While the cost ranges presented above provide a general idea, it's important to remember that the final figure will vary significantly based on several key factors such as:
Business size and complexity
Final sale price
Geographic location
Understanding these factors and their potential impact on the overall cost of selling a business can enable SME owners to make informed decisions when choosing professional service providers and planning their sale strategy. To make sure you get the right people by your side, enlist Stellar as your advocate throughout the sale process and enjoy a successful sale.
With our exceptional Interstellar Ecosystem, comprising reputable companies across various fields of expertise, you won’t need to search far and wide for professional service providers. As seasoned seller advocates who have helped several clients close successful business sales through the years, we can connect you with top-tier professionals to guarantee the best deal for you.
Working with a Stellar consultant means maximising your chances of success. We'll develop a foolproof exit strategy for your company that illuminates new opportunities for venturing into new endeavours and guide you through each step of realising this strategy. Learn more about our team by visiting this page.
Do you want to assess your readiness for a business sale before hiring a consultant? Try our self-paced assessment here and receive a personalised report outlining your performance in four key areas, along with industry-aligned tips for improvement.
