A business broker values the business, prepares it for scrutiny, finds and vets buyers, runs the negotiation and holds the deal together through due diligence. In New Zealand they are licensed under the Real Estate Agents Act 2008 and are usually paid a success-based commission.
The visible part of the job is finding a buyer. The part that determines whether you get a good outcome is everything around it:
It depends on what you need. If you already have a committed buyer at an agreed price, such as a family member, a long-standing manager or a competitor you deal with regularly, a good accountant and a good solicitor may be all you need.
A broker earns their fee in three situations: when you do not have a buyer and finding the right one is the whole job, when the sale has to be kept quiet, and when having more than one qualified buyer at the table is worth more than the commission. In the $1 million to $15 million range those three situations cover most sales.
Almost always on success. A commission becomes payable when the sale completes, usually calculated as a percentage of the sale price, frequently on a sliding scale so the rate reduces as the price rises. Some engagements include a modest upfront fee for preparation and marketing work, which is normally credited against the commission.
What matters more than the headline percentage is what the agency agreement says about the term, how it ends, whether the commission is payable if you sell to a buyer you found yourself, and how long after the agreement ends a commission can still be claimed on an introduced buyer. Read those clauses, and ask about anything you do not like the look of.
Fee structures vary between firms and between engagements. Ask any broker for their fee in writing, with a worked example at your likely sale price, before you sign an agency agreement.
Selling a business in New Zealand is real estate agency work, so a business broker must hold a licence under the Real Estate Agents Act 2008. That brings obligations that matter to a seller: a duty to exercise skill, care, competence and diligence, a duty not to mislead or withhold material information, mandatory disclosure of conflicts of interest, a written agency agreement, a client money regime, and a complaints process that ends with the Real Estate Authority rather than with the firm.
An unlicensed person cannot lawfully do this work for you, and cannot be held to those standards if something goes wrong. Ask to see the licence.
Ask questions that have specific answers:
The answer to the first question is the one that separates firms. A broker who mostly sells cafes at $300,000 is a good broker for a cafe and the wrong broker for a $3 million manufacturer, and the reverse is equally true.
When the business is really a job with no transferable value, when the owner is not genuinely ready to leave, and when a buyer is already committed on agreed terms. In the first two cases a good broker will tell you so rather than take the listing, and in the third you are paying for an introduction that has already happened.
The commission is success based, so it is payable on completion. Some engagements carry an upfront preparation or marketing fee that is payable regardless and normally credited against the commission on settlement. Ask for the position in writing before signing, including what happens if you withdraw partway through.
Most agency agreements in New Zealand are exclusive for a fixed term, so in practice no. Two brokers marketing the same confidential business also doubles the number of people who know it is for sale, which works directly against the thing you are trying to protect.
A commercial agent sells the property. A business broker sells the operating business, which is the earnings, the contracts, the plant, the staff, the goodwill and sometimes a lease on premises somebody else owns. They are different transactions with different due diligence, and where the business owns its premises the two often run side by side.
A confidential conversation with one of our brokers, at no charge. You will get a straight answer, including if the answer is to wait.
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