I'm planning to sell my HVAC business next year and keep going back and forth on whether to use a broker. I've had two brokers quote commissions around 8-10% of sale price, which on a $1.2M sale is $96k-$120k. That feels like a huge chunk. But I've also heard that trying to sell without one can lead to legal messes and lower offers. Has anyone actually run the numbers on both sides? What did you net after all costs?
Sale Costs
The financial breakdown of selling with vs without commission
We sold our landscaping company last year without a broker. Saved the commission but spent aboxut $18k on a business attorney and accountant to review everything. Net was still much higher than if we'd paid 9%. The buyer was a competitor who approached us directly, so we didn't need to market it.
That's the key though, you already had the buyer. Most owners don't. Marketing a business quietly and vetting buyers takes months. A broker's fee often covers that plus negotiation. But 10% does sound high. Did you try negotiating the the rate?
I looked at this from an accounting angle. Brokers claim they get you a higher sale price to offset the commission. In my experience, that's not always true. The final number is usually within 5% of what you'd get on your own if you're in a hot industry. But the process is way less stressful with a broker.
OP, what's your EBITDA? That changes the math. If youre at $300k EBITDA, a 2.5x multiple difference between a broker-led sale and a DIY sale is way more than the commission. But if you're smaller, the commission eats a bigger percentage of your net.
EBITDA is around $280k. I hadn't thought about it that way. Pinecone88, I did try to negotiate one broker down to 7% but they wouldn't budge below 8.5%. RustyGear, how did you handle confidentiality without a broker? I'm worried about employees finding out.
We had the buyer sign an NDA before any numbers were shared. Only my top manager knew, and only after the LOI was signed. It worked because the buyer was already in the industry and understood discretion. A broker would have handled that layer, but it's doable yourself if you're careful.
Don't forget the hidden costs of DIY: yoqur time. I spent 15-20 hours a week for five months on buyer calls, document prep, and negotiation. If you value your time at even $100/hr, that's $30k-$40k. Plus the emotional drain. Sometimes paying the commission is worth it just for that.
One more thing, a broker's fee is often paid by the seller but the buyer's broker fee can be separate. Make sure you read the fine print. Some listing agreements add a 2-3% buyer-side commission on top.