M&A Advisor vs Business Broker

Has the time come to sell your business? As part of your due diligence, before you offer your business for sale, it’s essential to choose the right broker. You want to find the best intermediary to work with you and help sell your business. This means taking care to see what services you need and are available.   

Before you contact a business intermediary, the following will help you to know. To help you make an informed decision, we’ve compiled a need-to-know guide about the different business intermediary services and how they relate to your business. 

Tips to Choose the Right Broker for Your Business

To ensure you make the best decision, review these tips to choose the right broker as well as a due diligence checklist for selling a business. 

What Industry sector does your Business Belong to?

Before you choose either a Business Broker or M&A Advisor, you should determine what industry sector your business belongs to, as this will guide the process to determine the value of your business. One of the determinants of the value of your business and the category it will fall into is your annual revenue:

• Main Street Business: Up to $2M in annual revenue
• Lower Middle Market: $2 - $50M annual revenue
• Mid-Market: $50M and above annual revenue

What is the Difference Between a Business Broker and an M&A Advisor?

The main difference between a Business Broker or M&A Advisor is that Business Brokers tend to focus on Main Street businesses with annual revenue of less than $2M while an M&A Advisor will focus on selling a business with $2M and above in annual revenue, 

M&A Advisors, deal with larger   transactions that can span multiple businesses with many locations. M&A Advisors can also handle complex transactions and business mergers, often dealing with multi-million dollar transactions. 

Ultimately, a business broker best serves main street businesses, while M&A advisors best fit lower and mid-market businesses. 

Finally, knowing your annual revenue, look at your financial statements, or even consider having a third party review the quality of your financial statements.  If your financial statements are not accurate you not only have virtually zero chance of selling your business, you also run the risk of a frustrated buyer wanting compensation for the hours of work they have done with their advisors plus more.

What Fees do Advisors vs. Business Brokers Charge?

Another component to consider when selling your business is the associated fees required for either a business broker or M&A Advisor. 

Business Brokers Fees

Business brokers will typically charge an initial fee to value the business plus a10% commission fee, otherwise known as a success fee. However, this fee is not concrete or regulated. The rate may fluctuate, but the standard fee across the board is 10%. 

Sell-side M&A Fees

M&A Advisor fees may not be as straightforward or as standard as business broker fees. M&A Advisors instead have a range of fees with a range of costs depending on the various services they provide and the deal components. 

One factor you’ll see that will influence sell-side M&A fees is the potential of the deal. M&A firms recognize that not every sale is successful; therefore, they will not invest their time and resources into deals they don’t think will sell. Because of this, you’ll see some firms reject clients even with expensive upfront retainers offered. 

Administrative and regulatory factors will also impact fees. Since M&A Advisory firms may have large networks and multiple divisions working together to make a sale, they may require significant administrative fees to recover. 

For a Lower Middle Market or Mid-Market M&A  advisory firm, you might want to check out RBS M&A Advisors or Andrew Rogerson, M&A Advisor.

What Do Business Sellers Get for Their Investment?

One of the most important factors to consider when selling your business is what you will get for your investment. You want to make sure that you’re getting the best possible results when you exit your company. Depending on your choice, you can expect different outcomes from either the business broker or M&A advisor. 

Conclusion

Before you hire a Business Broker or M&A Advisor, understand what’s out there so you can decide what works best for you. The most important ingredient in your final decision is Trust.  Do you feel comfortable that the person you are hiring will have your best interests at heart and communicate clearly during the sale of the business with all its many moving parts?.

If you are a retiring business owner looking to exit your lower middle market business in California, here are five tips to get you started:

1. Don't wait until the last minute to start planning your exit. The process of selling a lower middle market business can take a long time, so it's important to start early.

2. Have a clear idea of what you want to get out of the sale. Know your goals and what you're willing to negotiate.

3. Choose the right type of buyer. Not all buyers are created equal, so do your research and find the right one for your business.

4. Be prepared for a lot of due diligence. M&A buy-side due diligence is when buyers will want to know everything about your business, so be ready to provide documentation and answer questions.

5. Be flexible with the terms and conditions of the deal. It's important to be open to negotiation to get the best possible deal for your business.

Rogerson Business Services, also known as, California's lower middle market business broker is a sell-side M&A advisory firm that has closed hundreds of lower middle-market deals in California. We are dedicated to helping our clients maximize value and achieve their desired outcomes. 

We have a deep understanding of the Californian market and an extensive network of buyers, which allows us to get the best possible price for our clients. We also provide comprehensive support throughout the entire process, from initial valuation to post-closing integration. 

Our hands-on approach and commitment to our client's success set us apart from other firms in the industry. If you consider selling your lower middle market business, we would be honored to help you navigate the process and realize your goals.

If you have decided to value and then sell your lower middle market business or still not ready, get started here, or call toll-free  1-844-414-9600and leave a voice message with your question and get it answered within 24 hours. The deal team is spearheaded by Andrew Rogerson, Certified M&A Advisor, he will personally review and understand your pain point/s and prioritize your inquiry with Rogerson Business Services, RBS Advisors.