Business Brokers: A Guide for Small Business Owners
December 25, 2023 ⋅ 3 min read
Business broker agreements, also known as listing agreements, outline the terms and conditions under which a business broker will represent a seller in the sale of their business. While the specifics can vary, typical elements found in business broker agreements include:
Exclusive right to sell: This clause grants the broker the exclusive right to market and sell the business for a specified period. During this time, the seller cannot use another broker to sell the business.
Listing price and terms: The agreement specifies the listing price for the business and the terms under which the broker will attempt to sell it. This may include the minimum acceptable sale price, payment terms, and any seller financing arrangements.
Commission structure: Business brokers are typically compensated through a commission based on the sale price of the business. The agreement outlines the percentage or flat fee that the broker will receive upon the successful sale of the business.
Duration of agreement: The agreement includes the duration of the broker's representation, specifying the start and end dates. This timeframe can vary but is often negotiable between the broker and the seller.
Responsibilities of the broker: The agreement outlines the specific duties and responsibilities of the broker. This may include marketing the business, identifying and screening potential buyers, negotiating offers, and facilitating the due diligence process.
Confidentiality and non-disclosure: To protect the seller's business, the agreement typically includes provisions regarding the confidentiality of sensitive information and a commitment by the broker not to disclose confidential details to unauthorized parties.
Termination clause: This clause outlines the conditions under which either party can terminate the agreement before its expiration date. Common termination conditions include breaches of contract, mutual agreement, or failure to meet certain performance standards.
Expenses: The agreement may specify which party is responsible for certain expenses associated with the sale, such as marketing costs, legal fees, or other out-of-pocket expenses.
Protection period: Some agreements include a protection period during which the seller agrees to pay the broker a commission if the business is sold to a buyer who was introduced to the business during the term of the agreement, even if the sale occurs after the agreement has expired.
Representations and warranties: The seller typically makes certain representations and warranties about the accuracy of the information provided to the broker. This helps protect the broker in case of legal issues arising from misinformation.
It's important for both parties to carefully review and understand the terms of the agreement before signing. Consulting with legal professionals experienced in business transactions is advisable to ensure that the agreement meets the needs and expectations of both the seller and the broker. The Baton Team is here to help from getting you the highest business valuation to finding you the right buyer. We help business owners get to the closing table faster, and with more of their hard-earned money in their pockets.