In this article, we explain how three leading nationwide business brokers–Sunbelt, Transworld, and Murphy–can help you sell a business. We will compare the three and tell you who is the best business broker for small business owners.
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Best Broker for Small Businesses: Sunbelt
We selected Sunbelt as the best broker for small business owners because they have the longest track record (38 years) of successfully closing deals. They have the highest volume of businesses for sale, highest closing ratio, and highest average sale price.
|No. of Businesses for Sale at Any Given Time||Approx. 4,000||Approx. 3,000||Approx. 1,100|
|No. of Brokers Nationwide||Approx. 500 (650 including international)||Approx. 300||Approx. 180|
|Avg. Sale Price of Listed Business|
|Approx. $500K||Approx. $300K||Approx. $500K|
|Gross Revenue Range of Businesses Sold|
|$50K to $50 Million||No Minimum to $30 Million||$50K to $30 Million (net income)|
|Broker Commission at Closing|
|10-12 %||Follows industry average of 10-12 %||10-12 %|
|There may be a retainer fee, valuation fee, or cancellation fee depending on office and size/type of business||There may be a valuation fee or cancellation fee depending on office and size/type of business||There may be a retainer fee, valuation fee, or cancellation fee depending on office and size/type of business|
|Can Provide Certified Valuation Report?|
|Yes||Only for $1 million + businesses||Yes|
|Provide Confidential Marketing?|
|Screen Potential Buyers?|
Best Business Broker Overall for Small Businesses: Sunbelt
We recommend Sunbelt as the best business broker for small business owners looking to sell because they have a proven, 38-year track record of successfully closing deals better than their competitors.
Founded in 1978, Sunbelt considers themselves the largest business brokerage in the world in terms of number of listings, deals closed, and average listing price. Brian Knoderer, the President of Sunbelt, told us that at any given time, Sunbelt has about 4,000 businesses for sale, and they have offices in 37 states. They close about 2,500 deals every year. Offices have a closing ratio of 25 % up to 85 %, meaning that 25 % to 85 % of listings are sold. By comparison, the industry average is approximately 20 %. The average listing price of a business listed with Sunbelt is over $500,000, higher than the national average.
It’s not just these numbers that are impressive. Substantively, Sunbelt brings a tremendous amount of expertise and experience to the table. They have more brokers that are credentialed as Certified Business Intermediaries (CBI) by the International Business Brokers Association (IBBA) than any other brokerage firm. Why is this important? It means that Sunbelt brokers who are certified have a minimum of 3 years of education and experience in how to successfully sell a business.
Sunbelt provides a complete range of brokerage services. They will perform business valuations, confidentially market your business, screen potential buyers, and assist with financing options and closing. Sunbelt doesn’t price gouge–they follow industry standard pricing on commissions and fees. While this isn’t that different from the gamut of services provided by Murphy and Transworld, Sunbelt brings more experience to each stage of the process, which can help ensure that a deal is closed more quickly and to the mutual agreement of all parties involved.
The downside is that if you have a very small business, Sunbelt might not be a good fit. They help businesses with revenues typically between $50K and $50 Million annually. While this covers the majority of businesses, some really small mom-and-pop shops would do better with a firm like Transworld.
Best Business Broker for Very Small Businesses: Transworld
If your business is generating a very small amount of income (under $50K), then Transworld may be the best broker to choose. It’s rare to find good business brokers that will represent very small mom-and-pop shops, but Transworld has done deals with businesses netting as little as $20-25K annually, says CEO Andrew Cagnetta. Compared to Sunbelt, whose average listing price is around $500K, Transworld’s average sale price is $300K.
Transworld provides a complete range of broker services. They will confidentially advertise and market your website online, to their database of thousands of buyers, and through snail mail. Cagnetta says Transworld likely spends more money than competitors to market businesses on online channels; they have premium subscriptions on several online business-for-sale sites, which could give your business more exposure.
While Transworld is a nationwide business broker, it’s not quite as large as Sunbelt. Transworld has about half as many brokers and fewer listings than Sunbelt. That being said, Transworld has been around since 1979, so they bring a lot of experience to the table.
Best Business Broker for Valuation Services: Murphy
Murphy Business & Financial Corporation is another nationwide business broker. They are smaller than Sunbelt and Transworld, but they stand out for their business valuation services. Many of Murphy’s staff members are experts in business valuation. Russ Bieber, VP of Training & Sales for Murphy, says they offer four different types of valuations:
- Broker Opinion of Value – Broker-provided informal estimate of the value of a small business
- Calculation of Value Report – A more formal business valuation done using agreed-upon formulas
- Business Valuation Report – A formal valuation report that’s used for larger businesses, for buyouts, or if requested by the seller or buyer
- Business Appraisal Report – A formal valuation report that is suitable for use in litigation or submission to the IRS
Whether you need a quick broker’s estimate of value or a more in-depth valuation report, Murphy has several options for businesses needing a valuation. Their formal valuations are done in compliance with the Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice or the Institute of Business Appraisers’ Business Appraisal Standards.
Most small businesses don’t sell because they are priced inaccurately. Murphy has a great deal of expertise in business valuation to help ensure that the seller’s and buyer’s expectations match more closely.
Another area where Bieber says Murphy stands out is the training provided to brokers. Brokers must do an extensive 1-week training on site at Murphy’s Florida headquarters and a case study showing that they know how to successfully sell a business. Bieber credits the training system with Murphy’s success. Murphy’s closing ratio is roughly twice that of the national average.
In-Depth Review and Comparison: Sunbelt vs. Transworld vs. Murphy
Before we get to the in-depth comparison of Sunbelt, Transworld, and Murphy, it’s worth taking a minute to understand why having a business broker is important.
According to data from the US government and business marketplace BizBuySell, over 500,000 businesses are bought and sold each year! Only a small fraction of these transactions, about 20 percent, are handled by business brokers. Many sellers don’t know what a business broker is or the benefits of using one.
If you’re planning to sell your business, hiring a broker can help ensure that you get the right buyer and a fair price. Traditionally, brokers represent the seller, and the seller pays the broker’s commission. That’s how Sunbelt, Transworld, and Murphy work. However, buyer representation is becoming more common. For more buyer resources, click here.
Here are the main ways brokers can help:
- Finding and Screening Potential Buyers. A business broker’s primary goal is to help the seller find qualified, interested buyers for the business. Business brokers will market your business for sale on online and offline channels, screen buyers for financial eligibility and fit, and help you evaluate offers.
- Confidential Marketing. In a business sale, confidentiality is critical. If employees, vendors, or customers get wind that a business is up for sale, it can damage morale and ultimately hurt the value of the business. Brokers will ask buyers to sign confidentiality agreements before revealing your business’ identity.
- Business Valuation. Most business brokers will provide a value estimate for your small business once you retain them. Some, for an extra fee, will even provide a certified appraisal. The ultimate goal of valuation is to make sure the seller gets a fair but realistic price for the business. During price negotiations, the broker can act as an intermediary between seller and buyer.
- Financing Options. Business brokers will often have relationships with banks that can help provide the buyer with financing options for purchasing the business.
- Paperwork and Closing. Business brokers can be immensely helpful in making sure all the paperwork that’s needed in a business sale gets completed. They will bring together all the parties that are needed at closing, including the buyer, seller, attorneys, and accountants.
If you hire a broker, we suggest first checking if he or she is certified. 17 states (as of 2013) require business brokers to be licensed by the state’s real estate licensing body. The International Business Brokers Association (IBBA) is a private organization that provides credentials for brokers who have met specific education and experience requirements. Many (but not all) brokers retained by Sunbelt, Murphy, and Transworld are accredited as Certified Business Intermediaries (CBIs) by the IBBA–Sunbelt has the largest percentage of CBI brokers compared to other firms.
How Much Does A Broker Cost?
When you retain a broker to assist you with selling a business, you have to sign a listing agreement (aka engagement or retainer agreement) specifying that you will work exclusively with the broker for a certain period of time (usually 1 year).
The listing agreement will also specify any costs you are responsible for, of which there are four primary ones:
- Broker Commission – The industry standard commission is 10-12 % of the sale price of the business. This scales down for businesses valued over $1 million. We weren’t able to get specifics on how much it scales down, but the commission is negotiable.
- Retainer Fee – Some brokerage offices will charge an upfront retainer fee when you engage them to represent you and sell your business. The size of the fee varies significantly, from as little as $100 to as much as $1,500 or $2,000 for larger businesses.
- Valuation fees – There are two types of valuations, and there may be a charge for either or both.
- Broker Opinion of Value (BOV) – BOV is the broker’s estimate of the business’ value based on business financials, industry, business size, brand value, and several other factors. Some broker offices charge no additional charge for a BOV, while others do charge a separate fee.
- Certified Appraisal – With large transactions or complex ones, the seller or buyer may want a certified business appraisal and report. This may be done either in-house or through a third party. There’s usually an extra fee as certified appraisals require a significant amount of time and expertise. Certified appraisals generally start at around $5,000.
- Cancellation/withdrawal fee – If you walk away from the deal before the period specified in the contract, many brokers charge a cancellation fee or the entire 10-12 % commission.
Ultimately, if a broker tells you, “We don’t get paid unless the deal goes through,” that may or may not be true. You should carefully review your listing agreement with the broker to make sure you know about all fees in advance.
In general, most offices do not charge advanced fees, but only get paid a commission when the business sells. That being said, Knoderer did say that some offices may charge an upfront retainer fee. This is generally more prevalent with larger, more sophisticated sales.
Transworld – Pricing may vary from office to office. According to several sources, the industry average commission for most business brokerages is 10-12 %. When asked, Andrew Cagnetta confirmed that Transworld follows similar pricing as that of the industry. Transworld brokers do not charge a retainer fee, but cancellation and valuation fees may be charged. Contact your local Transworld office for more details.
Types of Businesses Represented
When selecting a broker, you should make sure that they cater to your size and type of business. If you have a small mom-and-pop bakery, for example, you probably shouldn’t choose a broker that specializes exclusively in multi-million dollar mergers and acquisitions. In addition, if you can find a broker that has special expertise in your industry, that can be helpful when it comes to valuing the business, marketing to potential buyers, and helping you negotiate a fair price.
Transworld – An advantage of Transworld is that they work with even the smallest of small businesses. They’ve worked with businesses doing as little as $20-25K in yearly revenues, and they don’t have a hard minimum. On the other end, they’ve also done deals for businesses that are doing as much as $30 Million in yearly revenues. Transworld works with a variety of industries, and they represent both independent businesses and franchises.
Business Valuation Services
Without knowing how much your business is worth, you can’t attract potential buyers. A broker can help you value your business. There are two main types of business valuation that business brokers can provide to you:
- Broker Opinion of Value (BOV) – BOV is an estimate of the business’ value based on business financials, industry, business size, brand value, and several other additional factors. To give the BOV, the broker will typically visit your place of business, collect business financial information and other pertinent information, and assess local market conditions. Some brokers charge no additional fee for a BOV, while others charge a separate valuation fee.
- Certified Appraisal & Valuation Report – In many cases, a BOV is enough to close a deal. However, with more complicated transactions, the seller or buyer may want a certified business appraisal and report. This may be done either in-house or through a third party, depending on the broker’s and office’s abilities.
Business valuation can be a complicated process, but one that’s crucial to getting you a fair price on your business. To learn about the factors that go into valuing a business, click here for our Guide to Business Valuation.
Finding & Screening Buyers
The goal of every good broker is to find a qualified, appropriate buyer for your small business. Brokers will market your business for you to potential buyers on various channels. They may list your business on business-for-sale websites, utilize internal databases of interested buyers, send out direct mail, or talk with buyer’s brokers in the local area.
Confidentiality is very important throughout a business sale. Brokers will keep the identity of your business confidential so that employers, vendors, and customers won’t know that the business is being sold. Only after a prospective buyer has signed a confidentiality agreement will the broker reveal the identity of the business. Until that point, your business will be described in general terms (e.g. “large office supply store” instead of “Office Max”)
When buyers show interest in a business, the broker will screen them to find those that are the best fits by requesting the buyer’s resume and financial history. If multiple buyers make an offer, the broker will help you evaluate the pros and cons of each offer.
A business broker can be invaluable in helping you sell your small business, finding the right buyer, and getting a fair price. The three leading nationwide business brokers–Sunbelt, Transworld, and Murphy–provide a complete package of brokerage services that will help you do just that. We recommend Sunbelt overall because they are the largest and have the longest track record.
For those small business owners interested in selling their business but uncertain of how much it’s worth, consider partnering with Business Exits. They specialize in selling businesses that earn between $250K and $3MM in annual profit and offer a free business valuation when you partner with them