Retainers by Business Brokers

2007-04-13T11:36:00.000-07:00

Retainers -vs- No Retainers charged by business brokers - what's better?
by Broker Service Network at www.brokerservicesnetwork.com

Really there is no right or wrong answer when it comes to retainer or "listing fees". The management team at Broker Service Network does not recommend that our business brokers charge ANY up front fees in a normal transaction process. BUT, we also do not necessarily think that retainers are wrong. For instance, retainer fees may be more likely in high end areas where advertising and marketing expenses are incredibly high IE: New York City or Southern California to name a couple.

The moral here is that a Retainer or Listing Fee charged by business brokers should be used and documented for expenses and services rendered. A retainer should not be used as a revenue source for the business brokers. UNFORTUNATELY, most - yes most, business brokers charging retainer or listing fees use this fee as their primary source of revenue - this is wrong!

If the business brokers you are speaking with require a Retainer or Listing Fee then...

Ask for a Fee Agreement then review it carefully and/or have your attorney review it. The Fee Agreement should be very clear on how the retainer or listing fee is being allocated and what the hourly fee charged for services that is being applied to the fee
Make sure there are no ongoing fees or escalator clauses
Ask for monthly updates on the expenditures complete with receipts for expenses
Ask for a itemized breakdown of services charged against the fee
Consider asking to have the retainer fee amount backed out of the business brokers commission

If the business brokers your are dealing with differentiate from #'s 1-4 above then find other business brokers. The commission clause in #5 above should not be a deciding factor but try.

Make sure the business brokers do all of the following.

Determination Of A Market Value For Listing
The listing
Buyer Marketing
Qualify Buyers
Get Qualified Buyers Under Confidentiality
Full Disclosure To Qualified Buyers
The Business Tour With The Qualified Buyer The Business Broker And You
The Business Financial Review To The Qualified Buyer
Due Diligence - Getting Updated Info For Qualified Buyer
The Offer
Offer Negotiations
Accepted Offer
Due Diligence Making Sure All Contingencies Are Met
Due Diligence Making Sure Financing Is In Place and Other Like Lease or Real Estate
The Closing And Dispersal Of Funds

FYI: Not only are Step #'s 13-14 above vital - it is also where many lazy business brokers falter and create the cancellation of the deal. If the business brokers you are talking to do not cover #'s 13-14 then find other business brokers.

BSN has certified all business brokers in our network at www.brokerservicesnetwork.com