Business broker fees in the UK

Most owners asking what a business broker costs are also asking whether the broker is worth it. The answer to the first depends on the engagement letter far more than on the percentage quoted in the first meeting. The answer to the second depends on something you already know, which is whether you need help finding a buyer at all.

This guide covers who does what, how the fees are built, the terms that cause the most regret, and when you can do without a broker.

Broker, corporate finance adviser, or neither

Three routes cover almost every owner-managed sale in the UK.

A business transfer agent or business broker markets the business to buyers the owner does not know. The typical work is a valuation to set the asking price, an anonymised teaser, advertising on listing sites and to the broker's own buyer list, handling enquiries and non-disclosure agreements, arranging viewings, and relaying offers. Brokers tend to work at the smaller end of the market: shops, pubs, restaurants, care homes, trade businesses and small service companies. Many handle a large number of instructions at once.

A corporate finance adviser is usually engaged on larger or more complex companies. The work goes deeper: preparing an information memorandum, approaching a targeted list of trade and financial buyers, running a competitive process, negotiating structure as well as price, and managing the deal through due diligence to completion. They take fewer instructions and are more selective about which they accept. Some corporate finance advisers are authorised by the Financial Conduct Authority, and you can check any firm's status on the FCA's Financial Services Register.

Selling privately means you find or already have the buyer, and you pay a solicitor and an accountant for the legal and tax work, usually on time spent or a fixed quote. You carry the marketing, the enquiries and the negotiation yourself.

The distinction matters because the fee is paying for different things. A broker's fee is mostly paying for reach and process. A corporate finance adviser's fee is mostly paying for negotiating strength and deal management. Neither is paying for the legal work, which you will need and pay for separately on every route.

How broker fees are structured

There is no official scale for business broker fees in the UK and no public body that collects or publishes them. Any figure you see online is one firm's pricing or one commentator's estimate, and you should treat it that way. What is consistent is the shape. Most engagement letters combine some of the following.

The success fee

A fee paid on completion, usually calculated as a percentage of the sale price. This is the part most people mean when they say what a broker charges. Three details change what it actually costs you:

• What the percentage is applied to. The headline price, the price including deferred and contingent consideration, the price including stock and property, or only the goodwill. On a sale with a large earn-out or a freehold, this can change the fee more than the percentage does.
• When it is payable. On completion on the whole price, or as each deferred payment is received. Paying a fee on money you may never receive is a real risk if part of the price is conditional.
• Whether VAT is added. A quoted fee is often exclusive of VAT.

The minimum fee

Many brokers set a minimum success fee. On a smaller sale the minimum, not the percentage, is often what you pay. Work out the fee at the price you realistically expect, not the asking price.

The upfront or marketing fee

A fee paid on signing, or in instalments soon after, to cover the valuation, the listing and the advertising. It is usually non-refundable and is payable whether or not the business sells. Some brokers deduct it from the success fee if a sale completes; many do not.

The retainer

More common with corporate finance advisers than with brokers: a monthly or staged fee for the work done during the process, sometimes credited against the success fee. A retainer is not unreasonable where the adviser is doing substantial work over many months. It is worth knowing exactly what it buys and how you stop paying it.

Exclusivity and tie-in clauses

Almost every engagement letter asks for some form of exclusivity for a minimum period. The wording matters:

• Sole agency usually means the fee is due if the business is sold through any agent during the period, but not if you find the buyer yourself.
• Sole selling rights usually means the fee is due if the business is sold to anyone during the period, including a buyer you found without the broker's help.
• A tail or introduction clause makes the fee payable if you sell, within a set period after the agreement ends, to someone the broker introduced, and sometimes to anyone at all.
• Notice periods and automatic renewal decide how long the tie-in really lasts.

The exact effect of any clause depends on how it is drafted, which is why the definitions section of the letter deserves more of your attention than the fee schedule.

Is a business broker regulated?

There is no licence to act as a business broker or business transfer agent in the UK, and no regulator that oversees business sales as such. Two pieces of law can still reach a broker's work.

The Estate Agents Act 1979. The Act applies to estate agency work, which it defines as work done in the course of a business, on a client's instructions, to introduce a person who wants to acquire or dispose of an interest in land, and to secure that disposal or acquisition (section 1). An interest in land includes a freehold and a lease that has a capital value which can be realised on the open market (section 2). So a broker selling a business that comes with its freehold or a valuable lease may be doing work the Act covers.

Where the Act applies, section 18 requires the agent, before the contract is entered into, to tell the client in writing when they will become liable to pay, the amount or how it will be calculated, and any other payments due. A contract made without that information is not enforceable by the agent unless a court orders otherwise. The Act is enforced by National Trading Standards, whose lead enforcement authority is operated from Powys County Council and can issue prohibition and warning orders against people found unfit to do estate agency work.

Money laundering supervision. HMRC's guidance lists "business brokers or transfer agents brokering the sales or transfer of client businesses to third parties" among the businesses that must register with it, where they carry out estate agency work as defined in section 1 of the Act (HMRC). It is reasonable to ask a broker whether they are registered.

None of this replaces reading the contract. Most of what goes wrong with brokers comes from the terms agreed, not from any breach of statute.

The red flags

The complaints owners make about brokers fall into a small number of patterns, and each is visible before you sign.

A large upfront fee with no link to a sale. A broker who is paid well on signing has already earned most of their money from you. That does not make every upfront fee wrong, but it changes the incentive, and the larger it is relative to the likely success fee, the more it matters.

A valuation that is higher than anyone else's. Brokers compete for instructions, and the easiest way to win one is to tell the owner a bigger number. A business priced above what buyers will pay sits on the market, goes stale, and is eventually sold for less than it would have fetched at a realistic price. Ask how the valuation was reached, which earnings figure and which multiple, and compare it against your own understanding of how UK businesses are valued and the multiples buyers pay by sector.

A long exclusive tie-in. A minimum exclusive term running well beyond the time a sale typically takes, combined with automatic renewal or a long notice period, can keep you with a broker who has stopped working on your business.

Sole selling rights you did not notice. If you already have a likely buyer in mind, a sole selling rights clause can mean paying a success fee on a sale the broker had nothing to do with.

Vagueness about what the fee buys. "Marketing" can mean a listing on a website and nothing more. Ask what will actually happen in the first month, and who will do it.

Questions to ask before signing an engagement letter

1. How did you reach the valuation?

   Ask for the earnings figure, the adjustments, and the multiple, in writing. If you cannot follow the reasoning, a buyer will not accept it either.

2. What exactly is the fee calculated on, and when is it due?

   Headline price or total consideration, goodwill only or including stock and property, all on completion or as deferred payments arrive, and whether VAT is on top.

3. What is non-refundable, and what is credited back?

   Get every upfront, marketing and retainer payment listed, with a clear statement of whether any of it comes off the success fee.

4. Is this sole agency or sole selling rights?

   And what happens if you find the buyer yourself, or already have one in mind. Name any existing contacts in the letter as excluded.

5. How do I end the agreement, and what survives it?

   The minimum term, the notice period, any automatic renewal, and the length and scope of the tail clause.

6. Who will actually work on my business?

   The person in the first meeting is not always the person who handles the instruction. Ask how many live instructions that person holds.

7. What have you sold that looks like mine?

   Recent completions in your sector and size band, not listings. A broker who has sold similar businesses usually has buyers who want them.

8. How will confidentiality be handled?

   What goes in the teaser, when your name is released, and to whom. Our guide to confidentiality when selling a business sets out the stages to expect.

Have a solicitor read the letter before you sign. The cost of an hour's review is small next to a fee clause that applies to a sale the broker did not make.

When a private sale or a marketplace makes more sense

A broker is paying for reach and process. If you do not need the reach, much of the fee buys you little.

You already know the buyer. A competitor who has asked before, a supplier or customer looking to integrate, a management team ready to buy you out. The work that remains is valuation, negotiation, heads of terms, due diligence and the legal close. An accountant and a solicitor cover most of it, and a corporate finance adviser on a fixed or capped fee can cover the negotiation if you want support.

The business is small and easy to describe. Buyers for straightforward businesses are often searching listings directly. A clear listing, a prepared information pack and a realistic price can do much of what a broker would do. Listing on Attainer charges no success fee, and brokers are never charged.

You have the time and the temperament. Selling privately means answering enquiries, qualifying buyers, managing NDAs and negotiating face to face. Some owners do this well. Others find that the emotional distance a third party provides is worth paying for.

A broker or adviser usually earns their fee when the buyer pool is unknown and needs building, when several buyers need to be run against each other, or when the owner cannot spare the time from running the business. Whichever route you choose, the same things decide the outcome: accounts a buyer can trust, a price grounded in evidence, and a document pack ready before anyone asks. Our step by step guide to selling a business covers the whole process, and the sell and valuation pages are the place to start if you want to test your price before choosing. Brokers will find more on the for brokers page.

A short checklist

• Work out the total fee at a realistic sale price, including any minimum fee and VAT.
• List every payment due whether or not the business sells.
• Read the exclusivity wording, the tail clause and the notice period before the fee schedule.
• Exclude any buyers you already know by name in the letter.
• Ask how the valuation was built, and compare it against independent evidence.
• Get a solicitor to read the engagement letter before you sign it.

The percentage is the part everyone asks about. The clauses around it are the part that decides what you actually pay.