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Are business transfer agents worth the money paid to them?
The biggest competitor to a business transfer agent is the client. The seller of a business often incorrectly thinks that they can save money by selling a business privately without the aid of an agent, however the seller of that business 99% of the time is worse off. Why? Well let us assume that an agent would have charged £4,750 to sell a business worth £95,000. This fee covers the cost of writing the sales memorandum, advertising the business, answering enquiries, qualifying the buyer, arranging meetings, answering queries, negotiating the selling price and writing head terms. In addition the agent is there to act as a go between the parties solicitors and accountants, have I missed anything out? Probably. So let us break down the costs involved in selling a business and undertaking these duties. Advertising a business on Daltons.com and businessesforsale.com for a 2 months period is c. £200, and an advert in Daltons Weekly would cost £50 a week. Often businesses do not sell immediately so up to a years advertising is necessary. Advertising costs of c £1,000 are not unusual. A seller of a business should also include within his “costs”, his hourly rate. This could quite easily be £100 an hour, the seller’s effective earning rate. However, a seller of a business often does not appreciate that work is happening behind the scenes and believes that nothing is happening, as he is not informed of every aspect of the work undertaken. It is not unreasonable for the seller without the aid of an agent to spend 30/40 hours time dealing with these enquires. This “cost” represents some £4,000 in lost earning time. So the true cost of not employing an agent can be much more than the agent’s fee, and we have not touched upon the value of the agents expertise and negotiating skills meaning that often they can obtain a higher price for the business than the owner. Nor in fact the loss of confidentiality as a seller may have to disclose the name of the business at a much earlier stage of his process. So if a seller thinks that he can save money by selling his business personally perhaps he should look at the true cost of doing so and recognise the true benefit of employing a good business transfer agent.
7 Responses to “Are business transfer agents worth the money paid to them?”Leave a Reply |
30/04/2010 at 03:31 pm
Advertising a business for 2 months on the Daltons website costs £99.95, not £200 : http://www.daltonsbusiness.com/addbusinesslogin.aspx?new=1
30/04/2010 at 05:15 pm
I know the cost of advertising on daltonsbusiness.com is currently a tad under £100, however buyers have favourites and there is a completely different set of buyers who are registered with businessesforsale.com.
The cost of advertising with businessesforsale.com also needs to be added to this cost as well. So the cost would be c £200 for two months advertising.
06/05/2010 at 02:48 pm
What’s the difference between buyers on daltonsbusiness.com and on businessesforsale.com? is there any sector where this is better to advertise on businessesforsale.com and others on daltonsbusiness.com? Thanks!
06/05/2010 at 03:49 pm
I think business buyers have favourite websites either the enquiry comes through businessesforsale.com or daltonsbusiness.com.
Not many times do I get the same enquiry from the same potential buyer through both websites.
I think that the buyer that finds a website they like and sticks to it, I don’t have enough data to recognise any particular trend within any sectors.
11/05/2010 at 09:16 am
I just met a lady at a newsagency yesterday who called me out to sign up as a client - only to have her apologise that she had signed-up with another agent who had called back “on spec” and convinced her to sign up with them. This, and telephone pestering is happenning more and more and people are not making sensible decisions based on facts. Unfortunately many agents now overvalue and make optimistic claims about how easily they can find buyers; and the for clients, the highest valuation is always right! As an agent, we can’t help people who won’t help themselves and its always the honest agent who loses out in this process.
01/11/2010 at 06:04 pm
what an incredibly misleading article as all your analysis is based on the business being sold. what normally happens is an agent charges a large up front fee, gets the business owner to sign an exclusive contract and then (unless the business is VERY easy to sell) forgets them. Meanwhile the business owner can’t get released from the contract without paying a large redemption fee and his/her motivation collapses as no buyers walk through the door. Transfer agents work for no-one but themselves. Avoid them.
01/11/2010 at 06:19 pm
I dont agree with Danny’s comments that business transfer agents work for no one but themselves, as many legitimate agents do add value.
Clearly though Danny has fallen foul to one of a small number of business transfer agents who do not act in the clients best interest.
The moral of the story is that a potential client should fully research the market before signing a contract, as they would have found plenty of similar complaints about certain business agents.