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
