There are many good reasons to consider selling your business. But before you jump in, it’s vital to get an idea of the potential costs involved. This will help you to negotiate a fair deal.
Some of the most significant fees when selling a business are those charged by business brokers, accountants and solicitors. The cost of selling a business may vary depending on the sale price, size of the company and complexity of the deal.
In this article, we’ll discuss how much it costs to sell a business (UK). We’ll also explain how you can save money by using a buy-side business broker such as Chelsea Corporate.
What Are the Costs Involved in Selling a Business (UK)?
Whatever your motivations, you’ve decided that now is the right time to sell your business. To negotiate the sale, you will need help from various professionals that specialise in mergers and acquisitions (M&A).
This may include business brokers, solicitors and accountants, among others – all of whom will charge a fee for their services. You may also need to cover certain additional costs, such as Capital Gains Tax.
Business Broker Fees
Many sellers hire a sell-side business broker to help them find a buyer, negotiate a price and close the deal. While this can save time and stress, it does come at a cost. The fees charged by business brokers vary greatly, and may include:
- A retainer: a flat fee for securing their services, charged up front or on a monthly basis. This may range from hundreds to thousands of pounds, and is payable whether or not your business sells
- A business valuation fee
- Marketing fees, usually charged per listing or advertisement placed
- A success fee, or commission, payable upon completion and calculated as a percentage of the sale price
The average broker fee for selling a business is 1-10%. This is inversely proportional to the sale price – the higher the price, the lower the fee. For example, if the broker charges 5% on a final value of £1m, you’ll pay £50,000.
While business brokers provide valuable expertise, their fees can eat into your profits. Fortunately, you can avoid costly commissions by selling off-market through a buy-side M&A expert, such as Chelsea Corporate. Buy-side business broker fees are paid by the buyer, not the seller – so you won’t have to pay a penny.
If you’re wondering who pays legal fees when selling a business, both the buyer and seller are responsible for hiring their own commercial solicitors. The solicitor’s job is to handle the legal aspects of the deal, such as:
- Preparing your company for sale (e.g. ensuring you are up-to-date with licenses and permits)
- Liaising with the buyer’s solicitor to help them conduct legal due diligence
- Drafting and/or reviewing the business sale agreement, raising any concerns and negotiating terms with the buyer
- Transferring leases and intellectual property rights
- Managing any changes to employment contracts in accordance with labour laws
Solicitors may charge a fixed fee or an hourly rate. The average solicitor fees for selling a business are around 1% of the sale price. However, more complicated sales (such as those with earn-out clauses or ongoing litigation issues) may incur a higher cost.
Your accountant will be intimately involved in the sale of your business. Among other things, it is their job to:
- Draw up historical and projected financial statements for valuation purposes
- Collate data on the business’s profits, trading and tax history as part of the financial due diligence process
- Produce the final accounts before ownership is transferred
- Deal with the tax aspects of the sale, ensuring you pay the correct amount to HMRC
If you have an in-house accountant, they may be able to handle this for you. However, if they do not have much experience in the M&A process, you may wish to have an external accountancy firm oversee the sale. They may charge up to £5,000 for this, depending on the size of the business and the amount of work required.
Finally, there are a number of additional costs that you may have to pay when selling your business. These will vary depending on the nature of the sale and any demands made by the buyer. For example:
- Conveyancing fees (if you are selling commercial property)
- The cost of renewing or obtaining relevant licenses, permits and certificates prior to selling (e.g. an Energy Performance Certificate)
- HR fees, if you need advice regarding your responsibilities to your employees
- Hire of an escrow agent to hold the funds securely until the transaction is completed
You will also have to pay Capital Gains Tax on any profit made above your tax-free allowance. The rate differs according to your income tax band. If you are eligible for Business Asset Disposal Relief, this may help to reduce the cost.
Can You Sell a Business Online for Free?
Theoretically, it’s possible to sell a business without paying any professionals for their services. However, we would not recommend it – selling a business is a time-consuming, complex process that requires extensive knowledge and experience. Without the help of M&A experts, you could end up undervaluing your business or making costly legal mistakes.
The good news is, while legal and accountancy fees may be a necessary expense, there is a way to avoid broker fees. If you’re wondering where to sell a business online free, without paying broker fees and commissions, contact buy-side M&A experts Chelsea Corporate.
Sell Your Business with Chelsea Corporate and Pay No Fees
If you’re looking to save on fees when selling a business, Chelsea Corporate can help. As buy-side M&A specialists, we are paid by the buyer – so it’s completely free to sell your business through us. We can handle everything fully remotely, so you don’t even have to leave home.
Simply provide your details and we’ll add you to our exclusive off-market database of businesses for sale. When we’ve found the perfect buyer, we’ll be in touch to negotiate a fair, market-rate deal.