Selling Your Online Business, Part 2 – Who is this broker?

So, you have decided to sell this thing you’ve built from a hobby in your garage or a side-business to a multi-million-dollar online business. What happens now?

Many online business sellers engage a business broker. You could engage a general business broker or a broker that specializes in the brokerage of online businesses. We’ve found that the brokers that specialize in online businesses are more familiar with the nuances of online businesses and the different challenges that online business sellers face when selling their businesses. Obviously, there is a cost to engaging the services of a business broker. And any good business broker will require you to execute a contract that at the very least addresses their commission. It might be called a broker agreement or an engagement agreement, but it is generally a one-sided agreement in favor of the broker. We highly recommend you engage legal counsel to have this agreement reviewed before signing.

Don’t be fooled. The broker is a salesman and hopefully, for your sake, a good one, but keep in mind that he is selling you too. He is in this for the commission. Generally, the broker’s commission is based on a percentage of the overall purchase and sale price, or some percentage scale formulae (e.g., Lehman Formula, Double Lehman, Reverse Lehman, or some alternative or progressive fee schedule, which each warrant a separate blog article unto themselves). It may or may not have floor – i.e., it includes a proviso that the commission will not be less than a certain amount. A lot of online business sales include seller promissory notes, consulting agreements, earn-outs, and other methods putting value on the purchase and sale of the business. Many brokers will insist that their commissions be based on the entire purchase price, including any amount due under a seller note, consulting fee, earn out payment, etc. Keep in mind, the brokers agreement is a negotiable document, and you can structure it in such a way that it makes sense for you and your business.

We can help. The attorneys at Walk Law Firm, PA are experienced in assisting clients with the review and negotiation of brokers agreement when clients are seller their businesses. We understand what brokers expectations are regarding these agreements and we will balance these expectations with our client’s best interest in the sale process. Please feel free to call one of our attorneys at (813) 999-0199, or contact us via our website at www.WalkLawFirm.com.

© 2017 Matt Welker – This article is for general information purposes only. Nothing contained in this article should be construed as legal advice or the formation of an attorney-client relationship.