An Innovative Approach to Business Brokerage and M&A Fees
Working with a business broker or M&A advisor can significantly enhance your results when selling your business. At our firm, we recognize the distinct needs of each client and offer an innovative alternative to the conventional business broker fee structure. In addition to the traditional full-service commission or success-fee model, Jackim Woods & Co provides clients with the option to engage us as consultants and pay on an hourly basis, offering a more personalized approach tailored to your requirements.
Our innovative hourly billing option allows you to access our expert services as needed, ensuring you only pay for the specific assistance you need, resulting in significant cost savings. Regardless of the fee model chosen, we are committed to providing exceptional services and outcomes aligned with your unique objectives.
Deciding Between Fee Structures
Success-Fee Basis
PROS:
- Aligned Interests: Our fee is contingent upon the successful sale, aligning our interests with yours and motivating us to get the highest price for you.
- Minimal Upfront Costs: With only a small retainer upfront, you can minimize initial expenses.
- Confidence in Broker’s Ability: Our willingness to work on a success-fee basis reflects our confidence our ability to sell your business.
- Risk Mitigation: If the deal falls through, you incur no financial obligation other than the initial retainer, thereby reducing your financial risk.
CONS:
- Higher Overall Cost: The success fee, a percentage of the sale price, will usually result in higher costs compared to hourly billing.
- Focus on Larger Deals: Brokers may prioritize larger deals due to their compensation being tied to deal size.
- Possible Rush to Close: There’s a risk of prioritizing closing the deal over negotiating optimal terms for you.
Hourly Basis
PROS:
- Cost Control: Hourly billing offers predictability and manageability, especially for smaller transactions or prolonged processes, ensuring you pay only for the services you need.
- Flexibility: You can tailor our services to your needs, from brief consultations to having us run a comprehensive sell-side process for you.
- Objective Advice: Our fee structure ensures impartial advice focused on your best interests rather than simply closing the deal.
- Transparency: Transparent billing simplifies expense tracking and comprehension.
CONS:
- Upfront and Ongoing Costs: The hourly fee is due whether the deal closes or not, so the cost to you may be higher than the initial retainer under the success fee based approach.
- Less Incentive to Close Quickly: Because we are solely focused on providing you with impartial, objective advice, it could potentially prolonging the process.
Case Study
Recently, we assisted the owner of a medium-sized court reporting firm in California. With a business valued at $1M, she sought our expertise in navigating a sale. She had already been approached by several buyers, so she just needed our help determining what her firm was worth, analyzing each buyer’s offer, providing assistance in negotiations and counterproposals, and help responding to the buyer’s due diligence requests. Since she didn’t need us to run a full sell-side process, the consulting model was ideal for her. Typically, brokers charge an 8-10% success fee, translating to $80,000 in this case. Opting for our hourly consulting model, she saved a substantial amount. With 40 hours of consulting time spent, including valuation, negotiation, and due diligence assistance, her total fee amounted to $15,800, saving her $64,200 compared to the traditional business broker commission model.
Conclusion
Recognizing the uniqueness of each client’s needs, we offer both traditional commission and consulting fee models. Whether engaged using a success-fee arrangement or hourly billing, our commitment remains steadfast to providing top-tier service tailored to your objectives.
About the Author and Jackim Woods & Co
Rich Jackim is an attorney, investment banker, and entrepreneur. For the last 25 years, Rich has been providing boutique investment banking services to small and middle-market companies in over 30 industries.
In addition to running a successful M&A advisory firm, Rich founded a successful training and certification company called the Exit Planning Institute, which he sold to a private family office in 2012.
Rich is also the author of the critically acclaimed book, The $10 Trillion Dollar Opportunity: Designing Successful Exit Strategies for Middle Market Businesses. It became an Amazon best-seller in the business consulting category the year it was published.
If you own a business and are interested in exploring your options, I would welcome an opportunity to speak with you. There is no cost or obligation to you and all discussions are completely confidential.
Feel free to contact me at 224-513-5142 or rjackim@jackimwoods.com.
