How Much Does it Cost to Sell a Business? A UK Guide 

If you’ve ever asked “how much does it cost to sell a business?”, you’ll have probably struggled to pin down a particular number. 

That’s because there are multiple variables at play when selling a business. The size and type of company you run has an understandably big impact on costs, but so too does the type of intermediary you choose to help you with the process. When you start to factor in all the other costs involved, such as taxes and legal fees as well, you can start to appreciate why specifics are in short supply. 

This guide should at least provide you with a means to gauge what you can expect to pay should you decide to sell your business. It pays to shop around for exact prices, but don’t be too quick to opt for the cheapest option. As we’ll see, these low-cost options can often be of little value. 

So how much does it cost to sell a business? 

Let’s break it down into the main costs that you’re likely to encounter. 

Intermediary costs 

There are several types of business sales specialists you can choose from to help sell your company. While sales advisory firms such as ourselves have specialists on hand to see a sale from start to finish, other firms such as brokers and even investment banks offer business sales services too. How much does it cost to sell a business with an intermediary? It all depends on the type of intermediary you hire.

Whichever route you choose, these costs are typically split into an upfront retainer fee and a success fee once the sale is completed. 

Retainer fee 

These can be made up of a single upfront payment, or a monthly fee paid until completion. There is a lot of work involved in selling a business, and many firms understandably ask for some payment upfront. Sellers can decide to walk away at any point and potentially cause intermediaries to have wasted hundreds of man hours and considerable work. Often intermediaries will be charging less than the overall cost of the preparation work in the hope that a success fee will make up the rest of the costs to them. 

In some instances, you may be able to find a ‘no deal-no fee’ structured offered. While these will lower your initial expenditure, they may well also lessen your chances to actually sell. 

The huge amounts of time involved in sourcing and liaising with interested buyers alone only makes up a fraction of the entire process. Firms providing a ‘no deal-no fee’ then, are unlikely to be putting in the amount of time and effort needed to ensure that their clients successfully sell their business.  

These free, and low-cost options tend to have low sales completion rates as their business models work on a numbers game. By offering high valuations and low initial fees, they’re able to attract many clients, which provides the occasional sale through sheer odds rather than any proactive practices. 

As such, you shouldn’t necessarily be put off by higher upfront fees. They often show that that the intermediary is simply aware of the amount of work needed to successfully sell a business. 

As a rough guide to the upfront retainer fees charged by many companies, these range from below £5k all the way up to £70k. 

Success fees 

These are almost always worked out as a percentage of the eventual sale price. The percentage being charged often depends on the size of the business. While the amount of work needed can increase with larger firms, they can usually expect to pay a lower percentage. Smaller ventures tend to pay larger percentages as their smaller sale prices would otherwise render the process unprofitable. 

Success fees for small businesses usually land between 3% and 10% with some brokers charging up to 15%. 

Companies in the £10m to £20m sphere can expect fees of around 2%-3.5%. 

Large businesses valued at over £20m, meanwhile, can enjoy rates of 0.5%-1%. 

Legal fees 

As you might expect, it’s a good idea to have a solicitor go over the details of any sale. This is especially true of deals involving the transfer of staff, as TUPE laws can be complex and potentially damaging if abused. 

They can also draft up sales agreements, heads of terms, and ensure any IP rights or leases are transferred properly. Agreements in particular can span over a hundred pages or more, with you being potentially liable should you renege on any of the details. As such, we recommend to hire a specialist M&A solicitor rather than your usual firm. 

Expect to pay at least 1% of your total price in legal fees. It’s worth asking how this is paid, however, as some will allow you to expense this through your company. 

Accountancy costs 

Even businesses with strong in-house financing departments are advised to invest in the services of a specialist accountant. There is a slew of tax obligations to consider, and a good accountant can steer you clear of paying more than you need to.  

A specialist accountant can be the difference between your business sale reaching completion or not. The 0.5%-1% of the sale fee you’d expect to pay for such services may well be worth it. 

Preparing for a sale 

Just as you might give a car you’re looking to sell a valet, sprucing up your business to attract buyers is always a good idea. These changes don’t need to be expensive, but the expenses can certainly add up. 

Some new carpets or a spot of redecorating in any premises you might own is always a good idea, while repairing any machinery is a must. You may even identify an opportunity to upgrade some of your equipment in order to secure a higher price. 

Be sure to also renew any licenses and certificates that are important to the company’s running, as well as any supplier contracts and building leases. 

Of course, some owners may be looking to sell because they’re struggling and think the business may have a better chance under different stewardship. A recent survey found that 34% of CEOs were doubtful that their firms would still be economically viable in a decade’s time. While it makes little sense for a struggling director to splurge on improvements to make their business more attractive, simple acts such as painting some tired-looking walls can still make a difference.

Q. How much does it cost to sell a business?

A. A little less with a free valuation and initial consultation. 

We’ve helped countless business owners to assess their options when they’ve decided to sell up. Call us to speak to one of our friendly specialists. You’ll get all the guidance you need for the best route to take for your business.

As specialists in business sales, we can help you to discover the right buyer for your company. Call us on 0808 280 6041, or email [email protected] for a free consultation.