Your Deal Team: Broker, Accountant, Lawyer
Who you need to sell a business in Australia, what each one does, and why two of the three bill according to how ready your business already is.
The document that decides what you walk away with is the sale contract. Not the listing, not the valuation, not the handshake. It has to satisfy the conditions of your state or territory, and it has to settle the questions nobody wants to raise while everyone is still friendly. What happens if the buyer walks. Who settles the creditors. Who is paying out employee entitlements, and when.
Read that with an owner's eye. Every one of those is a place where a deal comes apart months after everybody shook hands, and it is the reason the lawyer is the one person in a sale you do not skip.
Behind that document sit three people who are not you. A lawyer to draw and negotiate it. An accountant to handle the numbers and the tax position it creates. A business broker to find and manage the buyer in the first place.
You can find that list anywhere. What almost nobody tells you is where the bill really comes from.
Every page on this subject quotes the same percentages, and the percentages are roughly right. They also describe the smallest and most predictable part of your costs. Your broker's commission is a percentage of a number you already care about. Your accountant and your lawyer are the two who bill for time, and the amount of time they spend is set by the state your business is in when you hand it to them. That part is not fixed, it is not quoted anywhere, and it is the only part you can change.
Who does what
The business broker finds buyers, runs the marketing confidentially, screens enquiries and manages the process through to an offer. They will also give you a read on what your industry is doing and what businesses like yours are fetching. A good one is the buffer between you and twenty tyre-kickers, which matters more than it sounds when you are still running the place at the same time.
The accountant gets your financials into a shape a stranger can read, works out the tax position of different deal structures, and answers the buyer's questions about the numbers. Some of that is preparation and some of it happens live, during due diligence, while the buyer's own accountant is asking.
The lawyer drafts and negotiates the contract described above, and negotiates the warranties the buyer wants you to give. A good one will also tell you which of the buyer's requests are standard and which are the buyer trying it on, which is worth the fee on its own.
What each one costs
Broker commission is the figure everyone quotes. On average it lands somewhere between 5 and 10 per cent of the sale price, sometimes a little under on a larger deal, sometimes a little over on a small or difficult one. Some brokers also charge an upfront engagement fee on top. Our upcoming guide to broker fees and commissions goes through the structures and what tends to be negotiable.
Legal and accounting are the ones with no headline number, because there cannot be one. Both are billed on work done, and the work done depends on what you give them.
That is the sentence worth sitting with. Two of your three advisers are priced by your own preparation.
Why the bill varies so much between two similar businesses
Take two engineering firms, both turning over around $6 million, both selling in the same year.
The first has three years of financials that reconcile, contracts and leases in writing and in one place, and a general manager who can answer most of what a buyer asks. Its accountant spends the time on structuring the deal properly. Its lawyer spends the time on the contract itself.
The second has financials that need explaining, several arrangements that were agreed verbally years ago and never written down, and one person who knows the answer to everything. Its accountant now spends weeks reconstructing before any advice starts. Its lawyer has to draft around unwritten agreements, which means more warranties, more conditions and more back-and-forth with the buyer's lawyer, who is being paid to find exactly those gaps.
Same commission percentage. Different bill by a wide margin, and a longer process while it happens.
Nobody has overcharged anyone here. Your deal team bills for the work in front of them, and the second business handed them a great deal more of it. That is the part of the cost you set yourself, months or years before you engage a single one of them.
What catches owners out is when the bill lands, rather than how big it is.
From the advisory side of these deals, the legal and accounting hours cluster in the middle, through due diligence, which is exactly the stretch where the owner has the least capacity to feed them. The commission gets budgeted because it is a percentage and it is written down. Nobody budgets for the fortnight where three professionals are all waiting on the same set of numbers, and only one person in the business can produce them.
When to bring each one in
The accountant comes first, and earlier than most owners think. Structure, entity, who owns which asset and how long they have owned it are questions with answers that were set years ago and cannot be changed once a buyer is at the table.
The lawyer comes next, before you sign anything at all, including a heads of agreement that looks informal. Non-binding documents have a way of setting terms that are very hard to move later.
The broker comes when the business is ready to be seen, not when you decide to sell. A broker taking an unprepared business to market is being asked to sell something that has not been made ready, and the discount shows up in the offers.
Our guide to preparing a business for sale sets out the order of the preparation itself.
Do you need all three?
Not always. A sale to a family member or an existing manager may not need a broker at all, since there is nobody to find. Our guide to deciding on a broker works through when one earns the fee and when a private sale is reasonable.
An accountant and a lawyer are harder to skip. The contract is the document that decides what you keep, and the tax position decides how much of the negotiated price reaches you. Both sit outside what an owner can reliably do alone, and both are cheaper to get right the first time.
Frequently asked questions
How do you value a business for sale in Australia?
Your accountant or your broker, and often both, using more than one method and comparing the results, because there is no single set method and most valuations end up combining several. Our guide to valuing a business goes through them.
What is the formula for valuing a business to sell?
There is no one formula, which is why this is an engagement rather than a calculation. The multiple applied to your earnings moves considerably depending on the business, and our guide to valuation multiples covers what drives it.
What tax do you pay when you sell a business in Australia?
Your accountant, and this is the question they earn their fee on. The answer turns on your structure, your holding periods and your circumstances, so a general answer is worth very little. Our upcoming guide to tax when you sell covers the shape of it, and the specifics belong with a registered tax agent who knows your position.
How do I avoid capital gains tax when selling a business?
Same answer, same person. Eligibility for the small business concessions often turns on decisions made years before the sale, which is the practical reason the accountant is the first call rather than the last. Our guide to the small business CGT concessions sets out what they are.
What is the most tax-efficient way to sell a business?
An accountant question, and one where the honest answer is that it depends on the structure you already have. Raise it early, because some of what makes a difference takes time to put in place.
How much is a business worth with $5 million in sales?
Revenue alone does not answer it, since two businesses on the same revenue can be priced very differently depending on profit, stability and how much of the operation depends on the owner. Our guide to how much you can sell for works through it from an owner's side of the desk.
Sources
- business.gov.au, Sell your business
- business.gov.au, Value your business
- Lloyds Business Brokers, Comparing the cost of selling a business with and without a broker
- Xero, How to sell a business in Australia
Clarity Systems installs ClarityOS in owner-led businesses, so decisions, relationships and money stop running through the owner. The Independence Score is where you find out how close yours already is.
General information only. This article is general information about business operations and does not take account of your objectives, financial situation or needs. It is not financial, legal, taxation or accounting advice, and no advisory relationship is created by reading it. Clarity Systems is not a licensed financial adviser, registered tax agent or law firm. Before acting on anything in this article, obtain advice from a qualified professional who knows your circumstances. Information was accurate at the date of publication and may have changed since. To the extent permitted by law, Clarity Systems accepts no liability for any loss arising from reliance on this article. Third-party sources are cited for reference and their inclusion is not an endorsement.