Anyone planning to start a career as a business broker might be wondering—how much money does a business broker make. Well, there’s no definite answer to this as the salary of a business broker is not fixed. A full-time business broker is paid between $212K and $322K annually, while the median income for a full-time business broker is $275,000 per year.
With that said, it’s important to understand that several factors determine how much a business broker makes. These factors include:
When it comes to how much money a business broker makes, you can’t ignore their education. Your level of education is an indicator of your knowledge and expertise, which are key skills in the field of business brokering. Business brokers who hold at least one degree or certification directly related to the industry will generally be paid more than those without any degree or professional certification.
The National Association of Certified Valuation Analysts (NACVA) offers its members professional designations requiring passing exams that test knowledge in valuation analysis and corporate finance. Many business brokers consider these certifications when determining salary because they need years of in-depth study about valuing businesses, which many business brokers do for a living.
Another major factor that determines the salary of a business broker is their work experience. Mostly, this includes but is not limited to how much time they have spent in the industry and their prior success at brokering deals. A new full-time business broker will generally earn between $15 and $20 an hour, which increases to $18-$25 an hour after 3-5 years in the industry, and averages around $30 an hour once they’ve been working as business brokers for 5 or more years.
One of many factors that can impact how much money a professional Orlando Business Broker makes comes from local licensing requirements. In some counties and states, all business brokers are required to pay licensing fees to broker deals. Depending on the locality and the specific person licensing requirements, the fees can be as low as $50 or exceed $5,000.
Local cost of living
The local cost of living can also impact how much money a business broker makes, especially in areas where living costs are higher. Business brokers must charge more if their salary is based on a percentage per deal. Business brokers need to make enough money to pay for their own expenses like housing, food, etc., which takes up most of their income. However, they also need to make enough money to provide for their family members (if applicable) and still have some leftover cash for themselves. If they do not make this amount of money, they cannot be successful and may even need to get another job or slow their work in brokering deals.
Local tax rates
If a business broker earns $300,000 per year and works in a state with no income tax, such as Florida, California, or Texas, the business broker will generally make more than working in New York State because of the local percentage taxes paid on income. The same applies to states with an income tax but do not charge any percent-based taxes. The higher cost of living in these states means that business brokers can earn less while maintaining a profitable lifestyle. This allows them to charge lower fees and potentially compete with business brokers who live in areas with low living costs where they must charge higher rates to compensate.
How do business brokers make money?
Now, since you have an idea of how much a business broker makes, let’s look at the different ways in which business brokers make money.
The simplest way for a business broker to make money is through the use of a flat fee, which is usually paid upfront. In paying a flat fee, the business owner does not receive any financial benefit from the sale of the business and thus has no reason to pay additional fees. If an interested party decides they do not want to purchase, after all, this will result in either a partial or full refund being given to them by the broker or split between both parties.
Fee plus Commission (Retained) Brokers
With this arrangement, the business broker charges a flat fee plus a commission on the sale of the business. They receive both fees and commissions from either party or one party and keep it all if they represent only one side.
Split Commission Brokers
A split commission broker receives separate commissions for each party in the deal. These brokers negotiate different prices for each party in the agreement and then receive a commission.
In some cases, where a business owner is not comfortable with giving up financial control to a third party without being compensated for the risk it entails, business brokers offer contingency fee deals. If this option is taken, it means that the broker will receive their pay once a deal has been made and won’t need to wait around while negotiations take place; unlike flat-fee deals, which require no work from the broker once they have received payment, a contingency fee deal requires effort on behalf of the broker at all times because they are waiting for an agreement to be reached before receiving any money.