3 Types of Listing Agreements You Will Sign with a Business Broker

Selling your company is a huge decision and the process is often overwhelming for persons unfamiliar with the market. Your first step in selling a business should therefore be hiring a business broker in San Diego. A simple Google search will send you to websites of promising brokers. However, regardless of how experienced the brokers you are considering are, you have to note that some of them will entrap you with unfavorable terms in their agreements. But how do you know which broker to work with and which agreement to get into? The purpose of this post is to help you understand the different agreements you will come across.

The Listing Contract

When working with a San Diego business broker, you will be getting into a listing contract. This is the legal agreement between the two of you where the broker accepts to sell the business for you based on the specific terms outlined. The broker does most of the work including advertising and qualifying buyers.

There are several ways that business brokers in San Diego advertise your business. Some strategies are more effective than others. Therefore, before signing the contract, make sure that you fully understand how the broker plans on selling your business. There are three types of contracts used by business brokers.

Exclusive listing
This is the most common type of agreement you will get when working with a business broker. The agreement states that the broker is the only person that is allowed to promote your business for sale. The broker will then receive a full commission once the business has been sold. With this contract, the broker will still get a commission regardless of whether or not he is the one that brought the buyer.

It is obvious that once you get into an exclusive contract, you agree not to work with other San Diego brokers. It is, hence, important to make sure that you only pick the best broker that has a proven track record of selling businesses. Once you hire him, he will be the sole advocate of your business.

Open listing
With this agreement, you can use a business broker or sell the business on your own. This means if you bring in your own buyer and he buys your business, you don’t have to pay the broker a commission as is the case with exclusive listing. Additionally, if you choose to use more than one broker, commission will only be paid to the one that brings in the buyer.

Most business brokers in San Diego will not agree to this contract. They want to ensure they get the commission for their investments in your business sale.

Exclusive Agency Listing
With this agreement, you can sell on your own and not pay commission to the broker. However, you can only work with a single business broker who advertises your business. The broker only gets a commission if he brings in a buyer.

Before signing any contract, ensure you understand all the terms and conditions. You also need to make sure that you are working with the most competent business brokers in San Diego.