What does it cost to sell a business in the UK?

Most advisers will not tell you what they charge until you are sitting in front of them. That is a choice, and it is usually made because the number is easier to defend once a relationship exists. We would rather you knew now.

This page sets out what it actually costs to sell a business in the UK: the adviser, the lawyers, the accountants, and the costs nobody warns you about. Where we can give real ranges we have. Where a number depends entirely on your deal, we say so rather than inventing an average.

The short version

Adviser fees across the UK market run somewhere between about 3 and 15 per cent of the sale price. Legal, tax and accountancy together usually add one to three per cent, though on smaller deals they are a much larger proportion because legal work does not scale down neatly.

Total cost of sale for most owner managed businesses lands somewhere between 4 and 10 per cent of what you sell for.

But the percentage is the least interesting part of this page. What matters far more is when you pay and what you get for it, which is covered further down and is where owners actually lose money.

Adviser fees, and how they are structured

There are three components, and different firms use different combinations of them.

Success fee

A percentage of the sale price, payable on completion. This is the main event.

Across the UK market it runs anywhere from about 3 to 15 per cent. That is a genuinely wide range and we are not going to pretend otherwise, because the number depends on deal size, sector, how much work the adviser is actually doing and what else they are charging you alongside it.

Smaller deals sit at the higher end, for the straightforward reason that the work does not shrink in proportion to the price. A two hundred thousand pound sale takes most of the effort of a two million pound one.

Be careful comparing percentages in isolation. A lower success fee attached to a large upfront payment can cost you far more in total than a higher one with nothing paid in advance, particularly if the deal never completes.

Upfront or retainer fees

This is where the market divides, and where you should ask the hardest questions.

Some firms charge a substantial fee at the start, often several thousand pounds, sometimes considerably more. Others charge a monthly retainer through the process. Others charge nothing until completion.

An upfront fee is not automatically a bad thing. Preparing a business properly for sale is real work: the information memorandum, the financial analysis, the buyer research. A firm doing that work seriously has costs before any deal exists, and a fee that covers it filters out owners who are not actually going to sell.

The problem is the firms where the upfront fee is the business model. If a firm takes a few thousand pounds from a large number of owners, lists their businesses on a portal and waits, it does not especially matter to them whether anything completes. You can usually tell the difference by asking one question: what proportion of the businesses you take on actually sell? A firm that is proud of the answer will give it to you.

Where we sit

A small monthly retainer, and a 30 day market test with a money back guarantee.

The retainer is small deliberately. It covers the work of preparing and going to market properly, and it means we are being paid to do that work rather than to sit on a listing. What it is not is a large sum taken before anyone knows whether the market wants your business.

And the retainer comes off the success fee. It is not an additional cost on top, it is an advance against what you would pay on completion. If the deal completes you have paid the success fee and nothing more. That is the whole point of keeping it small: it funds the work without becoming a separate charge you never see back.

The market test is the part that matters. Thirty days, real acquirers, and a clear answer on whether the appetite exists at the value you are expecting. If it does not deliver, you get your money back. We would rather tell you in a month than take a fee and discover it slowly over a year.

Legal fees

You need a corporate solicitor, not your general commercial lawyer, and not the firm that did your house. Business sales have their own mechanics and a solicitor who does them regularly will save you more than they cost.

Budget somewhere in the region of £7,000 at the simple end to £50,000 or more on a complex deal. It is driven by complexity rather than by the size of the price, so a small deal with a leasehold site and four shareholders can cost more than a larger clean one.

What drives legal cost up:

• Property involved in the transaction, particularly leasehold with a landlord to negotiate with
• Multiple shareholders, especially any who are not aligned
• An earn out, which turns a simple sale agreement into a document with years of life in it
• Problems found in diligence that then need warranties, indemnities or price adjustments
• A buyer with an aggressive legal team and time to burn

Ask for an estimate with a stated assumption set rather than an hourly rate. Any decent corporate solicitor will give you one.

Accountancy and tax advice

Two separate things, and owners often budget for only the first.

Your accountant will be involved throughout: preparing figures, supporting the adjusted earnings position, and answering the buyer’s accountants during diligence. Budget a few thousand pounds for a straightforward deal and more if your records need work first.

Tax advice is separate and it is the one that pays for itself. How the deal is structured, whether it is a share sale or an asset sale, whether Business Asset Disposal Relief applies to you, how any deferred consideration is treated. Getting this wrong is measured in tens or hundreds of thousands. Getting advice before you agree heads of terms, rather than after, is the single highest return spend in the whole process.

The costs nobody mentions

• Your own time. A sale takes six to twelve months and it lands on the owner, not the team. The business still has to perform through it, because a dip in trading during diligence gets priced in immediately.
• Getting the house in order. Tidying up records, formalising contracts, resolving a dispute. Real costs, and cheaper before a buyer finds the problem than after.
• Diligence support. Some buyers expect you to fund elements of their investigation. Negotiable, but it comes up.
• Deferred consideration that never arrives. Not a fee, but it belongs on this page. If a chunk of your price sits behind an earn out and the target is missed, the money you thought you were getting is not a cost, it simply never appears.

Who pays what

You pay your advisers, the buyer pays theirs. That is the default and it rarely moves. What does get negotiated is how costs are treated in the completion accounts, and whether any of your transaction costs are treated as an adjustment to the price. Worth raising early rather than at the end.

Protect yourself, whoever you use

This is the part we would tell you even if you never spoke to us again.

Do not pay serious money upfront. The pattern that costs owners the most is a large fee taken at the start, somewhere between fifteen and fifty thousand pounds, followed by a long agreement and very little happening. Thirty days in you have spent real money, you have no offers, no evidence of buyer appetite, and a tie in that stops you going anywhere else.

It is not that upfront fees are wrong in principle. Preparing a business properly costs an adviser money before any deal exists, and a firm doing that work seriously has to cover it. The problem is scale and what you get for it. A modest retainer covering real work is reasonable. A five figure payment before anyone has tested the market is not.

Insist on a short, testable first stage. Whoever you appoint, try to structure it so you find out early whether the market wants your business. A defined piece of work, a defined output, and an answer within weeks rather than months. If an adviser will not put a short proving stage in front of a long engagement, ask why.

Things worth getting in writing before you sign anything:

• Is the retainer credited against the success fee, or is it on top? This is the single most useful question on the list and almost nobody asks it. A retainer that comes off the final fee is an advance. One that does not is an extra cost, and over a twelve month engagement the difference is substantial
• What happens in the first thirty days, specifically, and what you will have seen by the end of it
• Whether any of the upfront money is refundable, and on what basis
• The tie in length and the notice period, and whether a fee survives you walking away
• What proportion of their listings actually complete. A firm proud of the answer will give it to you
• Who does the work, because meeting a senior person and then dealing with someone junior is common
• What happens on a buyer you introduce yourself

None of that is difficult to ask. An adviser who is comfortable with their own model will answer all six without hesitating.

Three questions worth asking any adviser

1. Does anything I pay you before completion come off the success fee? If yes, the upfront element is an advance. If no, it is a separate charge and you should price it as one.
2. What proportion of the businesses you take on actually complete? This one question tells you more than the fee structure does.
3. What happens if I want to stop? Look for the notice period, the tie in and whether any fee survives termination.
4. Who will actually do the work? On smaller deals it is common to meet a senior person and then deal with someone far more junior. Ask who is on the phone to buyers.

If you want a view on what your business is worth before you think about any of this, the free valuation costs nothing and carries no obligation. If you would rather work it out yourself first, the valuation calculator will give you a range in a few minutes.