Business Broker
A licensed professional who acts as an intermediary between business sellers and buyers, managing the sale process from valuation through closing in exchange for a commission.
What is a Business Broker?
A business broker is a professional intermediary who helps owners sell their businesses. They perform a similar role to a real estate agent but for business transactions. Brokers handle business valuation, marketing, buyer qualification, negotiations, and deal coordination through closing.
Business brokers typically work with companies valued between $500K and $5M. For larger transactions, sellers usually engage M&A advisors or investment banks.
What a Business Broker Does
A good broker manages the entire sale process:
- Valuation. The broker analyzes your financials, applies industry multiples, and establishes a defensible asking price based on EBITDA or SDE.
- Preparation. They help you compile a Confidential Information Memorandum (CIM) and organize your financial records.
- Marketing. The broker lists your business on marketplaces, reaches out to their buyer network, and screens inquiries — all while keeping your identity confidential.
- Buyer qualification. Before sharing sensitive information, the broker ensures buyers sign an NDA and demonstrate financial capability.
- Negotiation. The broker facilitates offers, counteroffers, and letter of intent negotiations.
- Deal management. They coordinate due diligence, work with attorneys and accountants, and push the deal toward closing.
How Business Brokers Get Paid
Most brokers work on a success fee model, meaning they earn a commission only when the business sells. Standard commission rates are:
- 8% to 12% for businesses under $1M
- 6% to 10% for businesses between $1M and $5M
- Some brokers charge a modest upfront retainer ($5K to $15K) in addition to the success fee
Commission is typically calculated on the total transaction value, including cash at close, seller financing, and earnouts.
How to Choose a Business Broker
Not all brokers are equal. When evaluating candidates, ask about:
- Industry experience. A broker who has sold businesses in your industry will know the buyers and the multiples.
- Recent transactions. Ask for a list of deals closed in the last 12 months, including size and time to close.
- Marketing approach. How will they reach qualified buyers beyond listing on a marketplace?
- Listing agreement terms. Understand the exclusivity period, commission structure, and termination rights.
- References. Speak with past clients — both sellers whose deals closed and those whose deals fell through.
When You Might Not Need a Broker
Some sellers handle the process themselves, particularly when they already have a buyer in mind (such as a management buyout) or when the business is small enough that the commission would consume a disproportionate share of the proceeds. However, going without a broker means handling buyer negotiations, legal coordination, and confidentiality management on your own.