What is a business broker?
A business broker is an intermediary who helps owners sell privately held small businesses. Brokers usually represent the seller, market the business to potential buyers, screen those buyers, and help manage the process from listing to closing. Larger transactions are often handled by M&A advisors or investment bankers, who do similar work at a higher level of complexity.
Licensing requirements vary. In some US states, brokers handling transactions that include real estate may need a real estate licence; elsewhere, no specific licence may be required. Check local rules and ask about credentials and professional association memberships.
What a business broker does for sellers
- Valuation guidance: helps set a realistic asking price based on normalized earnings and market comparables. See business valuation.
- Preparation: gathers financials, recasts earnings with add-backs, and identifies issues to fix before going to market.
- Marketing materials: prepares a teaser and a confidential information memorandum (CIM).
- Confidential marketing: promotes the business to buyers without revealing its identity until an NDA is signed.
- Buyer screening: checks buyers' finances and seriousness to avoid wasting the seller's time.
- Negotiation: helps compare offers and negotiate price and terms, including seller financing.
- Process management: coordinates diligence, lenders, attorneys and accountants through closing.
Brokers are not usually a substitute for an attorney or accountant; you will still need those professionals.
What brokers mean for buyers
Most brokers represent sellers, so their duty is to the seller. Still, they are a major source of deal flow for buyers. Good relationships help you hear about opportunities early. Some advisers do work on the buy side, representing buyers in searching for or negotiating acquisitions, often for a retainer or success fee.
Buyer tips:
- Respond quickly and professionally; brokers prioritize credible buyers.
- Be ready to show proof of funds or financing capacity.
- Ask good questions about earnings quality and reasons for sale.
- Remember the broker works for the seller.
How business brokers are paid
Most brokers are paid primarily through a success fee (commission) when the business sells, typically calculated as a percentage of the sale price. Fee structures vary by deal size, firm and region. Common elements include:
| Fee element | What it is | Questions to ask |
|---|---|---|
| Success fee / commission | Percentage of the final sale price, paid at closing | What percentage? Is it tiered by price? |
| Minimum fee | A floor fee for smaller deals | What is the minimum? |
| Upfront or retainer fee | Paid at engagement, sometimes credited against the success fee | Is it refundable or credited? |
| Valuation or marketing fees | Charges for valuations or marketing packages | What exactly do I get? |
| Tail provision | Commission owed if a buyer introduced by the broker closes after the agreement ends | How long? Which buyers? |
| Exclusivity term | How long the broker has the exclusive right to sell | Can I cancel for poor performance? |
For larger transactions, advisers may use tiered structures with declining percentages on larger amounts. We do not publish typical rates because they vary widely; get written quotes from several firms and compare total cost at your likely sale price.
Business broker vs M&A advisor
| Business broker | M&A advisor | |
|---|---|---|
| Typical deal size | Smaller, Main Street businesses | Lower middle market and up |
| Typical buyers | Individuals, owner-operators | Strategic acquirers, private equity, family offices |
| Process | Listing-based marketing, more volume | Targeted outreach, often structured auctions |
| Fees | Mainly commission | Retainer plus success fee is common |
Do you need a broker?
A broker may be worth it if you lack time to run a sale, need help reaching buyers, want confidentiality, or are unfamiliar with valuation and negotiation.
You may not need one if you already have an interested buyer (for example a competitor, partner or employee), the business is very small, or you have experienced advisers. You will still need an attorney and accountant.
How to choose a business broker
- Ask about recent transactions in your industry and size range.
- Ask how they would value your business and why.
- Understand their marketing process and buyer network.
- Review the engagement agreement carefully: fees, term, tail, exclusivity and termination.
- Check references from sellers they've represented.
- Watch for brokers who promise unrealistically high prices to win the listing.
Business Valuation Calculator
Estimate a low, base and high value from SDE or EBITDA.
What a good broker engagement looks like for sellers
A typical engagement runs through preparation, valuation and packaging, marketing to buyers under confidentiality, buyer screening and negotiation through to closing. Before you sign, ask for a written outline of each stage, who does the work and how you will be kept informed. A clear process is a better sign of quality than an optimistic valuation, which is sometimes used to win the listing.
Questions to ask before signing a listing agreement
- How did you arrive at the suggested asking price, and what evidence supports it?
- How will you market the business while keeping it confidential?
- How do you screen buyers for financial ability?
- What is the fee, when is it payable, and what is the minimum fee?
- How long is the agreement, and how can either party end it?
- Is there a tail clause that pays a fee if a buyer you introduced closes after the agreement ends?
- What happens if I find the buyer myself?
Working with a broker as a buyer
Treat brokers as professional gatekeepers. Respond quickly, sign the confidentiality agreement, explain your buy box and show evidence of funding. Remember that a seller's broker represents the seller; do your own valuation and diligence. Brokers remember organised, credible buyers and may call them first when a suitable business comes in.
Frequently asked questions
What does a business broker charge?
Most charge a success-based commission at closing, sometimes with a minimum fee or upfront retainer. Rates vary by deal size, firm and region, so compare written proposals.
Do buyers pay business broker fees?
Typically the seller pays the broker's commission. Buy-side advisers who represent buyers are usually paid by the buyer.
How long does it take a broker to sell a business?
It varies with the business, price, market and how well prepared the seller is. Preparation before listing often shortens the process.
Can a broker value my business?
Brokers commonly provide an opinion of value or a broker price opinion to set the asking price. For tax, legal or lending purposes, you may need a formal valuation from a credentialed appraiser.
Sources and further reading
Primary sources for the rules and definitions referenced in this guide. Programs and rules change; check the current version.
- Close or sell your business, U.S. Small Business Administration. Steps to prepare a business for sale, including financial records and broker fees in the terms of agreement.
Educational content, not advice. Bootstrapper.com publishes general information for education. It is not legal, tax, accounting, lending or investment advice and does not consider your circumstances. Calculator outputs are illustrative estimates. Rules, rates and programs change; confirm details with qualified professionals before making decisions.