Business Brokers: Why and How to Hire One
A business broker is a specialist who runs the confidential sale of a small business end-to-end. The right broker earns their fee many times over. The wrong one costs you time, money, and sometimes the deal.
Why sellers hire a broker
- Confidentiality. Buyers are screened and sign NDAs before learning the company name. Employees, customers, and competitors never find out.
- Competitive process. Multiple qualified buyers compete, which drives price up and terms in your favor.
- Time. You keep running the business at full speed instead of fielding tire-kicker calls.
- Net proceeds. Broker-represented sales typically close at 90 to 95 percent of asking, versus 75 to 85 percent for DIY. Even after commission, sellers usually net more.
- Closing rate. 60 to 80 percent of listings with a good broker close. DIY listings close 20 to 30 percent of the time.
How to pick the right broker
- Specialization. Match the broker to your deal size and industry. A $500K auto shop and a $5M SaaS company need very different brokers.
- Licensing. Some states (California among them) require a real estate broker license for business brokerage. Verify it.
- Recent closings. Ask for the number of businesses they closed in the last 12 months and the industries. Vague answers are a red flag.
- Confidentiality process. They should have a documented buyer screening and NDA workflow, not a "we send it to our list" approach.
- Realistic pricing. A broker who quotes you a much higher price than others is trying to win the listing, not sell the business. Overpriced listings sit and go stale.
Questions to ask before you sign
- How many businesses like mine have you closed in the last 24 months?
- What is your average time from listing to close?
- What percentage of your listings close?
- How do you screen buyers and verify their funds?
- What marketing channels do you use, and how do you keep the sale confidential?
- What are your fee structure, listing term, and tail period?
- Can I speak to 2 or 3 recent sellers as references?
Red flags
- Large upfront fees with a small success fee.
- Valuation dramatically above every other opinion.
- Long listing terms (12+ months) with a long tail.
- No recent closings in your industry or size range.
- Pressure to sign at the first meeting.
BizBuzz Brokers is happy to be one of the brokers you interview. If we are not the right fit for your business, we will tell you and point you toward someone who is.
Frequently asked questions
How much does a business broker cost?+
Most Main Street brokers charge a 10 percent success fee on the sale price, paid from proceeds at closing. Larger deals (above $5M) move to investment banker structures with a retainer plus a smaller success fee.
Do brokers charge anything upfront?+
Some charge a small valuation or marketing fee ($500 to $3,000). Be wary of brokers demanding large upfront fees, that is often a sign the broker earns more from listings than from closings.
How long is a typical listing agreement?+
6 to 12 months, with the shorter term being negotiable. Most listings include a tail period so the broker still earns commission if a buyer they introduced closes shortly after termination.
Can I fire my broker?+
Yes, subject to the terms of your listing agreement. Read the termination and tail clauses carefully before you sign.
What is the difference between a broker and an M&A advisor?+
Rough rule: brokers handle Main Street deals up to $2M to $5M. M&A advisors and investment bankers handle middle-market deals from $5M to $100M+, with more institutional buyers and more complex structures.
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