What it means
Selling a business is unlike selling almost anything else, because the asset is confidential, hard to value and only worth what a specific buyer will pay. A broker exists to bridge that gap: they package the financial history into something a buyer can assess, then find and qualify the handful of people genuinely able to complete a purchase.
Most brokers concentrate on deals below roughly $10,000,000, above which investment banks and merger advisers usually take over. The work begins with preparation rather than marketing.
A broker will normalise the accounts by adding back owner perks and one-off costs, build a valuation range, and write an information memorandum that a buyer can read without learning the seller's identity. Getting the numbers clean at this stage often adds more value than any negotiation later.
Confidentiality is a large part of what an owner is paying for. Staff, customers and suppliers who learn a business is for sale tend to react badly, so brokers use blind profiles, staged disclosure and non-disclosure agreements before releasing anything identifying.
A broker who leaks the sale can damage the very asset being sold. Fees are almost always success-based, with a modest upfront retainer that is credited against the final commission.
Rates commonly sit between 5% and 12% of the sale price for smaller deals, with tiered scales reducing the percentage as the price rises. Because the fee is tied to price, the broker's incentive is broadly aligned with the seller's, though not perfectly, since a quick sale at a lower price can still be attractive to a busy intermediary.
Choosing one is largely about sector experience and buyer reach. A broker who has sold eleven dental practices knows the buyer pool, the typical multiple and the licensing quirks; a generalist starts from scratch.
Owners should ask how many deals actually completed rather than how many were listed, because listing is easy and closing is not.
In practice
Real-world examples.
Example
The owner of a heating and ventilation firm engages a broker on an 8% success fee and completes at $2,400,000, producing a commission of $192,000. The owner accepts the cost because three of the four bidders came from the broker's existing buyer list.
Example
A cafe chain sells for $3,000,000 on a tiered scale of 10% on the first $1,000,000, 8% on the second and 6% on the third. The fee is $100,000 + $80,000 + $60,000 = $240,000, an effective rate of 8% on the whole price.
Example
A retiring printer lists at $1,300,000; the broker screens roughly 60 enquiries down to four credible buyers and completes at $1,150,000. At a 10% fee the commission is $115,000, and the seller judges it worthwhile because none of the four buyers were previously known to him.
Formula
Calculation
Broker commission = agreed commission rate x final sale price, with any retainer already paid credited against the total.
An owner sells a specialist engineering firm for $1,800,000 under a 10% success fee, having paid a $12,000 retainer at the start of the engagement. The gross commission is 10% x $1,800,000 = $180,000. Because the retainer is credited, the amount due at completion is $180,000 - $12,000 = $168,000.
The seller also pays $60,000 in legal and accounting fees. Net proceeds before tax are $1,800,000 - $180,000 - $60,000 = $1,560,000, so total transaction costs absorb $240,000, or about 13% of the headline price.Case study
Seen in the real world.
Harbour Lane Bakeries is a fictional five-site bakery whose founder wanted to retire within eighteen months. She initially tried to sell privately, spoke to two local buyers over a year, and received one offer of $1,400,000 that collapsed during due diligence when the buyer could not follow the owner-managed accounts.
A broker was engaged on a $10,000 retainer and a 9% success fee. Over four months the broker restated three years of accounts, added back $95,000 of annual owner salary and personal vehicle costs, and marketed the business anonymously to a list of regional food groups. The asking price was set at $2,200,000 and the business completed at $1,950,000, producing a commission of 9% x $1,950,000 = $175,500.
Net of that commission the founder received $1,950,000 - $175,500 = $1,774,500. In this illustrative case that is $374,500 ahead of the collapsed private offer, largely because the cleaned-up accounts allowed a trade buyer to see the true earnings.
Watch out
Common mistakes.
- Assuming a broker's valuation is a guaranteed price, when it is a marketing range that only becomes real once a funded buyer signs.
- Signing an exclusive agreement of two years or more without a performance break clause, leaving the owner stuck if the broker goes quiet after month three.
- Ignoring the tail clause, which can require a commission on any buyer the broker introduced even if the sale completes a year after the agreement ends.
Questions
People also ask.
What does a business broker actually charge?
Typically a small retainer of a few thousand dollars plus a success fee between 5% and 12% of the sale price, with the percentage falling as the deal size rises.
Do I need a broker if I already have a buyer?
Not necessarily, though many owners still engage one on a reduced fee to manage negotiation, structure and documentation rather than to find the buyer.
How long does a broker-led sale take?
Six to twelve months is common for a healthy small business, with roughly a third of that time spent preparing before the business is ever shown to a buyer.
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