Business broker

What this seat actually does

Brokers market smaller businesses, usually through listing platforms, to a broad pool of individual buyers. For a buyer, broker listings are the visible, accessible end of the market: easy to search, easy to inquire about, and correspondingly competitive on the good ones.

For a seller of a genuinely small business, a competent broker can be exactly the right answer. The role becomes a poor fit as a company grows into the range where a structured process aimed at strategic and financial buyers would produce materially better outcomes.

When you need one

As a buyer, treat broker listings as one sourcing channel among several, never the only one. As a seller, the honest question is whether your company has outgrown the channel, and a broker is not a disinterested party to ask.

How they charge

Typically a commission on sale, sometimes with a modest upfront or marketing fee. Commission structures at this end of the market are usually less negotiable than banker fees.

Understand who the broker represents. In some arrangements and jurisdictions a broker may act for both sides of the same transaction, which changes what their advice is worth to you.

What to ask before you hire

• Do you represent the seller, the buyer, or both in this transaction?
• How many businesses like this one have you actually closed, as opposed to listed?
• What is your ratio of listings to completed sales?
• How is the asking price on this listing derived, and by whom?
• What licenses do you hold, and in which states?

How to compare candidates

• Ask about closings, not listings. A wall of listings can indicate marketing reach or it can indicate a graveyard.
• Ask directly about dual representation and get the answer in writing.
• For sellers: get a second view on whether you belong in this channel at all, from someone who will not earn the commission.

The mistake owners make

For a seller, using a broker for a company that has outgrown the channel and quietly leaving a great deal of money on the table. For a buyer, treating a broker’s asking price and financial summary as diligence. They are marketing.

What this is not

Not an investment bank, and not an M&A advisor running a competitive process. The distinction is the process and the buyer pool, not the job title, and job titles in this space are used loosely.

The Institute accepts no payment from any advisor, takes no fee tied to any transaction, and does not place or refer professionals for compensation. This entry describes a role, not a recommendation of any firm.