What is a Business Broker and Should You Hire One?

Selling your small business represents one of the most significant and complex decisions you'll face as an entrepreneur. You've likely heard of a "business broker," and you might wonder, "What exactly is a business broker, and do I need one to help me sell my business?"

This post explains what business brokers do, their qualifications, and how to work with them. We'll explore the costs, benefits, and risks involved—helping you decide if a broker is right for your business sale.

Understanding Traditional Business Brokers

Who Are They?

Simply put, a business broker is a professional or a firm that specializes in helping entrepreneurs sell or buy privately-owned businesses. Think of them as intermediaries, similar to real estate agents, who help match sellers with qualified buyers, guide negotiations, and assist through various details of the transaction. Typically business brokers support entrepreneurs by:

• valuing and pricing the business

• marketing the business opportunity

• identifying and screen potential buyers

• managing negotiations on deal terms

• assisting with the sales agreements

Where Do They Come From?

Interestingly, the business brokerage industry evolved out of the real estate sector. Decades ago, realtors would often oversee business transactions because many early deals involved leased properties or land transfers typically handled by real estate agents. Thus, the foundation of the business brokerage business maintained many of the same norms and incentive structures familiar to the real estate model— which hasn’t necessarily been beneficial for sellers.

Typical Business Broker Qualifications

Unlike investment banking or specialized M&A advisors, traditional business brokers usually have varied backgrounds. Commonly, you'll find brokers with experience in:

• Real estate sales and brokerage

• Small business ownership or commercial sales

• General sales and marketing careers

Unfortunately, they don’t always have deep understanding of the complexities involved with valuing businesses accurately or anticipating financial and operational due diligence questions

What Does it Look Like to Work with a Business Broker?

Typical Engagement Process

• Initial Meeting & Valuation: You’ll have a meeting to discuss your business, goals, timeline, and financials. The broker will usually provide a suggested valuation based on surface-level market data and comparable listings. Be cautious—these valuations are often overly optimistic and can set unrealistic expectations early on.

• Listing Agreement and Upfront Payment: You’ll typically pay a non-refundable commitment fee—usually between $25,000–$50,000—and sign an exclusive listing agreement, locking you in with that broker for 12–24 months.

• Marketing the Business: The broker may prepare a short summary of your business, often just a few pages, and begin marketing it through public online listings or their personal network. More sophisticated brokers might develop a full Confidential Information Memorandum (CIM), but this isn’t always the case.

• Buyer Screening & Meetings: While brokers may present interested buyers as "qualified," most don’t perform meaningful screening beyond checking if someone is willing to sign an NDA. It’s not uncommon for business owners to waste time with unfit or unserious prospects.

• Negotiation & Closing: In theory, brokers help both parties navigate negotiation, due diligence, and closing. In practice, only experienced brokers provide real support here—many sellers report being left to handle diligence and negotiations on their own due to broker unresponsiveness, with buyers and sellers often defaulting to working directly together to get the deal done.

Upfront Fees and Costs

Business brokers typically follow a commission-based compensation structure:

• Commission Fees: Usually range from 8% to 15% of the total sale price. Higher percentages are common for smaller transactions.

• Upfront Retainers: Many brokers charge upfront fees or retainers ranging from $25,000-$50,000 thousands of dollars, payable regardless of whether the business ultimately sells.

  Brokers charge this fee because they're not salaried; they rely on commission and need to ensure some income as they focus on representing your business.

Evaluating Whether You Should Work With a Broker

Why Some Business Owners Choose A Business Broker

Working with traditional broker offers several advantages, especially for certain types of sellers who value:

• Local Market Experience: If your business is closely connected to local markets or includes real estate holdings (such as storefronts, leases, or commercial properties), brokers from real estate backgrounds can be particularly adept at navigating local regulations and market conditions.

• Basic Marketing Exposure and Effort: Brokers provide exposure for your business listing online, through their personal networks, sometimes through local business groups or associations. These avenues may create sufficient initial interest for smaller or straightforward transactions.

• Familiarity & Simplicity of Process: The broker model is straightforward and resembles the well-established real-estate brokerage model. Many sellers find comfort in this familiar framework, with clear expectations, defined roles, and structured steps toward a sale.

Risk of Working With a Business Broker

However, it's equally crucial to understand the potential drawbacks and risks involved when engaging traditional brokers.

• High Fees & Upfront Costs: Brokers typically charge significant commissions (8%-15%), plus potentially large retainers or upfront fees payable regardless of successful sales outcomes.

• Incentive Misalignment: Brokers relying on upfront retainers may prioritize quick sales below your expectations or encourage overly optimistic valuations to secure listings, negatively affecting pricing accuracy and timing expectations.

• Uneven Levels of Expertise: Brokers are skilled in negotiations and business communication but often vary in financial training and M&A expertise, lacking critical industry knowledge, valuation accuracy, or transactional structuring skills necessary for optimal outcomes.

• Reduced Transaction Certainty: Limited buyer vetting and inadequate transaction strategies can compromise momentum toward a successful closing, resulting in delays or failures that negatively impact your business valuation and personal timeline.

• Limited Buyer Reach: Brokers depend heavily on networks, personal relationships, and general online listings. Unfortunately, these methods are often passive, limiting your potential pool of qualified buyers.

Choosing the Best Path Forward

As you evaluate brokers versus specialized advisors, reflect on your target goals and priorities:

• Does transaction certainty matter significantly?

• Can you afford upfront fees without immediate outcomes?

• How important is proactive buyer engagement and an accurate valuation for your situation?

Ultimately, familiarizing yourself with how brokers operate—typical engagements, costs, and incentives—equips you to choose the best professional for your unique circumstances.

OffDeal leverages advanced technology and expertise to help small business owners achieve the same quality of M&A service previously reserved for large corporations. Our mission is to ensure every business owner has the opportunity to maximize their value when they're ready to sell.