What Does a Business Broker Do? And Do You Need One?

If you're thinking about selling your business, you've probably wondered whether you need a broker — and what one actually does. It's a fair question. Broker fees aren't small, and if you're a capable business owner, it's natural to think you might handle it yourself.

Here's an honest breakdown of what brokers do, how they get paid, and when it makes sense to hire one.

What a Business Broker Actually Does

1. Valuation

Before anything goes to market, a broker assesses your business's value using industry multiples, comparable transactions, and financial analysis. This isn't a number pulled from thin air — it's a defensible range based on what buyers are actually paying for businesses like yours.

2. Preparation

A good broker helps you get your business ready for sale. That means organizing financials, identifying potential deal issues, and building a marketing package — typically called a Confidential Information Memorandum (CIM) — that presents your business in the best possible light.

3. Marketing and Buyer Outreach

This is where brokers earn a significant portion of their fee. Selling a business isn't like listing a house on the MLS. Brokers have networks of qualified buyers — private equity firms, strategic acquirers, search funds, and individual operators. They reach out confidentially, qualify buyers, and manage the flow of information.

4. Managing the Process

From first inquiry to closing, a business sale involves dozens of moving parts: NDAs, buyer qualification, facility tours, management meetings, due diligence, financing contingencies, legal review, and closing logistics. A broker quarterbacks all of it.

5. Negotiation

This is arguably the most valuable thing a broker does. Experienced brokers have seen hundreds of deals. They know when a buyer is bluffing, when an offer is below market, and how to structure terms that protect the seller. Having someone negotiate on your behalf — someone who isn't emotionally attached to the business — consistently produces better outcomes.

6. Deal Structure Optimization

Price isn't everything. The structure of a deal — cash at close vs. earnouts, seller financing, working capital adjustments, non-compete terms — can dramatically affect your actual take-home. Brokers help you evaluate the full picture, not just the headline number.

How Business Brokers Get Paid

Most business brokers work on a success fee basis — meaning they only get paid when the deal closes. Standard fee structures vary by deal size:

• Businesses under $5M: Typically 8-12% of the sale price
• $5M–$25M: 5-8%, sometimes with a minimum fee
• $25M+: Often follows a modified Lehman formula (declining percentage tiers)

Some brokers charge an upfront retainer (typically $5K–$25K) that's credited against the success fee at closing. A retainer signals that the broker is investing real time and resources in your deal — and it aligns both parties.

When You Need a Broker

Your business is worth $500K or more. At this level, the complexity and the stakes justify professional representation.

You don't know your buyer. If you already have a buyer lined up (a competitor, an employee, a family member), you might not need a full brokerage engagement — though you may still want advisory support for valuation and negotiation.

You want a competitive process. A broker's primary value is creating competition among buyers. Multiple offers mean higher prices and better terms.

You want confidentiality. Selling a business without employees, customers, or competitors finding out requires careful handling. Brokers manage information flow and screen buyers before revealing your identity.

You don't want to run the business and sell it at the same time. The sale process is time-consuming. Taking your eye off operations during a sale is one of the most common — and costly — mistakes owners make.

When You Might Not Need a Broker

Very small businesses under $250K. The economics of broker fees may not make sense for very small deals. Some brokers won't take on businesses below a certain threshold.

You have a known buyer. If your business partner, key employee, or a competitor has already approached you, a transaction attorney and a valuation advisor may be sufficient.

You're selling to a family member. Family transitions involve estate planning, tax strategy, and relationship dynamics that are better handled by attorneys and accountants than brokers.

How to Choose the Right Broker

Not all brokers are equal. Ask these questions:

• How many deals have you closed in my industry? Industry experience matters. A broker who knows your buyer universe will get you better results.
• What's your average time to close? Good brokers close deals in 6-9 months. If they say 12-18 months, ask why.
• How many active listings do you carry? A broker with 40 listings isn't giving your deal enough attention. Look for someone who takes on a manageable number of engagements.
• Can I talk to past clients? References matter. Talk to at least two sellers who closed deals with this broker.
• What's your marketing strategy for my business? You want specifics — not "we'll list it on BizBuySell."

My Approach

I work exclusively with business owners doing $500K–$50M in revenue across California. I take on a limited number of engagements at a time so every client gets real attention. If you're exploring a sale, schedule a free call and I'll give you an honest assessment of your situation.