What a broker actually does
The commission covers a defined set of work. Judging whether it is worth paying starts with knowing which parts you would otherwise do badly, slowly, or not at all.
| Function | What it involves | Doing it yourself |
|---|---|---|
| Valuation and pricing | A defensible number and range | Achievable with tools and a CPA |
| Marketing materials | Teaser, memorandum, listing copy | Time-consuming but achievable |
| Buyer sourcing | Databases, existing buyer lists, outreach | The hardest part to replicate |
| Screening | Filtering unqualified enquiries | Substantial and unrelenting work |
| Confidentiality | NDAs, staged disclosure, anonymity | Achievable with discipline |
| Negotiation | An intermediary between the parties | Harder emotionally than owners expect |
| Process management | Keeping diligence and financing moving | Where deals quietly die |
Business brokers typically handle transactions up to a few million dollars on commission. M&A advisers or investment banks work on larger deals, usually with a retainer plus a success fee, and run a more structured competitive process. Transaction attorneys and CPAs do the legal and tax work either way — a broker does not replace them.
The case for hiring one
- Buyer access. A broker active in your industry has a list of people who have already said they are looking. Building that yourself takes months you may not have.
- You keep running the business. The most underrated cost of a self-managed sale is the owner's attention. A business that dips during the process loses more value than the commission.
- Screening. Most enquiries are unqualified, and some are competitors gathering information. Someone else absorbing that is worth real money.
- Emotional distance. Owners defend their business rather than negotiating for it. An intermediary can push back on a low offer without either party losing face.
- Process discipline. Diligence stalls, lenders go quiet, buyers drift. Someone whose job is chasing those threads meaningfully raises the probability of closing.
- Confidentiality. A broker markets anonymously as a matter of routine, which is harder to do credibly yourself.
The commission is not paid for finding a buyer. It is paid for the difference between a deal that closes and one that does not.
A broker running a real process to multiple buyers can create competitive tension, and that frequently moves price more than the commission costs. One interested buyer knows they are the only one. If a broker turns a single approach into three conversations, they have usually paid for themselves.
The case against
- The cost is real. Ten percent of a $2M sale is $200,000, and most agreements include a minimum fee that bites hardest on smaller deals.
- Quality varies enormously. The field is lightly regulated in many states, and a poor broker adds cost without adding buyers.
- Incentives are not perfectly aligned. A broker earns far more from closing at a slightly lower price than from not closing at all, which can produce pressure to accept.
- You may already have the buyer. If a competitor, a customer or your management team is the likely acquirer, a broker adds a commission to a conversation you can have directly.
- Listing exclusivity binds you. Most agreements are exclusive for six to twelve months and often capture buyers you introduced yourself.
- Small deals get less attention. A broker with a $5M listing and a $400,000 listing is not dividing their week evenly.
Nearly every agreement includes a tail — if you sell within twelve to twenty-four months after the agreement ends, to anyone the broker introduced, the commission is still owed. That is reasonable in principle. What matters is whether 'introduced' is defined by a written list, and whether buyers you brought yourself are carved out. Both are negotiable, and both are frequently left as the broker drafted them.
The economics, plainly
| Deal size | Typical commission | On the fee |
|---|---|---|
| Under $500K | 10–12%, minimum fee likely | $25–50K minimum is common |
| $500K – $1M | 10% | $50–100K |
| $1M – $5M | 8–10%, sometimes tiered | $80–400K |
| Over $5M | Lehman-style scale or M&A adviser | Retainer plus success fee |
The question is not whether the commission is large. It is whether the broker produces a better outcome by more than the commission. On a $2M sale a broker needs to add roughly $200,000 of value — through a higher price, a deal that would otherwise have failed, or time you spend running the business instead.
Works: you have no buyer in mind, the business is saleable but not obviously so, you are fully occupied running it, and the broker knows your industry. Does not: you already know your buyer, the business is small enough that a minimum fee is a large percentage, or the broker is a generalist with no relevant list.
If you use one, choose on evidence
The variance between brokers is larger than the variance between using one and not. These are the questions that separate them.
- How many businesses like mine have you sold in the last two years? Ask for the count, the sizes and the industries. Vague answers are the answer.
- What is your listing-to-close ratio? A broker who lists everything and closes a third is running a volume model.
- Who actually does the work? The person pitching is often not the person managing your sale.
- Show me a sample memorandum. Redacted is fine. It tells you what your materials will look like.
- How will you find buyers for this specific business? Named channels and a real list, not 'our extensive network'.
- What is the exclusivity period and the tail? Negotiate both. Six months with a defined introduction list is reasonable; twelve months with an open tail is not.
- Are buyers I introduce carved out? If your management team or a known competitor buys, the commission position should be agreed in advance.
A high indicative valuation is the standard way to win a listing, and it costs the broker nothing to be optimistic in the first meeting. Get a valuation from someone who is not competing for the mandate, and treat a broker's number that is well above it as a question rather than good news.