Costs
Part of Four things a business broker actually does, and where incentives stop matching yours
Matching a business broker service to your deal, and what the fee covers
Match the kind of intermediary to your transaction, then test the individual on completions, process, references and liability before any price is quoted.
First judge which kind of service your transaction needs. Then test candidates within that kind.
A firm built for owner-operated businesses will misread a company with a management team. An advisory boutique built for larger transactions will not return a small company's calls.
This page does the first part, then sets out how to test a candidate properly, including how to run a reference call so that it tells you something.
What to take away
- Match the kind of intermediary to the size and shape of the transaction before you compare individuals.
- The reference call is the single best test, and most owners waste it by asking whether the person was nice.
- An intermediary is one of three professionals a sale of this size warrants. Judge them on the process they run, and keep the accountant and lawyer separately engaged whatever they offer.
The kinds, and what each is built for
Built for
- Main-street brokerage
- Owner-operated businesses sold to individuals; local buyers; simple structures
- Advisory boutique
- Businesses with a management layer, sold to companies or investors; structured deals
- Sector specialist
- One trade, known buyer pool, typical deal shapes
- Franchise resale desk
- Transfers within a franchise system, where the franchisor's consent is the gating item
- Accountant-led sale
- A business whose buyer is already identified and whose main work is numbers and structure
- Online listing with light brokerage
- Very small businesses where the fee for a full process is not justified
Where it misfits
- Main-street brokerage
- A business with a management team, several sites or a corporate buyer; the valuation and the buyer pool are both wrong
- Advisory boutique
- A small owner-operated business; you get little attention and a fee scale designed for larger deals
- Sector specialist
- Anything outside the sector, and any owner who wants buyers the specialist does not already know
- Franchise resale desk
- Independent businesses; and it may owe more to the franchisor than to you
- Accountant-led sale
- A sale that needs marketing, buyer qualification and confidentiality; those are not accounting skills
- Online listing with light brokerage
- Anything where confidentiality matters, because the model depends on visibility
Business brokers: two rules of thumb follow. If your business could run a month without you, you are likely in the second row, not the first, whatever its size.
Broker type fit and misfit
Kind of service
- Main-street brokerage
- Owner-operated, local buyers
- Advisory boutique
- Management layer, structured
- Sector specialist
- One trade, known buyers
- Franchise resale desk
- Within franchise system
- Accountant-led sale
- Buyer identified, numbers
- Online listing light brokerage
- Very small businesses
Built for
- Main-street brokerage
- Corporate buyer, several sites
- Advisory boutique
- Small owner-operated business
- Sector specialist
- Outside sector, unknown buyers
- Franchise resale desk
- Independent businesses
- Accountant-led sale
- Needs marketing, confidentiality
- Online listing light brokerage
- Confidentiality matters
Where it misfits
- Main-street brokerage
- Advisory boutique
- Sector specialist
- Franchise resale desk
- Accountant-led sale
- Online listing light brokerage
If your buyer is already in the room, the fourth or fifth row may suffice, if you can create competition without a process. The main page covers when an intermediary is not the answer.
The named examples below are for comparison, not endorsement. The table describes kinds of service, not particular companies, and nothing here is a recommendation for one.
Named examples: BizBuySell and BizQuest for online listings; Sunbelt Business Brokers, Transworld Business Advisors, and Murphy Business & Financial for main-street brokerage; Flippa and Empire Flippers for digital businesses. Typical main-street commissions are 8 to 12 percent of sale price. Typical online success fees are 10 to 15 percent, with listing fees separate.
The service that earns its fee in 2027 is the one whose kind matches your transaction and whose assigned person passes the tests below. On the fee test, main-street brokerages earn their 8 to 12 percent when they run a full process. Online listing services earn their listing fee when confidentiality is not required.
What the fee covers
Commission is the standard model, and it is a percentage of the sale price. Most engagement letters also carry a minimum fee, a retainer, or both.
- Main-street brokeragetypically 8 to 12 percent of the sale price, with a floor on small deals.
- Advisory boutique and sector specialisttypically 4 to 8 percent, often with a retainer credited against the commission at closing.
- Franchise resale deska rate set inside the franchise system, plus the franchisor's transfer fee.
- Accountant-led salehourly or fixed, priced on the numbers and the structure, not on the price.
- Online listinga flat listing fee, with brokerage charged only if a deal closes.
The ranges above are typical, not quoted. Price, complexity and the buyer pool move them.
The fee trigger matters more than the rate. Ask whether it is paid at closing, at a signed letter of intent, or on a tail after the term ends.
Testing a candidate within the kind
Once the kind is right, test the person, not the firm. The firm's completions are not the individual's.
Test the individual, not the firm
- Completions by this person, not listings
- Written process for marketing and qualification
- Their reading of your accounts
- Liability insurance and qualification
- Engagement letter at first meeting
Completions, by this person, of businesses like yours. Not listings. Not "involvement". Ask how many they took from engagement to closing in the last few years, and how many engagements did not complete and why.
The process, in writing. How the business is marketed without being identified, what a buyer sees before a confidentiality agreement, how buyers are qualified on funds, what is released at each stage, and how offers are brought to a deadline. A candidate who describes this fluently has done it. One who talks about their contacts instead has not.
Their reading of your business. Before any number, ask what a buyer's accountant will question in your accounts and what they would want fixed before market. The answer tells you whether they have looked. It is also the beginning of your preparation.
Liability and qualification. Ask whether they carry professional liability insurance and what it covers. An intermediary who is not liable for the numbers in the package will present numbers your accountant must stand behind, so the accountant needs to have produced them.
Licensing and registration. In the US there is no single national license for business brokers, and the rules sit with the states. Several states require a real estate broker's license when the sale includes real property, some require registration or disclosure under business opportunity laws, and transaction based pay on a securities deal can require registration as a broker-dealer with the SEC and FINRA. In Canada, provincial regulators apply the same rule to transaction based pay on a securities deal.
The engagement letter, before you decide. Ask for it at the first meeting. Fee trigger, base, term, termination, tail and buyer register. A candidate who will not show the letter until you have decided is negotiating already.
Running the reference call
Most owners ask a former client whether the intermediary was good, hear yes, and stop. Ask instead:
- How long did it take, from engagement to closing?
- How many buyers did you meet, and how many made an offer?
- What did the intermediary do in the first two weeks?
- What went wrong, and how did they handle it?
- How were buyers qualified on funds before they saw anything sensitive?
- What did the final fee come to, and what triggered it?
Reference call questions
- How many offers, how close together?
- What did they tell you to fix?
- What did the buyer's accountant challenge?
- What was the final deal structure?
- What would you add to the engagement letter?
- Would you use the same person again?
The pattern of answers matters more than any one of them. Offers that clustered describe a process that worked. A single offer, accepted, describes a conversation. A second opinion from a second former client, chosen by you from the completion list rather than supplied, is worth the extra call.
What a candidate should never offer
- A figure before seeing the records. It is a pitch.
- To draft the contract, or to save you the cost of a lawyer. The contract is where liability lives, and it belongs with someone liable for it.
- To handle the tax structuring. That belongs with your accountant, who has to model the structures before a price is agreed.
- To skip buyer qualification to move faster. Speed with unqualified buyers is how packages leak.
- To run diligence for you. They can organize the data room; the examining is the accountant's and lawyer's.
Any one of these is a sign of an intermediary working outside their competence, or inside their incentive.
Never accept these offers
- A figure before seeing records
- To draft the contract
- To handle tax structuring
- To skip buyer qualification
- To run diligence for you
