Should you hire a broker to help sell your business?
It can be a tricky question for a first-time seller. There’s a lot to learn: What does a broker do for the seller? How much does it cost? And how do you find a broker you can trust?
The topic is complicated by the negative perception many of us have of brokers; a few slimy characters have given the industry a bad rap. Bringing some apprehension to this process can work in your favor, as choosing the wrong broker can derail your entire sale process. Likewise, choosing the right one can make all the difference.
We’ll break down all the questions you might have around whether to hire a broker and how to work with one, so you can decide whether it’s right for you. To flesh out these concepts, we asked brokers who specialize in selling online businesses and founders who have used a broker in their sale to share their real-world experiences.
If you read through this Q&A and decide you’d like to work with a broker to sell your business, we can help you choose one that’s a fit for your type and size of business.
Here’s what we cover in this story, in case you want to jump to specific questions:
- What is a business broker?
- Why might you consider hiring a broker to sell your business?
- Why is the option of using a business broker appealing?
- What does the broker relationship look like?
- How should you choose a business broker?
- How early in the process should you hire an online business broker?
- How do you know if you’re ready to hire a broker?
- What questions should you ask as a seller, when you interview brokers?
- What questions do brokers wish sellers would ask?
- What do business brokers charge, and is it worth it?
- Who doesn’t need to use a business broker to sell their business?
- Do you need a broker if you already have a buyer?
- Do sellers ever successfully sell their business without a broker?
- What about hiring an investment banker vs a business broker?
- Is an advisor the same thing as a broker?
- Summary: Should you use a broker?
A business broker is a person you hire who helps you sell your company. Their job is to help you find a great buyer for your business, negotiate a sale price and deal terms that’s a win-win for both parties, and keep the deal on track to close.
The best business brokers have plenty of experience selling companies, and many have sold their own online businesses as well. Brokers are sometimes called M&A advisors.
Brokers do not have to be licensed or certified to represent sellers of online businesses in the U.S. However, if the online business has a physical location, you need a broker who has a real estate license in that state, or a real estate agent to help with that part of the transaction.
This makes it challenging to figure out which brokers are truly qualified to help you sell your business.
They can, however, earn certifications, and while they’re not required, they are important, said Chris Wozniak, an M&A advisor/broker with Quiet Light Brokerage who has sold businesses for years. “They demonstrate you’ve been educated, they require evidence of deals being done to maintain some of those designations, they require continued education to maintain those designations, and they require a sizable financial investment to maintain those designations, which also demonstrates commitment,” he said.
Some examples include Certified Business Intermediary (CBI), which is issued by the International Business Brokers Association (IBBA); Certified Mergers & Acquisitions Professional (CM&AP), issued by Kennesaw State University; and certificates issues by state broker associations.
Brokers specialize in selling different types of businesses, so you should look for one who has experience selling the type of business you’ve built. If you’re selling an online business, for example, don’t make the mistake of working with a broker who has primarily sold brick-and-mortar companies.
In short, because successfully selling your business is difficult to pull off. In most cases, the seller is a first-timer, going up against experienced buyers. If you go it alone, it’s easy to be taken advantage of—and even more common that your sale never happens.
“We [brokers] sell businesses every day—we are in the business of selling businesses. We are the experts,” said Adrianna Smith, a broker with First Choice Business Brokers. “If you’re going to the Olympics, you don’t go without a coach.”
A broker helps improve your odds, Smith noted. A good broker will have sold scores or even hundreds of businesses during their career, so they know the problems that can crop up. One of their main jobs is to keep your sale on track through those bumps in due diligence, and shepherd you to a successful exit.
If you don’t know who your buyer could be or what your business might be worth, having a broker in the mix will probably help you get the best outcome, said Geoff Matthews, an M&A advisor with The FBA Broker.
“The broker is out trying to get you competing offers to drive the price up, and in many cases is getting you more money,” he said.
Running your business is often a full-time job for the owner. Selling a business is, too. Trying to juggle these two roles and sell on your own can turn the sales process into a slow-running marathon. You might not have enough time and energy to devote to perfecting your marketing materials, building your network, and vetting prospective buyers.
The right broker is a time-saver thanks to their full-time focus on the sales process and their wealth of past experience, said Manuel Frigerio, who used a broker to sell his SaaS startup ReferralHero.
“The reason why I chose a broker was primarily time,” said Frigerio, who was juggling another business and a new baby when he decided to sell ReferralHero. “Also, that they know what they’re doing, so they’re not going to mess up.”
This is a question to ask the broker you’re thinking about working with, since brokers will have different working styles. Matthews notes that some brokers act almost like a business-sale marketplace, running hundreds of listings at a time. You won’t get a lot of individual attention or hustle from this type of broker to maximize your sale price, he noted.
“They’re just trying to close a lot of deals,” he said.
Many brokers start with a complimentary market price analysis or valuation, even before signing sellers as a client. That’s a chance for the seller to learn how much their company might be worth.
One big thing to know is that if you do sign with a broker, you’ll be signing an exclusive contract for a period of time, Smith said. The broker needs to know they have exclusivity to market your business.
From there, your broker will gather information, create marketing materials, and confidentially market the business, targeting likely buyers in their network. Once you find your buyer, the broker will negotiate on your behalf directly with the buyer, then troubleshoot every step of the way, making sure the deal doesn’t derail.
“Once we start negotiating with a buyer, we will be the glue that holds this deal together,” Smith said.
Also know that a broker will expect to serve as one key part of your deal team. They’re not qualified to fill every role necessary to sell your business.
“We’re not an accountant or a lawyer, but one cog in your deal team,” said Matthews. “We only bring one business to market at a time, trying to sell for a premium.”
Investment banks and some advisory firms that service 8-figure deals typically bring those other roles to the table or help you find the right professionals to fill them. But that’s not expected when you work with a broker.
Sellers who’ve used a broker say they added marketing expertise, as well as vital help finding prospective buyers and comparing offers. For instance, Wang’s broker provided critical input for understanding deal terms and choosing the best offer.
“There were so many terms that I didn’t even know what they meant,” Wang said. “My broker said, ‘Don’t look at this vanity figure—this is the real number.’ They pointed out that cash on closing is what matters, because the earn-out portion could go away.”
When it comes to finding a broker, nothing beats meeting them and having a chance to talk. Most brokers will give you an initial free consultation, so you can see if you’re a fit to work together. Many prefer to meet well before you’re ready to sell, as that allows them to guide you to be well-prepared before you receive an offer.
For instance, Frigerio first met his broker, FE International, in London at the SaaS conference LTV. “At the time, I wasn’t even thinking about selling the business,” he said. He enlisted that firm for help when he was ready.
Tom Wang, who was co-owner of the Amazon marketplace business Sdara Skincare, met his broker when he attended conferences put on by the firm, The FBA Broker. Wang now coaches other ‘Fulfilled By Amazon’ (FBA) entrepreneurs. He first met with FBA in 2019, and sold in early 2021 after a Covid delay.
He subsequently interviewed a couple of other brokers, but the relationship he’d built with FBA made him trust their team more, he said. Also, FBA had a key point of difference that made them stand out.
“One thing I liked about TheFBABroker is that they didn’t publish an asking price for our business,” he said. “They just described our business and showed its metrics, and we had a number in our heads.”
One great way to find a trusted broker is asking others for recommendations. At They Got Acquired, we can help you choose one that’s a fit for your type and size of business.
Many sellers wait until they’re ready to sell or even have a buyer before looking for the right broker to support them. But it works in your favor to talk with one earlier in the process if possible.
Here’s why: A broker can help you think through how to get the maximum valuation for your business. When you review your business performance together, they might identify levers you could pull or things you could change that will make the business more valuable to a buyer. It will then likely take time to implement those changes so they result in an increased valuation.
Because of this, some of the best brokers are happy to talk with entrepreneurs who are thinking about selling months or even years before they’re ready to sell. They know they can work alongside the seller to increase the value of the business, which benefits both parties when they sell.
Since many brokers expect payment only when the deal closes, you can talk with them early in the process without having to shell out a lot of cash at that point.
One simple way to find out if you’re ready to engage a broker is to talk to one, said Matthews.
Good brokers are used to working with first-time sellers who have lots of questions. They’ll help you assess the state of your business and whether you’re ready to move forward with a sale. They should also be able to provide checklists of the paperwork you’ll need for due diligence, so you can start thinking about all the pre-sale preparation.
“Not every business is ready to sell, or at the best possible point,” said FBA’s Matthews. “Talking to a broker can help you decide if there’s more prep work you need to do first.”
In choosing a broker, learn about their background and track record selling businesses. You want to choose one who has sold businesses similar in industry and size to yours. For example, many brokers have experience selling brick-and-mortar businesses, but if you’ve built a primarily online business, you want a broker who has sold that kind of company and understands its unique complexities.
“Sometimes, you see realtors or commercial brokers dabbling in business sales, but it’s not what they do all the time,” says Smith. “That’s like going to a heart doctor for a foot problem.”
She advises taking a look at the broker’s current listings and how they get the word out about them. Find out whether they do proactive marketing, beyond putting an ad on Craigslist. If they know the industry players and outreach directly to them, that’s a point of difference, she said.
Also, ask questions about how the process will work, if you engage them. What technologies will be used to track deal progress? How focused will they be on your deal, and how quickly can you expect them to respond to questions from your buyer?
“The number-one complaint about brokers is: ‘They don’t call me back,’” said Smith.
Here’s a short list of questions to ask a broker as a starting point:
- Can you share examples of businesses like mine that you’ve sold in the past?
- What would the process be like if we worked together?
- How does your fee structure work?
- How many buyers would you expect to be seriously interested in my business?
- In this market, how quickly would you expect my business to sell?
- If we work together, what does the process look like?
- Can you put me in touch with other sellers who have used your services, so I can ask them what it’s like to work with you?
- In addition to sharing this opportunity with your list of buyers, how will you go about approaching potential strategic buyers?
- How would you value my business?
Don’t be afraid to talk with more than one broker before deciding who to work with. This could be one of the most important transactions in your life, so you want to work with a solid partner.
Topping Matthews’ list of questions many sellers skip: “Is the broker obligated to sell at a particular price?”
Some brokers’ contracts specify that if they bring in an offer that comes within, say, 90% of their list price, you have to sell the business.
“That should never be the case,” said Matthews, “because that’s a made-up number from the broker. If you don’t like the offer, you may want to come back in 6 or 8 or 10 months, after you address the problems.”
Another question Matthews suggested is: “What’s your vetting process like?”
Ideally, there should be gated access, where they’re only showing your listing to highly qualified buyers for your type of business. By the time the seller gets on the phone with a buyer, he said, a ton of work should have gone into vetting and qualifying that buyer. That can save tremendous time and energy for the seller.
Finally, if your buyer sets a list price, sellers should ask questions about how the broker arrived at that valuation, he said.
“We try to get feedback from real buyers, and see what they think it’s worth,” he said.
Most of the brokers we recommend at They Got Acquired work on a success-fee basis, whereby they get a commission only if and when you sell the business. It’s similar to a real estate transaction, where your real estate agent gets a percentage of the sale when you sell your house.
Some specialized brokerage firms also charge a monthly fee leading up to the sale of your business, which compensates them for marketing your business even if it doesn’t sell. Investment banks charge for the preparation phase, too. This is more common for larger sales (more than, say, $10 million deals), but also might become a factor if you work with a specialized firm.
For 6 or low-7 figure sales, we typically recommend working with a firm that expects a success fee only, because it aligns their incentives with yours. They get paid when you get paid. But brokers who work solely on commission tend to only take on companies they’re confident they can sell, so they don’t spend months working on a sale that never goes through.
The percentage brokers charge for commission varies, but it’s typical to expect to pay around 15% for deals up to $500,000, around 10% for deals up to $1 million, and a lower percentage for bigger sales. Most firms use a sliding scale that reduces the fee as the deal size grows.
Choose a broker whose fee structure makes sense to you. Matthews said he’s seen everything from flat fees in under-$1 million deals to straight 10%-15% flat commissions on larger deals.
Sellers who used a broker that we’ve interviewed for They Got Acquired seem almost universally satisfied that they got good value for the broker’s fee. However, we’ve also talked with some sellers who had a bad experience with a broker along the way. So who you choose to work with really matters.
“For the amount of work they do, it’s probably worth it,” said Frigerio, whose broker charged a 15% flat fee for his 6-figure exit. “Because they take a percentage of the final sale, they’re incentivized to find the best possible deal.”
Two common scenarios usually point to not using a broker:
Your business is very small, for example, just over 6 figures. In that case, you might be a better fit for a marketplace transaction. Many brokers have a minimum fee of $15,000 or so–so if your business is only worth $30,000, that’s obviously not going to work.
The other scenario is that you’ve received an unsolicited offer from a competitor or key employee that you think is as good as you’ll do, or you have no interest in soliciting other offers. “Say you’re selling your restaurant to your general manager—maybe you could just get a valuation and hire an attorney,” Smith said.
They Got Acquired founder Alexis Grant didn’t use a broker when she sold her website for writers, The Write Life, in early 2021. She had several offers from competitors in the space, was able to drive up the price on her own through a competitive bidding process, and leaned only on an M&A lawyer for the mid-6 figure sale. The process went smoothly, but knowing what she knows now, Grant said she would seek out a broker or advisor for a larger sale.
Plenty of entrepreneurs don’t use a broker or advisor if they already have a buyer. Since one of a broker’s primary responsibilities is to find the right buyer for your business, some sellers forgo hiring a broker if they already have a buyer they’re happy with.
But you might choose to work with one for other reasons. They might be able to help you solicit more offers, which can create competition that drives up your selling price. And even if you’re satisfied with the buyer you’ve brought to the table, the broker’s other main role—negotiating the terms of the sale—is just as important as finding the right buyer.
They might be able to help you negotiate more favorable terms, and they know how to recognize and avoid common mistakes, such as how to structure an earn out. Having a partner to lean on throughout the process can also make the transaction less stressful.
Of course, there’s also a cost to working with a broker, so for smaller deals, say, in the low-6-figure range, it might not be worth it if you already have a good-fit buyer.
Absolutely! Entrepreneurs who don’t use a broker tend to sell in three main ways:
The buyer approaches them. Sellers who are happy with the buyer and terms of the offer often take the opportunity, though we’ve had some sellers say they wish they’d solicited competitive offers to further drive up the price. Backlinko, a content site that focuses on SEO, sold to Semrush after they approached the company directly.
The seller approaches potential buyers directly. Sellers might do this with or without a broker’s help. We’ve seen it can be an effective strategy. That’s how Laura Roeder landed a 7-figure deal for her social media scheduling tool MeetEdgar.
Using a marketplace. Marketplaces for selling and buying businesses connect sellers directly to buyers. Some of them do offer an advisor or customer support specialist to help the seller figure out how to price the business or navigate the process.
In general, investment bankers tend to focus on shepherding larger businesses through their sale. How big? Think $20 million in annual revenue and up.
“If you’re a small business, an investment banker probably isn’t going to work with you,” Smith said.
If you’re expecting an 8-figure sale, it’s worth exploring investment banks or advisory firms that specialize in your type of business because they’ll likely offer more in-depth support for your sale. They tend to be more costly, too, but that’s often worth it for a larger sale.
Sometimes. Some brokerage firms use the words interchangeably. They might call their brokers “advisors” in part because that title tends to garner more trust. Other brokers call themselves “business intermediaries.”
If you’re not sure whether the professional you’re considering working with would serve in a broker capacity, simply ask them: how does what you do compare to a broker’s services?
If you’re still wondering if you should find a broker for your business sale, here are a few key questions to ask yourself:
Do you need help finding a buyer? If yes, a broker is a good way to do that. If you have a buyer in mind, you might not need a broker’s help.
Is your company worth at least a few hundred thousand dollars? Brokers aren’t typically worth the cost for smaller sales, and many brokers won’t take on companies that won’t sell for a couple hundred thousand dollars anyhow. If you’re navigating a small sale and need help finding a buyer, try direct outreach or a marketplace instead.
Is your company likely to sell for 8 figures? In that case, you might want to consider working with an investment bank or specialty advisory firm that supports larger deals.
Do you want help negotiating the terms of the deal, even if you’re bringing your own buyer? That’s the main value of a broker other than finding a buyer, and it’s why Grant, founder of They Got Acquired, recommends working with a broker for most deals over half a million dollars—because that experienced partner can help you avoid common mistakes and negotiate the best outcome.
Deal terms are so much more than sale price: they can include the structure of an earn out, what you’ll be expected to do during the transition, and whether you can start a new business in the space after the sale—all details that can have significant impact on your life.
Want help deciding whether you truly need a broker? We’re happy to talk it through with you.
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