A business broker is a licensed professional who helps business owners sell their companies. They set the asking price, find qualified buyers, and manage the sale from start to finish.
For a small to mid-sized business sale, a broker typically charges 8% to 12% of the final sale price. The smallest deals often hit the 12% to 15% range, while larger transactions use a tiered fee scale.
This article covers what a business broker does, how their fees work, and how to decide if hiring one is worth the cost.
What Is a Business Broker
A business broker is a professional intermediary who connects business sellers with qualified buyers. They price the business, market it confidentially, vet buyers, and manage the deal through to closing.
Business brokers are not the same as real estate agents or investment bankers. Real estate agents handle property transactions. Investment bankers work with large corporations on multi-million-dollar mergers. Business brokers work with small to mid-sized businesses, typically valued between $500,000 and $50 million.
What Does a Business Broker Do
A business broker handles five main stages of a sale:
- Business Valuation: The broker reviews your financial statements, market conditions, and industry data to set a defensible asking price. This prevents both overpricing (which kills buyer interest) and underpricing (which costs you money).
- Confidential Marketing: The broker markets your business through platforms like BizBuySell, their buyer database, and co-brokering networks, all without naming you publicly. This protects your staff, customer, and supplier relationships during the sale process.
- Vetting Qualified Buyers: The broker screens every inquiry before you speak to anyone. Buyers must demonstrate financial proof and genuine intent before they get access to your business details.
- Negotiation and Deal Structuring: When offers arrive, the broker negotiates price, terms, and structure on your behalf. This includes handling seller financing, earnouts, and contingencies.
- Managing Due Diligence: At the final stage, the broker coordinates with your attorney and accountant to manage document review, financial audits, and closing paperwork.
A business sale typically takes 6 to 12 months. A broker keeps the process on track and reduces the risk of deals collapsing at the due diligence stage.
How Business Brokers Make Money
Business brokers earn a commission based on the sale price of the business. They only get paid when the deal closes, which means their incentive is to get you the highest price possible.
This is called a “success fee.” It is agreed on before you list, and it is paid at closing. Some brokers also charge an upfront retainer, typically $5,000 to $25,000, to cover valuation and marketing costs before the sale starts.
Retainers are common on larger or more complex deals. On simple Main Street transactions under $1 million, many brokers do not charge a retainer. If a retainer is charged, check whether it is credited toward the final commission or treated as a separate non-refundable fee.
How Much Do Brokers Charge to Sell a Business
Business brokers charge a commission of 5% to 15% of the final sale price, depending on the size of the deal (BizBuySell). The most common rate for small businesses is 10%.
Here is how rates typically break down by deal size:
- Under $500,000: 12% to 15%, or a minimum fee of $15,000 to $50,000, whichever is higher
- $500,000 to $1 million: 8% to 12%
- $1 million to $5 million: 8% to 10%
- Over $5 million: 6% to 8%, often using the Lehman Formula
Minimum fees matter on small deals. If your business sells for $150,000 at 10%, that is $15,000. Many brokers have a floor of $15,000 to $50,000. This means the percentage effectively goes higher on very small sales.
What Is the Lehman Formula
The Lehman Formula is a tiered commission structure used on larger deals, typically above $1 million in sale price. It works like this: 10% on the first $1 million of the sale price, 8% on the second $1 million, 6% on the third $1 million, and so on, reducing by 2% for each additional million. A modified version, the Double Lehman Scale, doubles these percentages for smaller or more complex transactions.
What Influences These Rates
1. Business size and complexity: Larger businesses carry lower percentage rates but higher dollar amounts. A $10 million sale at 6% equals $600,000 in commission. Multi-location businesses, regulated industries, or distressed businesses require more broker time, which can increase fees.
2. Industry type: Brokers with niche expertise in SaaS, healthcare, or restaurants typically charge more than generalists. Their buyer networks in those sectors are worth paying for.
3. Deal structure: Seller financing, earnouts, and contingencies add complexity to a deal. Brokers working through these structures often adjust their fees to reflect the extra time and risk.
4. Exclusivity agreements: Most brokers require an exclusivity period of 6 to 12 months. During this time, you cannot list with another broker. Some also charge monthly marketing fees in addition to the commission. Read the engagement agreement carefully before signing.
Note: Do not shop purely on rate. A broker with a strong buyer network and track record in your industry may get you a better price than a low-fee generalist.
Business Broker vs. Selling on Your Own
Selling without a broker saves you the commission but adds significant risk and workload. Here is a direct comparison:
| Factor | With a Business Broker | Selling on Your Own |
|---|---|---|
| Confidentiality | Blind listings protect your identity | Risk of exposure to staff and competitors |
| Valuation | Data-based, market-tested pricing | Guesswork or emotional pricing |
| Buyer Network | Access to pre-screened, qualified buyers | Limited reach |
| Negotiation | Experienced deal-making | Risk of accepting poor terms |
| Time | Broker handles marketing and paperwork | Selling takes time away from running the business |
| Fees | 8% to 12% commission | No broker fee, but likely a lower sale price |
The key trade-off: you avoid the commission fee by selling yourself, but a broker’s buyer access and negotiation skill often produce a higher final sale price. Whether that covers the fee depends on the size of your deal and the quality of the broker.
What to Look for When Choosing a Business Broker
The broker you choose directly affects the final sale price and how long the process takes. Check these before signing:
- Licensing and credentials:Confirm state licensing. The Certified Business Intermediary (CBI) credential from the International Business Brokers Association (IBBA) is a recognized standard in the US market.
- Industry experience: Ask how many businesses in your industry they have sold in the last two years. A broker who regularly sells restaurants will have a stronger buyer network for a restaurant sale than a generalist.
- References: Ask for two or three recent seller references. Call them. Ask about timeline, communication, and final price versus asking price.
- Engagement agreement terms: Review the exclusivity period length, any monthly fees, and whether the retainer is credited against the final commission.
Ask the broker these questions before signing:
- How will you value my business?
- What marketing platforms do you use?
- How do you screen buyers?
- What is your average time from listing to close?
- What percentage of your listings actually close?
Frequently Asked Questions
Do buyers pay business broker fees?
No. The seller pays the broker commission at closing. Buyers do not pay a fee to the broker.
Can I negotiate the broker’s commission?
Yes. Commission rates are not fixed. Negotiation is common, especially on larger deals. On transactions above $1 million, brokers often expect to discuss the rate.
What happens if my business does not sell?
With a success-fee-only model, you pay no commission if the deal does not close. You may still lose any upfront retainer paid.
How long does it take to sell a business with a broker?
The typical timeline is 6 to 12 months from listing to closing, depending on deal size, industry, and buyer demand.
Is a business broker the same as an M&A advisor?
Not exactly. Business brokers work with smaller businesses, typically under $5 million. M&A advisors handle mid-market deals of $5 million and above, often with higher retainer requirements.
Is Hiring a Business Broker Worth It
A business broker handles the parts of a sale that take the most time and carry the most risk: pricing, confidential marketing, buyer screening, and negotiation.
The commission is real. On a $500,000 sale at 10%, you pay $50,000. But a broker who gets you $550,000 instead of $400,000 has more than covered that cost.
For a business sale under $5 million, a qualified broker with a solid track record in your industry is worth considering carefully. The right one speeds up the process and protects your asking price.
Use the questions above to compare at least two or three brokers before you commit. The engagement agreement matters as much as the commission rate.
