What Is a Business Broker? A Global Perspective on Business Intermediaries

Introduction

Business brokers—also known as business intermediaries, transfer agents, or transaction advisers—play a critical role in the buying and selling of privately held businesses. While the profession is most commonly associated with the United States, similar roles exist across the globe, often under different regulatory frameworks and job titles. This article provides a detailed, internationally-informed overview of what business brokers do, the services they offer, how they are compensated, and how the profession varies in different countries.

What Does a Business Broker Do?

A business broker acts as a facilitator between a business seller and a prospective buyer. Their primary objective is to ensure a smooth, confidential, and efficient business sale process. Their key responsibilities include:

. Valuation of the Business

What it is: Determining the fair market value of a business is the first and one of the most critical steps in the sales process.

In Detail:

• Financial Analysis: Brokers analyze financial statements (Profit & Loss, Balance Sheet, Cash Flow) over the past 3–5 years.

• Add-backs & Normalization: Owner-specific or one-time expenses are adjusted to reflect the true earnings (Seller’s Discretionary Earnings or EBITDA).

• Industry Comparisons: Brokers compare the business to similar companies in the same industry using valuation multiples (e.g., SDE × 2.5).

• Asset Valuation: Tangible (equipment, inventory) and intangible assets (brand value, goodwill, customer base) are factored in.

• Market Trends: Local and global economic conditions, competition, and market demand influence valuation.

• Purpose: Accurate pricing avoids overpricing (leading to no offers) or underpricing (leaving money on the table).

2. Marketing the Business

What it is: Strategic promotion of the business to attract serious and qualified buyers—without harming the business’s reputation or operations.

In Detail:

• Confidential Information Memorandum (CIM): A professional document prepared by the broker that includes financial data, growth opportunities, operational overview, and market positioning.

• Blind Ads: Listings on business-for-sale platforms and broker networks without revealing the name or location of the business.

• Targeted Outreach: Brokers may directly contact synergistic buyers or competitors who would benefit strategically from an acquisition.

• Email Campaigns & Buyer Databases: Brokers use proprietary databases to reach active, pre-screened buyers.

• Confidentiality Agreements (NDAs): Before disclosing sensitive information, brokers ensure all prospective buyers sign NDAs.

3. Qualifying Buyers

What it is: Screening potential buyers to ensure they are capable of completing the transaction financially and operationally.

In Detail:

• Financial Qualification: Review of personal financial statements, proof of funds, or SBA loan pre-approval (in the U.S.).

• Experience Assessment: Evaluation of a buyer’s background to determine if they have the skills and vision to run the business.

• Intent Verification: Confirming if the buyer is serious or just “tire kicking.”

• Fit Analysis: Checking if the buyer aligns with the seller’s legacy goals (important for family-run or mission-driven businesses).

• Reduction of Time Waste: By vetting buyers early, brokers save time for both parties and prevent deals from falling apart later.

4. Negotiation

What it is: The broker acts as a neutral intermediary to manage offers and counteroffers, helping both parties arrive at a fair and mutually beneficial agreement.

In Detail:

• Offer Structuring: Assisting with deal terms such as price, payment method (cash, seller financing, earn-out), non-compete clauses, training periods, and transition support.

• Conflict Resolution: Helping both parties overcome disagreements with objective, data-backed reasoning.

• Emotional Buffering: Sellers are often emotionally attached to their businesses. Brokers keep discussions focused on business, not emotion.

• Multiple Offers Management: If several offers are received, the broker helps compare and analyze them, advising the seller on the best option.

5. Due Diligence Coordination

What it is: Supporting both buyer and seller through the rigorous process of verifying all aspects of the business.

In Detail:

• Data Room Setup: Brokers help organize a secure, central repository of documents—tax returns, contracts, leases, licenses, employee records, etc.

• Checklist Management: Brokers use due diligence checklists to ensure nothing is overlooked.

• Professional Coordination: Brokers liaise with the buyer’s accountants, lawyers, and bankers to provide necessary documents and explanations.

• Problem-Solving: If red flags or discrepancies appear, brokers work with the seller to address them without derailing the deal.

• Time Management: Brokers ensure due diligence proceeds efficiently, helping avoid buyer fatigue or missed deadlines.

6. Closing Support

What it is: Guiding the transaction through its final legal, financial, and administrative stages to a successful closing.

In Detail:

• Purchase Agreement Review: While attorneys draft and review legal documents, brokers ensure terms are accurate and reflect the negotiated deal.

• Escrow Management: In some countries (like the U.S.), brokers coordinate with escrow or settlement attorneys to manage fund transfers, inventory counts, and legal filings.

• Licensing and Permit Transfers: Ensuring the buyer gets all necessary business licenses, tax IDs, and health or safety permits (depending on industry).

• Franchise Transfer: If the business is a franchise, brokers facilitate the required approvals and documentation from the franchisor.

• Closing Checklist: Brokers ensure all final signatures, payments, asset transfers, and legal filings are completed before the business officially changes hands.

• Post-Sale Transition: Arrangements may include training by the seller or transitional support to ensure business continuity.

Business Broker Compensation

Business brokers, like other professional intermediaries, are compensated for the value they bring in managing and closing successful business transactions. Their compensation varies based on the region, business size, complexity of the transaction, and the broker’s service model. Below is a breakdown of common fee structures, followed by specific models in the United States and the United Kingdom.

1. Success Fee (Commission-Based Compensation)

Definition:

The success fee is a performance-based payment calculated as a percentage of the final sale price of the business.

Details:

• Standard Rates: For small businesses (valued under $5 million), the success fee typically ranges from 8% to 12%.

• Deal Size Impact: As deal size increases, the percentage may decrease due to economies of scale.

• Calculation:

  • In the U.S., the Double Lehman Formula or Modern Lehman Formula is often applied:

    • 10% on the first $1 million

    • 8% on the next $4 million

    • 6% on the remainder

  • For example, if a business sells for $6M:

    • First $1M → 10% = $100,000

    • Next $4M → 8% = $320,000

    • Last $1M → 6% = $60,000

    • Total Fee = $480,000

• Minimum Fees: Many brokers enforce a minimum fee, often around $50,000, to justify the time and risk involved.

Critical Analysis:

• Pros: Aligns broker incentives with successful outcomes. Brokers are motivated to secure the highest price and best terms.

• Cons: Sellers may perceive the commission as high, especially when business value is low but complexity is high.

• Market Comparison: This model mirrors investment banking and real estate models, but applies more specialized due diligence and strategic advisory services.

2. Retainer Fees

Definition:

A non-refundable, upfront payment made to the broker before work begins. It may be credited against the final success fee.

Details:

• Common in mid-market and complex deals.

• Typical U.S. retainer: $5,000 to $25,000.

• In the UK: ranges from £500 to over £10,000, depending on business size and broker prestige.

• Covers preparation of marketing materials (e.g., CIM), valuation, outreach strategy.

Critical Analysis:

• Pros: Filters serious clients from non-committed sellers. Enables brokers to invest time and resources upfront.

• Cons: May deter sellers unsure about selling. Risk of dissatisfaction if the business doesn’t sell.

• Credibility Factor: Established firms with a track record typically command higher retainers due to their network and methodology.

3. Milestone Fees

Definition:

Fees tied to achieving specific transactional milestones (e.g., valuation report, buyer interest generation, LOI signing).

Details:

• Often used in conjunction with success or retainer fees.

• Examples:

  • $3,000 for business valuation report.

  • $5,000 upon delivery of 5+ NDAs from potential buyers.

  • $10,000 upon receiving a Letter of Intent (LOI).

Critical Analysis:

• Pros: Creates a transparent, results-driven process. Sellers see progress and understand what they’re paying for.

• Cons: Can be seen as nickel-and-diming if not communicated properly.

• Best Fit: For advisory-focused engagements or when selling niche or hard-to-value businesses.

4. Hourly Fees

Definition:

A time-based compensation model where brokers charge an hourly rate for consulting, research, or advisory work.

Details:

• More common in exit planning, pre-sale consulting, or when a seller needs valuation or strategy but isn’t ready to sell.

• U.S. rates: $150–$500/hour, depending on expertise.

• UK rates: Generally £100–£300/hour.

Critical Analysis:

• Pros: Transparent and flexible. Ideal for clients needing expert input without committing to a full sale.

• Cons: No performance-based motivation. May not be cost-effective if work doesn’t lead to a transaction.

• Typical Use: Often offered by M&A advisory firms or business valuation specialists.

U.S. Fee Structure – In Depth

Sources:

• International Business Brokers Association (IBBA)

• BizBuySell Insights

UK Fee Structure – In Depth

Market Traits:

• The UK market favors lower upfront costs, particularly for small business sellers.

• Larger business brokers or those dealing with M&A (over £2M deals) may charge hybrid models involving retainers and success fees.

Sources:

• UK Institute for Transaction Advisers and Business Brokers

• Daltons Business Broker Fees Guide

Final Thoughts: Choosing the Right Compensation Model

Business sellers and buyers should consider:

• Deal Size: Larger deals justify tiered or milestone-based compensation.

• Risk Appetite: Sellers who value certainty may prefer hourly or fixed milestone models.

• Broker Reputation: Top-tier brokers can demand higher fees due to strong success rates and networks.

• Service Scope: Full-service brokers providing end-to-end support typically justify higher commissions and/or retainers.

the buying and selling of privately held businesses. While the profession is most commonly associated with the United States, similar roles exist across the globe, often under different regulatory frameworks and job titles. This article provides a detailed, internationally-informed overview of what business brokers do, the services they offer, how they are compensated, and how the profession varies in different countries.

What Does a Business Broker Do?

1. Valuation of the Business

What it is: Determining the fair market value of a business is the first and one of the most critical steps in the sales process.

In Detail:

• Financial Analysis: Brokers analyze financial statements (Profit & Loss, Balance Sheet, Cash Flow) over the past 3–5 years.

• Add-backs & Normalization: Owner-specific or one-time expenses are adjusted to reflect the true earnings (Seller’s Discretionary Earnings or EBITDA).

• Industry Comparisons: Brokers compare the business to similar companies in the same industry using valuation multiples (e.g., SDE × 2.5).

• Asset Valuation: Tangible (equipment, inventory) and intangible assets (brand value, goodwill, customer base) are factored in.

• Market Trends: Local and global economic conditions, competition, and market demand influence valuation.

• Purpose: Accurate pricing avoids overpricing (leading to no offers) or underpricing (leaving money on the table).

2. Marketing the Business

What it is: Strategic promotion of the business to attract serious and qualified buyers—without harming the business’s reputation or operations.

In Detail:

• Confidential Information Memorandum (CIM): A professional document prepared by the broker that includes financial data, growth opportunities, operational overview, and market positioning.

• Blind Ads: Listings on business-for-sale platforms and broker networks without revealing the name or location of the business.

• Targeted Outreach: Brokers may directly contact synergistic buyers or competitors who would benefit strategically from an acquisition.

• Email Campaigns & Buyer Databases: Brokers use proprietary databases to reach active, pre-screened buyers.

• Confidentiality Agreements (NDAs): Before disclosing sensitive information, brokers ensure all prospective buyers sign NDAs.

3. Qualifying Buyers

What it is: Screening potential buyers to ensure they are capable of completing the transaction financially and operationally.

In Detail:

• Financial Qualification: Review of personal financial statements, proof of funds, or SBA loan pre-approval (in the U.S.).

• Experience Assessment: Evaluation of a buyer’s background to determine if they have the skills and vision to run the business.

• Intent Verification: Confirming if the buyer is serious or just “tire kicking.”

• Fit Analysis: Checking if the buyer aligns with the seller’s legacy goals (important for family-run or mission-driven businesses).

• Reduction of Time Waste: By vetting buyers early, brokers save time for both parties and prevent deals from falling apart later.

4. Negotiation

What it is: The broker acts as a neutral intermediary to manage offers and counteroffers, helping both parties arrive at a fair and mutually beneficial agreement.

In Detail:

• Offer Structuring: Assisting with deal terms such as price, payment method (cash, seller financing, earn-out), non-compete clauses, training periods, and transition support.

• Conflict Resolution: Helping both parties overcome disagreements with objective, data-backed reasoning.

• Emotional Buffering: Sellers are often emotionally attached to their businesses. Brokers keep discussions focused on business, not emotion.

• Multiple Offers Management: If several offers are received, the broker helps compare and analyze them, advising the seller on the best option.

5. Due Diligence Coordination

What it is: Supporting both buyer and seller through the rigorous process of verifying all aspects of the business.

In Detail:

• Data Room Setup: Brokers help organize a secure, central repository of documents—tax returns, contracts, leases, licenses, employee records, etc.

• Checklist Management: Brokers use due diligence checklists to ensure nothing is overlooked.

• Professional Coordination: Brokers liaise with the buyer’s accountants, lawyers, and bankers to provide necessary documents and explanations.

• Problem-Solving: If red flags or discrepancies appear, brokers work with the seller to address them without derailing the deal.

• Time Management: Brokers ensure due diligence proceeds efficiently, helping avoid buyer fatigue or missed deadlines.

6. Closing Support

What it is: Guiding the transaction through its final legal, financial, and administrative stages to a successful closing.

In Detail:

• Purchase Agreement Review: While attorneys draft and review legal documents, brokers ensure terms are accurate and reflect the negotiated deal.

• Escrow Management: In some countries (like the U.S.), brokers coordinate with escrow or settlement attorneys to manage fund transfers, inventory counts, and legal filings.

• Licensing and Permit Transfers: Ensuring the buyer gets all necessary business licenses, tax IDs, and health or safety permits (depending on industry).

• Franchise Transfer: If the business is a franchise, brokers facilitate the required approvals and documentation from the franchisor.

• Closing Checklist: Brokers ensure all final signatures, payments, asset transfers, and legal filings are completed before the business officially changes hands.

• Post-Sale Transition: Arrangements may include training by the seller or transitional support to ensure business continuity.

• Who Uses Business Brokers?

  While business brokers are commonly associated with smaller, “Main Street” businesses (those with revenues typically under $5 million), they also serve:

  • Family-owned businesses

  • Franchise resellers

  • Professional service practices (e.g., accounting, dental, legal firms)

  • Online businesses (e-commerce, SaaS)

  Larger businesses or complex transactions often involve M&A advisors, investment banks, or corporate finance firms.

• Business Brokers vs Real Estate Agents vs M&A Advisors

• Role	Main Focus	Typical Deal Size	Licensure Required
  Business Broker	Selling privately held businesses	<$5 million	Varies by country/state
  Real Estate Agent	Selling real estate	Depends on property	Yes, real estate license
  M&A Advisor	Mergers and acquisitions	$5M–$100M+	Often securities-licensed

• Common Misconceptions About Business Brokers

  1. “They’re just real estate agents.”

  Clarification:
  While business brokers and real estate agents may share some licensing requirements in certain jurisdictions (e.g., California, Florida, Australia), the nature of their work is significantly different.

  • Real estate agents focus on tangible assets like land and buildings.

  • Business brokers specialize in intangibles, including goodwill, intellectual property, customer relationships, and cash flow.

  • Business brokers must understand business financials, operational structures, buyer due diligence, and deal financing—areas where real estate agents typically have limited training.

  Critical Insight:
  Thinking of business brokers as real estate agents undersells the complexity of business transactions. Selling a business is not about square footage—it’s about earnings, scalability, contracts, inventory, brand equity, and liability.

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  2. “They only handle large corporations.”

  Clarification:
  The majority of business brokers actually operate in the Main Street and lower-middle market, typically handling businesses valued between $100,000 and $5 million.

  • These include restaurants, service businesses, small manufacturers, medical practices, franchises, e-commerce operations, and more.

  • Large corporations (over $50 million in value) are usually handled by investment banks or corporate M&A firms, not brokers.

  Critical Insight:
  This misconception likely stems from confusion between business brokers and M&A advisors. In reality, over 90% of U.S. businesses fall into the broker-appropriate category in terms of size and complexity.

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  3. “They replace lawyers and accountants.”

  Clarification:
  Business brokers are not legal or tax advisors, and ethical brokers never claim to replace these professionals.

  • They work alongside lawyers to draft or review legal documents such as Asset Purchase Agreements (APA) or Share Purchase Agreements (SPA).

  • They collaborate with accountants to ensure tax-efficient deal structuring, proper normalization of financial statements, and due diligence support.

  • Their core role is transaction management, including buyer screening, marketing, deal flow coordination, and negotiation support.

  Critical Insight:
  Brokers act as transaction orchestrators—they bring the pieces together and ensure forward momentum, but they rely on licensed professionals for specialized legal and financial tasks.

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  4. “They’re not needed in the digital age.”

  Clarification:
  While online marketplaces like BizBuySell and Daltons Business are helpful for exposure, they cannot replace the critical functions a broker provides:

  • Confidentiality: Brokers protect sensitive information like employee status, customer lists, and proprietary processes.

  • Valuation Expertise: Accurately pricing a business is far more complex than valuing a home or car.

  • Buyer Vetting: Brokers qualify buyers before disclosing sensitive information or arranging meetings.

  • Negotiation and Structure: Brokers understand deal structures (e.g., seller financing, earn-outs) and help prevent breakdowns during negotiations.

  Critical Insight:
  Digital tools support brokers, but do not replace them. The human element—negotiation nuance, trust-building, and confidentiality—is more critical than ever in high-stakes transactions.

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  5. “They only work with sellers.”

  Clarification:
  Many business brokers also offer buyer representation services, particularly for:

  • Private equity firms looking for acquisitions.

  • Franchise buyers seeking brand-aligned investment.

  • Individuals seeking off-market opportunities.

  In tight industries—like healthcare, SaaS, or construction—many deals never reach public listing. Brokers help buyers access these hidden opportunities.

  Critical Insight:
  Buyer mandates are becoming more common in professional brokerage. These arrangements create dual pipelines of opportunity, increasing deal velocity and efficiency for brokers.

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  Role of Associations and Certifications

  Professional associations play a vital role in setting ethical standards, providing training, and building public trust in the business brokerage profession.

  United States

  • International Business Brokers Association (IBBA)

    • Over 1,000 members.

    • Offers Certified Business Intermediary (CBI) credential.

    • Hosts annual conferences and continuing education.

  • M&A Source

    • Focused on deals between $2 million and $50 million.

    • Offers the M&AMI (Mergers & Acquisitions Master Intermediary) designation.

  Canada

  • IBBA Canada

    • Affiliated with IBBA U.S.

    • Provides bilingual training, market research, and professional development.

  United Kingdom

  • Institute for Transaction Advisers and Business Brokers

    • Promotes professional ethics and standardization.

    • Offers UK-specific advisory training focused on GDPR, UK employment law, and HMRC issues.

  Australia

  • Australian Institute of Business Brokers (AIBB)

    • Offers broker certification.

    • Works with the Australian Competition and Consumer Commission (ACCC) to ensure compliance and consumer protection.

  Critical Insight:
  Association membership signals credibility, accountability, and ongoing education, and should be a key factor when selecting a broker.

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  Why Use a Business Broker?

  Selling or buying a business is often the most complex financial transaction an entrepreneur will experience. Business brokers offer value at multiple stages:

  1. Access to Qualified Buyers

  Brokers have networks of pre-vetted buyers, including individuals, investment groups, and corporate acquirers. This increases the likelihood of finding the right buyer faster and more discreetly.

  2. Confidentiality

  Selling a business openly can harm relationships with:

  • Employees (who may leave prematurely)

  • Customers (who may move to competitors)

  • Suppliers (who may renegotiate terms)

  Brokers protect the seller’s identity using blind listings and secure confidentiality agreements (NDAs).

  3. Accurate Valuation and Marketing

  Professional brokers:

  • Normalize financials to determine true cash flow.

  • Perform comparative sales analysis.

  • Create compelling Confidential Information Memorandums (CIMs) and buyer presentations.

  4. Negotiation Expertise

  Brokers negotiate with objectivity and professionalism, reducing emotional friction and increasing the chances of a win-win outcome.

  • They structure deals using tools like earn-outs, seller financing, or equity rollovers to close valuation gaps.

  5. Higher Success Rate

  The majority of FSBO (for-sale-by-owner) business listings do not sell. In contrast, brokers bring structure, deal management, and post-LOI coordination that significantly boost the chance of a successful closing.

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  Final Thoughts

  Business brokers are essential facilitators in the private business transaction ecosystem. They don’t just find buyers—they:

  • Manage confidentiality

  • Maximize business value

  • Create deal structure

  • Coordinate due diligence

  • Mitigate risks

  For any business owner contemplating a sale, or an entrepreneur seeking acquisition, the guidance of an experienced broker is often the difference between deal success and a missed opportunity.