Small Business Broker: What They Do & When to Hire One

What Is a Small Business Broker?

A small business broker is an intermediary who helps you sell your company. They list your business, find qualified buyers, negotiate terms, and guide you through closing. Think of them as real estate agents for businesses-they take a commission (usually 10-15% of the sale price) in exchange for handling the entire sales process.

I've sold five SaaS companies, and I've used brokers for some deals and gone direct for others. The decision isn't obvious, and a lot of entrepreneurs either overpay for broker services they don't need or try to DIY a complex deal that falls apart.

Here's what you actually need to know about small business brokers, when they're worth it, and how to work with them without getting screwed.

What Small Business Brokers Actually Do

Most brokers handle the same core functions, though quality varies wildly:

Business Valuation

They'll value your company using multiples of EBITDA, revenue, or seller's discretionary earnings (SDE). For most small businesses under $5M in value, they use SDE-basically your profit plus owner salary, benefits, and one-time expenses. Typical multiples range from 2-4x SDE depending on your industry, growth rate, and how dependent the business is on you personally.

Good brokers know current market multiples for your specific niche. Bad brokers inflate valuations to win your listing, then lower expectations once you're locked in.

Marketing Your Business

Brokers create a confidential information memorandum (CIM)-basically a sales deck for your company-and list it on business-for-sale marketplaces like BizBuySell, Flippa (which also has a marketplace for SaaS and online businesses), and industry-specific platforms.

They also tap their network of private buyers and reach out to strategic acquirers who might want your customer base, tech, or team. The best brokers have real relationships with buyers who've closed deals before-not just a list of tire-kickers.

Qualifying Buyers

This is where brokers earn their keep. Most people who express interest in buying a business aren't serious or can't actually close. Brokers filter out the noise by requiring proof of funds, NDAs, and initial qualifying conversations before you waste time with unqualified buyers.

They also handle the awkward money conversations. Instead of you asking "Can you actually afford this?" the broker does it professionally.

Negotiating Terms

Price is just one variable. Brokers negotiate payment structure (cash vs. seller financing vs. earnouts), transition period, non-compete terms, asset vs. stock sale, and dozens of other deal points that can cost you six figures if you don't know what you're doing.

A good broker has closed enough deals to know what's market standard and what's a red flag. They'll push back on unreasonable buyer demands and keep the deal moving when emotions run high.

Managing Due Diligence

Once you have a letter of intent (LOI), the buyer's team will crawl through your financials, contracts, operations, and legal docs. This process kills more deals than anything else. Brokers coordinate the data room, answer questions, and keep both sides moving toward close.

They also know which buyer requests are reasonable and which are fishing expeditions designed to renegotiate the price.

Here's something most brokers won't tell you: the process of selling a business has similarities to my lead generation work, where I've seen companies scale to $100M+ through systematic outreach. Just like a good broker needs to find qualified buyers, I train my clients to find 200 relevant leads per day using specific criteria. One client selling their SaaS business realized their broker was essentially doing lead generation-identifying buyers, qualifying them, and setting up meetings. Understanding this parallel helped them evaluate brokers based on their systematic approach to buyer outreach, not just their charm.

When You Need a Broker (and When You Don't)

I didn't use a broker for my first two exits. I went direct to buyers I already knew, negotiated the terms myself, and saved the commission. But for my third sale, I hired a broker and it was worth every dollar.

Here's how to decide:

You Probably Need a Broker If:

Your business is worth $500k to $10M. Below $500k, broker commissions eat too much of the sale price. Above $10M, you're in investment banking territory with different fee structures. But in that middle range, brokers have the best networks and know how to market businesses at that scale.

You don't have a specific buyer in mind. If you need to run a broad sales process and field multiple offers, a broker is worth it. They'll generate competition, which drives up price and terms.

Your business is complex or has IP. If you're selling anything with multiple revenue streams, technical assets, or intellectual property, you need someone who's navigated those deals before. One mistake in the asset purchase agreement can cost you more than the broker commission.

You need to stay confidential. If your customers, employees, or competitors can't know you're selling, a broker creates a buffer. They market the business anonymously and only reveal details to serious, vetted buyers.

You Can Probably Sell Direct If:

You already have a buyer. If a competitor, partner, or strategic buyer has approached you directly, you don't need a broker to find buyers-you just need a good M&A attorney to review the deal.

Your business is under $200k in value. At this price point, broker commissions ($20k-$30k minimum) are too high relative to the work involved. List it yourself on Flippa or a niche marketplace and hire a lawyer to review the purchase agreement.

You have M&A experience. If you've bought or sold businesses before and understand deal structure, you can handle most of the process yourself. Just bring in specialists (attorney, accountant) for the technical parts.

I built a framework for scaling and exiting agencies that covers the financial and operational prep work you need before you even talk to a broker or buyer. Most entrepreneurs aren't ready to sell because their businesses aren't transferable-revenue depends on them personally, financials are a mess, or customer concentration is too high.

I recorded a full explanation on this:

How Much Small Business Brokers Cost

Most brokers use the Lehman Formula (also called the Double Lehman Scale):

• 10% on the first $1M
• 8% on the second $1M
• 6% on the third $1M
• 4% on the fourth $1M
• 2% on everything above $4M

Some brokers charge a flat 10% regardless of deal size. Others have minimum fees ($25k-$50k) to avoid working on tiny deals.

For businesses under $1M, you'll typically see commissions between 8-12% of the final sale price. As your business value increases, the percentage drops. Most mid-sized deals between $1M and $10M see blended rates of 5-8%.

A few things to watch for:

Upfront fees. Some brokers charge $5k-$15k upfront to cover valuation and marketing costs. This isn't necessarily a scam, but it should be credited against the final commission. Avoid brokers who charge large upfront fees with no success fee-they make money whether you sell or not.

Exclusive agreements. Most brokers require a 6-12 month exclusive listing agreement. That's reasonable, but make sure there's a clear out clause if they're not performing. I've seen brokers sit on listings for months without generating a single qualified buyer.

Tail provisions. Brokers usually include a "tail" clause that pays them commission if you sell to a buyer they introduced, even after the agreement ends. Standard tails are 6-12 months. Anything longer is excessive.

How to Find a Good Small Business Broker

Most brokers are mediocre. They'll list your business on the same marketplaces you could access yourself, send a few emails, and wait for inbound leads. The good ones are proactive, have real buyer relationships, and actually know how to sell.

Look for Industry Specialization

A broker who specializes in your industry will know the buyer landscape, typical multiples, and what makes deals fall apart. An e-commerce broker won't be effective selling a SaaS company, and vice versa.

Ask potential brokers: "How many businesses in my industry have you sold in the last 12 months?" If they can't name at least three recent exits with specifics, keep looking.

Check Their Track Record

Ask for references from sellers they've worked with recently. Call those references and ask:

• How many buyers did the broker bring to the table?
• Did the final sale price match the initial valuation?
• How long did the process take from listing to close?
• Would you work with them again?

Also search for them on LinkedIn and in industry forums. Good brokers have reputations. Bad brokers have warning threads.

Interview Multiple Brokers

Talk to at least three brokers before signing anything. Pay attention to:

• Realism about valuation. Be skeptical of anyone who promises a much higher multiple than the others. They might be inflating numbers to win your listing.
• Marketing plan specifics. Ask exactly where they'll list your business and which specific buyers they plan to contact. Vague answers are a red flag.
• Communication style. You'll be working closely with this person for 6-12 months during a stressful process. If they're hard to reach or dismissive during the sales pitch, it'll only get worse.

When vetting brokers, I use the same approach I teach for hiring lead generators on platforms like Upwork: hire multiple candidates for a small test project first. In my book, I recommend starting with 3-4 different lead generators at $15 for 100 verified leads each-this lets them essentially interview by doing the work. Apply this to brokers: ask 3-4 brokers to each provide a preliminary market analysis or valuation. You'll quickly see who's thorough, who understands your industry, and who's just trying to lock you into a listing agreement.

Common Mistakes When Selling Your Business

I've watched dozens of entrepreneurs blow deals because they made preventable mistakes. Here are the ones that cost the most money:

Not Preparing Early Enough

Most owners decide to sell and expect to close within six months. That's unrealistic. The businesses that command premium multiples spend years building transferable operations, clean financials, and consistent growth.

Start preparing at least two years before you plan to sell. That gives you time to fix customer concentration issues, build out your management team, and document your processes. Buyers pay for predictable, transferable businesses-not ones that collapse when the owner leaves.

Letting Business Performance Slip

When you're focused on selling, it's easy to take your eye off operations. But buyers are looking at trailing twelve-month performance. If your numbers start declining during the sales process, buyers will either walk away or renegotiate the price downward.

Keep running the business aggressively until the deal closes. A thriving business attracts multiple buyers and drives up your final sale price.

Breaking Confidentiality Too Early

The second you tell employees or customers you're selling, the business is at risk. Employees worry about job security and start looking for new roles. Competitors use the information to poach your customers. Vendors renegotiate terms because they know you're distracted.

Keep the sale confidential until you have a signed purchase agreement. Only tell people who absolutely need to know, and make everyone sign NDAs.

Accepting the First Offer

Single-buyer processes rarely produce optimal outcomes. When you only have one offer, the buyer controls the negotiation. They'll push for seller financing, earnouts, and other terms that reduce your cash at close.

Run a competitive process with multiple qualified buyers. That's how you maximize both price and terms. Buyers behave differently when they know they're competing for the deal.

Ignoring Tax Planning

Tax consequences can eat 30-50% of your sale proceeds if you don't plan ahead. The structure of the deal (asset sale vs. stock sale), timing of the transaction, and your entity type all have massive tax implications.

Work with a CPA who specializes in business sales at least a year before you list. Some tax strategies (like S-corp elections) need to be implemented years in advance to avoid penalties.

Preparing Your Business for Sale

Whether you use a broker or sell direct, most of the work happens before you ever list the business. Buyers are looking for clean financials, transferable operations, and growth potential. If your business is a mess, no broker will save you.

Get Your Financials Clean

Hire a CPA to produce at least two years of reviewed financials (three years is better). Separate personal and business expenses. Document any add-backs you're claiming (owner salary, one-time costs, personal expenses run through the business).

Buyers will assume anything that's unclear or undocumented is hiding a problem. Clean books remove friction and build trust.

Reduce Owner Dependence

If the business can't run without you, it's worth less. Buyers discount heavily for key-person risk. Document your processes, train a manager to handle day-to-day operations, and show that revenue doesn't drop when you take a vacation.

This is the hardest part for most entrepreneurs, but it's also where you create the most value. A business that runs without you is worth 2-3x more than one that collapses when you leave.

Build a Transferable Customer Base

Buyers hate customer concentration. If 30% of your revenue comes from one customer, that's a huge risk. Work on diversifying your customer base at least a year before you sell.

Also document customer acquisition channels. Buyers want to see that you have repeatable systems for generating new business, not just a few big relationships that might leave.

If you need help building those systems, I break down the exact prospecting and sales frameworks I used to scale multiple companies in my discovery call framework. Most agencies and B2B companies struggle with inconsistent pipeline-fixing that makes your business dramatically more valuable.

If your customer acquisition depends on finding local business leads, tools like this Maps scraper can help you build repeatable prospecting systems. The point isn't the specific tool-it's having documented processes that work without you.

Preparing your business for sale is like crafting what I call a 'clear offer' in cold email. One of my best examples: 'Book 10 meetings in 4 weeks or your money back.' This works because it's concrete and risk-free. Your business needs the same clarity-specific revenue numbers, documented processes, and guaranteed metrics. A client preparing to sell their marketing agency increased their valuation by 40% simply by documenting their repeatable systems (lead sources, conversion rates, delivery processes). Buyers want proof they can replicate your success, just like prospects want proof you can deliver results.

Alternatives to Traditional Brokers

Depending on your situation, you might not need a full-service broker.

M&A Attorneys

If you have a buyer but need help negotiating and closing the deal, hire an M&A attorney instead of a broker. They'll charge hourly ($300-$600/hour) or a flat fee ($10k-$25k depending on complexity), which is a fraction of a broker commission.

You handle finding the buyer and initial terms, and the attorney structures the deal, drafts the purchase agreement, and manages closing.

Business Marketplaces

For smaller businesses, you can list directly on marketplaces and manage the sale yourself. You'll pay a much smaller commission (typically 2-5%) and handle buyer communications directly.

This works well for businesses under $500k where broker economics don't make sense. Just be prepared to field a lot of tire-kickers and low-ball offers.

Investment Bankers

For businesses worth $10M+, investment bankers replace traditional brokers. They run formal auction processes, target institutional buyers and private equity firms, and charge 2-5% (with minimum fees in the low six figures).

Unless you're doing a significant exit, investment bankers won't take your deal.

Understanding Business Valuation Multiples

Valuation is more art than science, but understanding how multiples work helps you set realistic expectations.

For small businesses, most valuations use SDE multiples. Average multiples across all industries run around 2.5x SDE, but this varies widely by sector. Service businesses with high owner involvement might trade at 1.5-2x SDE. SaaS companies with recurring revenue can command 3-5x SDE or higher.

What drives higher multiples? Recurring revenue, low customer concentration, documented processes, strong management team, and growth trajectory. Basically, anything that reduces buyer risk increases your multiple.

As businesses grow past $5M in revenue, buyers shift from SDE to EBITDA multiples. The math changes because institutional buyers assume they'll need to hire a CEO to run the business. EBITDA deducts management salary, so the number is lower than SDE-but the multiples are higher (typically 3-6x EBITDA for mid-sized businesses).

Understanding valuation multiples reminds me of the benchmark stats I track for cold email campaigns. Just like I expect a lead generator to produce 200 leads daily and a closer to achieve 10-25% close rates on cold leads (80% on warm leads), you need to know the benchmarks for your industry. One agency owner I worked with was offered 2.5x EBITDA but discovered through research that comparable agencies were selling at 4-5x. He walked away, improved his metrics for six months, and eventually sold at 4.2x. Know your numbers cold, or you'll leave money on the table.

What I'd Do Differently Next Time

I've learned something from each exit. Here's what I'd change if I sold another company tomorrow:

Start prep work two years before selling. Most entrepreneurs decide to sell and expect to close within six months. But the businesses that command premium multiples spend years building transferable operations, clean financials, and consistent growth. The earlier you start thinking like a buyer, the more you'll get paid.

Interview buyers early. Even if you're not ready to sell, have informal conversations with potential acquirers. Ask what they look for, what kills deals, and what makes a business attractive. This intelligence is gold when you're actually ready to sell.

Negotiate the broker agreement harder. Most entrepreneurs sign the first agreement a broker sends over. Don't. Negotiate the commission structure, exclusivity period, marketing commitments, and out clauses. Everything is negotiable.

Build buyer demand yourself. The best deals happen when multiple buyers want your business. Even if you hire a broker, do your own outreach to strategic buyers, competitors, and private equity firms in your space. More competition means better terms.

If you're thinking about an exit in the next few years, focus on the fundamentals: growing revenue, cleaning up operations, and reducing dependence on you personally. Those changes make your business more valuable whether you use a broker or not.