Working with a business broker can save time when you are buying a business, but you need to know whose interests the broker serves before you share anything.
Working with a business broker: what brokers do
A business broker helps sellers list, market and negotiate the sale of a business. Some also work with buyers. This article is general information, not legal or financial advice. Rules about broker licensing and disclosure vary by state, so check your state’s requirements and ask for the details in writing.
- Listing and marketing the business
- Screening buyers
- Helping negotiate and close
Whom the broker represents
In many deals the broker works for the seller and is paid when the sale closes. That does not make the broker dishonest, but it means the broker’s goal is to close the deal at a good price for the seller. Ask in writing whom the broker represents. You may want your own adviser, such as an accountant or attorney, to protect your interests. Keep this in mind with working with a business broker.
- Ask whom the broker represents
- Understand how the broker is paid
- Use your own accountant and attorney
How to start working with a business broker as a buyer
Be ready to share basic information, such as your budget, your experience and how you plan to fund the purchase. Brokers often ask for a confidentiality agreement before sharing details. Our guide on a reliable business for sale marketplace covers where listings come from, and our guide on the steps to buy a business shows where the broker fits in the process. It is a key part of working with a business broker.
- Share your budget and goals
- Expect a confidentiality agreement
- Read every document before you sign
Questions to ask a business broker
Ask how long the broker has worked in your industry, how many deals they have closed, and how they found the listing. Ask how the numbers were prepared and whether they were reviewed by an accountant. Do not rely on the broker’s summary. Our guide on due diligence explains how to verify claims, and our guide on how to value a business explains what the price should be based on. Remember this about working with a business broker.
- Experience in the industry
- How the numbers were prepared
- What to verify on your own
Watch for red flags
Be cautious if a broker pushes you to skip due diligence, refuses to share records, asks for large fees before showing real information, or promises guaranteed results. Our guide to business opportunity scams lists more warning signs. If something feels wrong, pause and get advice. This is central to working with a business broker.
- Pressure to skip checks
- Large up-front fees
- Guaranteed results
Use a broker without giving up control
A broker can help you find and negotiate, but you still make the decision. Keep your own adviser, verify the numbers, and take your time. Our guide to buying a business, linked below, ties the steps together, and your local SBDC offers free advice. Working with a business broker works best when you stay in charge.
- Keep your own advisers
- Verify before you commit
- Take your time
Related reading on working with a business broker
- Guide to Buying a Business: Steps, Costs and Checks
- The Steps to Buy a Business: A Nine-Step Roadmap
- Is There a Reliable Business for Sale Marketplace?
- How to Buy an Existing Business: A Due Diligence Guide
- How to Value a Business Before You Buy: Multiples and Seller’s Discretionary Earnings
- Business Opportunity Scams: 12 Red Flags to Check
- America’s SBDC small business advising
- SCORE free business mentoring
- SBA 7(a) loan program
- NerdWallet guide to buying an existing business
