Article Summary
Whether to use a broker or M&A advisor comes down to net proceeds and probability of closing, not just the fee. A good advisor handles valuation, confidential marketing, buyer vetting, a competitive process, negotiation, and diligence management. This is work that often more than covers the fee through a higher price and a smoother close. Fees are typically success-based and a percentage of what the business sells for, per the Pepperdine Private Capital Markets Report. Selling without a broker can make sense for very small businesses or pre-arranged deals with a known buyer, provided the owner has strong legal and tax support.
Business Owner Summary
Business owners looking to sell often get preoccupied with the question of “how much does a broker charge?” Yet that’s not the best way to look at things. Remember, you can’t take paper valuations to the bank, deals need to close to receive the full value What really matters is how much you net from the sale and how likely the sale is to close.These are the two central concerns of any sale. Hiring a professional advisor with a demonstrated record of success generally improves your outcome in both regards, while enabling you to focus on running your business. This is essential for ensuring your business doesn’t bleed value during the months-long sale period.
Key Takeaways:
- Always evaluate a broker on how likely you are to close and your net proceeds; don’t get “fee tunnel vision.”
- Good advisors have confidential processes for marketing and selling that you cannot replicate.
- The industry generally uses a success-fee model, shrinking as the deal value grows.
- Smaller or pre-worked out deals can sometimes be handled without a broker.
This advice pertains to privately-held firm owners who are pondering a sale, but it’s important to remember that fee structures and the value of representation can increase as deals grow larger and more complex.
At Sun Acquisitions, we’ve spent more than two decades applying these frameworks, leading to 500+ successful transactions after advising owners on price, positioning and overall exit strategy.
Let’s get the obvious out of the way: Nobody likes writing large commission checks. It’s the first objection in any owner’s mind, and it’s entirely logical to think this way. On a sale that stretches into the millions, we’re talking real money.
Yet the fee is a trap. It’s the wrong number to focus on. What matters is what’s left in your account after the close, and whether you get the deal to close at all. Saving money on a broker’s fee is a small consolation if your deal never closes or if you close at a number that a more competitive process would have blown away.
The correct answer to “should I use a broker?” is to learn what a broker offers, what a broker truly costs, and when you don’t need a broker. Understand all three and you can make the most informed decision when considering a sale.
What a Business Broker or M&A Advisor Actually Does
The advisory process boils down to a few key parts.
- Valuation, or creating a credible price based on comps and normalized earnings, enabling you to head to market grounded in reality.
- Confidential marketing, which involves blind profiles, NDAs, and a controlled disclosure process that ensures the business can be marketed without employees or customers starting to panic.
- Vetting of buyers, which removes the unserious bidders: those who don’t have the funds or those who just want to gather data about your business.
- Creating competitive bidding markets, which brings a variety of buyers to the table to bid against each other, creating leverage for you.
- Managing diligence, which helps you turn letters of intent into closed deals by skillfully navigating the avoidable pitfalls that plague due diligence.
- Helping owners navigate the pitfalls and speedbumps that are inherint in every deal. Obstacles that may kill a deal unless you have the experience and knowledge of how to mitigate or eleviate the inevitable deal challenges.
Every step mitigates some risk, but addressed as a whole, these steps raise your asking price and help ensure you close on time and on good terms. You can also spend 6-12 months running your company instead of trying to shepherd a deal to the finish line, eliminating the risk of your performance cratering mid-deal and inviting renegotiation. This, unfortunately, happens all too often.
How Much Does a Broker Really Cost?
Industry fees are almost always based on success, which translates to paying a percentage of the completed transaction value. Pepperdine University’s Private Capital Markets Report says brokers average the below commission rates on closed transactions.
Let’s take a quick look at a deal-size table:
| Deal Size | Typical Structure | Typical Blended Fee |
| Under $1M | Flat commission | ~8–12% |
| $1M – $5M | Flat or Double Lehman tiers | ~6–10% |
| $5M – $25M | Lehman-style tiers | ~3–6% |
| $25M+ | Modified Lehman / negotiated | ~1–3% |
Sources: Pepperdine Private Capital Markets Report; IBBA/M&A Source Market Pulse.
If you’re not familiar with the jargon used above, here’s a quick breakdown: The “Lehman formula charges a higher percentage on the first million and those percentages then progressively descend as deal values rise. The widely used Double Lehman structure (10% on the first million, 8% on the second, stepping down to 2% above $4 million) would generate a $300K fee on a $5M sale, or 6% blended.
Lower middle-market advisors sometimes charge upfront retainers or monthly fees, which may be credited against future payments. You should always inquire as to what happens to any upfront money if there is no sale. At Sun Acquisitions, we work on a success-based framework with any compensation being tied to your transaction closing. That’s what we urge business owners to seek no matter whom they choose to work with. It’s the fairest, safest model for you, and it requires your advisor to deliver on their promises.
Why Use a Broker: The Bottom Line
The case for hiring a broker and maximizing value comes down to the important factors that solo sellers almost always struggle with, beginning with reach. Brokers/advisors have massive databases of qualified buyers, including “quiet buyers,” or the strategic/off-market bidders that business owners cannot access, and who don’t check listing sites because they don’t need to. If you lack access to these buyers you are immediately excluding some of the heaviest hitters from the bidding pool.
Next, confidentiality is essential. A broker can market your business quietly and handle inquiries without setting off alarm bells. Business owners cannot anonymously market themselves, which means you invite lots of risk into the process, either from snoops on a fishing expedition or from workers/vendors/clients who may get unsettled if things become public.
A truly competitive process requires a pool of qualified buyers creating price momentum by bidding against each other. A single buyer or a weak pool have no reason to be aggressive, and every reason to slow play you. A good broker can create this environment.
Continuity is also critical. This process can absorb most of your time and attention, and that can have serious impact on your business. Getting a sale accomplished is a full-time task even for an experienced specialist. Without a broker, you don’t have enough hours in the day to oversee your business and learn how to sell it on the fly.
Finally, brokers have seen it all. They can recognize deal killers before they emerge. They know how to solve them. The reality is many deals don’t die from one nasty surprise, but from an accumulation of smaller ones. Brokers are invaluable when it comes to anticipating these traps and helping you avoid them.
When Selling Without a Broker Might Make Sense
Full disclosure: You don’t always need our help. If you’re selling to a family member or a partner who already owns 49% (someone who is vetted and inside the operation), a rigorous marketing process just adds cost. If this business is very small, the economics may not support professional help.
In such cases, it may be better to fly solo. Just remember you still need a trusted transaction attorney who focuses on deals and a CPA who can help model tax implications before terms are agreed. You still may want an advisor, but for a limited scope, such as creating an independent valuation agreeable to all parties (and possibly the IRS).
What you don’t want is to have a business of real value, no buyer lined up, and an owner who plans to “talk to a few people quietly.” That’s the recipe for a disaster: A high-end asset being sold casually and amateurishly.
How to Choose the Right Advisor?
It’s simple: Evaluate their work. How many deals have they closed in your size and industry? While slick marketing and advertising to potential business sellers is fine (it at least shows the advisor is competent in that area), the numbers are ultimately what matters. If they show you a strong track record and offer to walk you through how they would sell your business in detail, you’ve got promising lead.
Ask them how they protect confidentiality, get the fee structure in writing, and have them explain with specificity how they will earn that fee and the mechanics of their process. Bad advisors prefer vagueness, generalities and promises.
The ROI Question
Before you get started, do the math. Say a business earning $1M in adjusted EBITDA is sold in a single-buyer negotiation at 4.5x and brings $4.5M. Sold through a competitive process at 5.25x, that business now rings $5.25M. The fee on that larger deal, at a blended 6%, is about $315K. The owner nets roughly $435K more with the advisor than without. That doesn’t even include improved terms, a better chance at closing, and a business insulated from risk because the owner is preoccupied with a sale.
This is also why the overwhelming number of lower middle market sellers use professional help. The most sophisticated sellers, such as repeat sellers and PE firms selling portfolio companies, almost always use professional help.
The people who sell businesses most often are the least likely to sell without an advisor and that revealed preference is worth more than any sales pitch.
Final Thoughts
The true issue isn’t “is a broker worth the fee?” but rather “can I afford to sell without the price, the protection, and the certainty a good advisor provides?”
If you have a buyer in hand, then skipping a broker may be possible, with the right attorney and CPA supporting you. If your buyer is TBD and your business is a valuable asset that took decades to build, then the broker fee is likely the cheapest part of the deal.
The next step is a no-commitment conversation with an advisor to find out more. Sun Acquisitions’ advisors are always candid, and we’ll tell you if you don’t need us. Yet we can also tell you what your business is likely worth, who the realistic buyers are, and what any sales process would entail. And all of it is confidential, with no obligation.
