The 10 Things Your Business Broker Must Do to Earn the Fee

By Erick Hamdan
Published: January 6, 2014 | Last updated: March 21, 2024
Key Takeaways

Not all business brokers are created equal. Before you hire one, find out what the good ones do to consistently make the sale and earn their fee.


I talk to a lot of company owners who have sold their business using an investment banker or business broker. I always ask them how their experience was. It seems the answers are always either extremely positive or negative. It’s either “we could have never sold our company without the help of our broker,” or “it was completely useless, I could have done it myself.”


As a buyer, I feel the same way. We have worked with business brokers who are extremely good at managing the transaction and ensuring their client gets the best deal possible. We have also worked with some that seem to disappear after the letter of intent is signed, or worse yet, get in the way of getting a deal done. Business brokers are an important part of the transaction process, and we have done more broker-represented deals than not, but it can be downright painful for the buyer and the seller when the wrong broker is selected.

So what’s the difference?


What makes the good ones so valuable and worth their success fee?

Here’s the top 10 things that the great brokers always do:

#1 They don’t just say they know your industry, they prove it

Go with a broker who works in all industries and you likely will have a mediocre experience. If your company’s product is Iphone apps, don’t get a broker who specializes in oilfield services. Get one who does mobile technologies. You’re in control, so ask a lot of specific industry questions. If the answers are vague or too general, move on to the next one.


#2 They get inside your kitchen before selling your food

Knowing your industry is one thing, and knowing your company is another. Nobody can sell your company’s attributes better than you, but the broker must come a close second. A good broker spends some serious time immersed in your business before putting together any sales material and/or marketing your company. They figure out how the equipment works, they understand your employees, they walk through a job, they get in your company’s kitchen and learn the recipes.

#3 Their selling materials are worthy of your company

One of the first things your broker will do is prepare a teaser and CIM, so ask them to show you some examples and see if you like how they market companies. I read a lot of CIMs and the best ones are concise and to the point. The worst ones are unorganized or loaded with boiler plate industry information; they fail to draw any attention and quickly find the recycle bin.


#4 Like a great closer in baseball, they close deals

All brokers will tell you they can sell your business, but only nine out of 10 private companies for sale actually sell. Either more than 10% of businesses sell and this statistic is wrong, or brokers who tell you they can sell your company actually can’t. Like a closing pitcher who has a great save percentage, you want to see how many deals the broker closes against the number of assignments he/she gets. Don’t do this, and you risk being a blown save.

#5 They leave no stone unturned

Your broker must know all the potential buyers that could have an interest in your company. They should be prepared to approach them all with a teaser, or risk missing the one buyer who could be the perfect fit for you.

#6 They become your financial advisor

Selling a company is tough. Your lawyer and your accountant are on your team, but they may not have the necessary experience navigating a deal. A good broker does. Therefore, they need to look after you and assess all aspects of a proposed transaction – if you are getting consideration shares of the buyer, how is their value determined? what are the tax implications of the transaction structure? Is the buyer actually a good fit for you?

#7 They manage your expectations

You hire a broker to get you the best deal and sometimes the best outcome is just getting a deal. If you won’t sell your business unless you get a multiple of 10X EBITDA, and the most recent transactions for similar companies in your industry support 5X, then you won’t sell your business. A great broker strikes the right balance between getting you the most value and keeping you realistic.

#8 They roll up their sleeves

There is nothing more painful to watch during a transaction than a broker who doesn’t help out. Once the letter of intent is signed, the buyer will conduct due diligence on your company. Great brokers run the due diligence process for you. They work with your accountant to gather up all the information even before it is requested. They set up a virtual data room. They know selling a company is not your day job, it is theirs, so they work 24/7 to make the due diligence process as painless as possible for you.

#9 They make sure you train before the big race

The management presentation is one of the most important steps in the transaction process. A good broker prepares you for it. They anticipate all the questions that will be asked and rehearses with you. This isn’t about having a canned response because buyers see through that, but rather about not being blindsided by the questions that are often asked during these presentations.

#10 They understand which deal points to fight for

Every deal has negotiating points back and forth. The good brokers and buyers know which battles to fight, and which hills to die on. Unfortunately, we’ve seen too many deals crater at the last hour because the broker forgot the process was about getting the best value for their client, rather than about proving a point.

Pay the Fee, But Get the Result

Business brokers get paid a fee that is contingent on your success, so they take on some risk with you. Their risk is that they end up working really hard and the deal doesn’t close. Therefore, they are motivated to get deals closed, and the best not only get them closed, but they get them done right. If you feel uncomfortable with the sales process, a business broker can be invaluable for buyers and sellers alike. Just make sure you get what you’re paying for.

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Written by Erick Hamdan

Erick Hamdan
Erick works with business owners, investors, and private equity firms looking to create value and maximize their returns on exit. Working as adviser, founding partner, and/or CFO of three private companies that each grew to revenues over $300 million, he has worked on valuing, acquiring, and integrating over 30 companies.

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