M&A Advisor vs. Business Broker: Who Should Sell Your Business?

Acquiring a new business, or selling the business you spent years growing, is one of the biggest decisions you’ll ever make. You deserve a trusted advisor that will support your goals and help you achieve the best possible outcome. But, which one to choose?

When it comes to buying or selling a business, advisors generally fall into two categories: business brokers and mergers and acquisitions (M&A) advisors. While both professionals help you sell your business, their expertise and approach differ greatly.

Here are a few factors that can help you determine which advisor is right for your needs. 

  1. Size of Your Business 

    The size of your business can help you determine which professional is right for you. Typically, M&A advisors are used by larger companies in the $5 to $100 million range, or with $2 - $20 million in earnings. These businesses usually have a management team or board of directors that need to be considered in the sale as well.

    Business brokers specialize in buying and selling successful small businesses, usually valued at $5 million or less. These companies are generally run by an owner/operator without the oversight of a board. 

  2. Valuation Method

    The business brokerage market uses multiple of sellers discretionary earnings while the M&A market uses multiples of earnings before interest, taxes, depreciation, and amortization (EBITDA).

  3. The Buyer

    Like the sellers, buyers in the business brokerage space tend to be individuals with an interest in running their own company, or a synergistic buyer (another corporation) from a similar industry looking to grow through an acquisition. The M&A market typically sees synergistic buyers or financial buyers (private equity groups, family offices) rather than individuals.

    As you consider who might be the ideal buyer for your business, think through the outcomes you value most (your legacy, money in your pocket, future growth of the business, your employees being taken care of, etc.) and which type of buyer will help you achieve those goals.

    It’s also worth noting that business brokerages typically have an “open” buyer search while M&A has a targeted buyer list and a closed auction.

  4. The Process

    The business brokerage process typically begins with an analysis and valuation phase, marketing the business for sale, searching for and screening buyers, negotiating a deal, and coordinating the closing. Buyers are identified through an “open” search utilizing listing websites, email campaigns, and other methods.

    The M&A process is similar, yet includes additional steps on both the front and back end, including exit planning, conducting due diligence, assisting CPAs with tax planning, coordinating with lawyers to close the sale, and developing a transition plan. In the M&A process, buyers are compiled on a targeted list and presented with the opportunity, after which there is a call for offers and a coordinated march to the closing.

  5. Fees

    Business brokers typically charges 10% of the sale price, but have no upfront fees, meaning you pay nothing until your business is sold. M&A professionals charge between 3 and 5% of the sales price, but may have a retainer, meaning you will be paying them regardless of if your business sells quickly or not.

So, which professional should you choose?

Choose a Business Broker if your business is relatively small, has limited complexity, or you're looking for a quick sale with less financial structuring, a business broker might be the right choice for you. They are also ideal if you don’t require a high level of confidentiality or anticipate complex negotiations.

Choose an M&A Advisor if your business is larger, more complex, or if you're seeking to maximize value through a strategic sale, an M&A advisor is likely the better option. They can help structure the deal in a way that maximizes the financial outcome and ensures the deal is in your best interest. Whether you choose a business broker or an M&A advisor, ensure that the person you work with has the experience and expertise that aligns with your business’s needs.