OnwardLearn · Selling · Step 2. Decide how to sell
What a broker does for you
The short version
- A [broker](/learn/reference#business-broker "A person or firm paid, usually a percentage of the sale price at closing, to value a business, prepare the materials, find and screen buyers and manage the process. What a broker does and does not do is its own piece.") sells your business for you, from pricing to closing.
- They prepare what buyers read, find and screen buyers and keep the sale confidential.
- They help negotiate, help you build the data room buyers will check, then keep the deal moving through the buyer's review and the bank.
- They work for you. They do not give legal or tax advice.
- Rules for brokers vary by state. Ask what applies where you are.
What a broker does, stage by stage
Pricing. Most brokers start with an opinion of what the business will sell for. It is based on your financials and on sales they have seen. It is not an appraisal. Lesson 1.3 explains the difference.
The [CIM](/learn/reference#confidential-information-memorandum "The document that describes a business for sale to a buyer who has signed a non-disclosure agreement. The numbers, the history, the customers, the people and the reason for selling."). The broker writes the main document buyers read, called a confidential information memorandum, or CIM. It describes the business, its history, its people and its numbers. They also write a short, anonymous description used to draw interest without naming you.
Finding buyers. The broker markets the business to their own list of buyers, to other brokers and through listings. A good broker also reaches buyers who are not actively looking.
Screening. Before a buyer learns your name, the broker asks them to sign a confidentiality agreement, often called an NDA (non-disclosure agreement). They also check that the buyer can pay. Most owners never meet the buyers who do not pass.
Meetings and questions. The broker handles most buyer questions and sets up meetings. That keeps the sale from taking over your week.
Negotiation. The broker helps you compare offers and negotiate the [letter of intent](/learn/reference#letter-of-intent "The offer document. It sets out the price, the structure and the main terms, and starts diligence."), the first written offer that sets price and terms. Your M&A attorney reviews it before you sign.
The data room. A data room is a secure online folder that holds the documents a buyer will check: tax returns, financial statements, leases, contracts and more. The broker tells you what to gather, organizes it and controls which buyer sees which documents, and when. You still supply the documents. Most of them come from you and your accountant.
Getting to closing. After you sign, the buyer checks everything in the data room and more, called due diligence, and the buyer's lender runs its own review. The broker keeps both moving and helps resolve problems before they stall the deal.
What a broker does not do
A broker does not give legal advice. That is your M&A attorney. A broker does not give tax advice. That is your accountant. A good broker will tell you when a question belongs to someone else.
Who the broker works for
A broker hired by you works for you. The buyer has their own advisors.
Licensing and credentials
Rules for business brokers differ by state. Some states require a real estate license. Some require registration. Some have no specific requirement. Ask what applies in your state, and check it.
There is also a professional credential. The International Business Brokers Association awards the Certified Business Intermediary (CBI) designation. It requires brokerage experience, required coursework, an exam and continuing education. A credential shows training. It does not replace checking a broker's recent sales.
When you are ready to talk to someone
Nobody needs to know you read this. When you are ready, these are the questions to bring.
- "How would you arrive at a price for my business, and what would make you lower it?" Listen for: reasons tied to your earnings and to recent sales of similar businesses. Be wary of a number that seems designed to win your listing.
- "Who writes the CIM? Can I see one you have written, with the names removed?" Listen for: a yes and a real sample. The CIM is how the broker will present your business to every buyer.
- "How do you find buyers for a business like mine, and how many would you expect to hear from?" Listen for: the specific places they look and a realistic number, not "we have a big list."
- "What does a buyer have to show you before they learn my name?" Listen for: a signed confidentiality agreement and proof they can pay, every time.
- "Who builds the data room, and what will you need from me?" Listen for: a clear split of the work and a document list early, well before a buyer asks for it.
- "What does my state require of you, and how can I check it?" Listen for: a clear answer and where to look it up yourself.
When you’re ready
What is the business actually worth? Start there — no account, no contact, no obligation. Find out what it's worth