Working with a business broker when you're the buyer
Short answer
Most business brokers represent the seller and are paid a commission by the seller when the deal closes. They control access to listings, NDAs, financial packages and the seller, so being a buyer they take seriously matters: have a clear buy box, proof of funds or lender pre-qualification, and respond quickly and decisively.
Remember whose side they're on. They'll present the business well; verifying it is your job.
Brokers are gatekeepers. They decide which buyers get the CIM, which get meetings, and which get a call when a good listing is about to go live. Understanding their incentives makes you more effective and less likely to be misled.
How brokers are paid
Typically the seller signs a listing agreement and pays the broker a commission at closing. That means the broker is paid only if a deal closes, and paid more if the price is higher. Neither makes them dishonest, but it shapes how they present the business and which buyers they favor: ones who will close.
Worked example: what the commission means for the price
Illustrative example, not market commission rates
A business lists at $1,000,000. Say the listing agreement pays the broker 10% at closing. At $1,000,000, the seller nets $900,000 before other costs; at $900,000, they net $810,000. The broker's fee falls from $100,000 to $90,000, a $10,000 difference to the broker and a $90,000 difference to the seller. So a broker has reason to want the deal to close more than to hold out for the last $100,000, which often makes them a useful channel for explaining evidence-based offers to the seller. It also explains why brokers push pace: their pay depends on closing at all.
How to be the buyer brokers call first
- A one-page buy box: industry, size, location, timeline.
- Proof of funds and a lender pre-qualification letter.
- A quick NDA turnaround and thoughtful questions.
- Clear yes/no decisions; don't string brokers along.
- Offers backed by reasoning, not lowballs.
What brokers won't volunteer
- Which add-backs are weak.
- How long the business has been on the market, and why previous buyers walked.
- Lease problems they haven't asked the landlord about.
- Whether the seller would accept less or more seller financing.
Ask these questions directly; good brokers answer them honestly because surprises kill deals. Then verify. See reading a CIM and checking SDE.
What a good broker does for you, even as the seller's agent
A good broker keeps the deal moving: chases documents from the seller, explains the seller's priorities, manages other buyers and keeps emotions out of negotiations. They know how similar deals in their market have been structured and can tell you what the seller is likely to accept. Use that knowledge, and keep your own diligence independent. Ask the broker what the seller cares about besides price (timing, staff, the name, a role after the sale); meeting those needs can be worth more to a seller than a higher number.
Reading a broker's financial package
Brokers usually prepare a confidential information memorandum (CIM) and a recast showing how they got from reported profit to SDE. It's the seller's case, prepared by the person paid when the deal closes. That doesn't make it wrong, but it means every number needs a source document. Read it with three questions: where does the starting profit come from (tax return, internal P&L or the broker's own spreadsheet?), what's added back and is each item documented, and which year or period is being used, and why that one?
Illustrative example, not a real listing
The recast starts with $180,000 of net profit from the internal P&L. The tax return for the same year shows $142,000. The difference is $38,000 of expenses the internal P&L moved "below the line". The recast then adds back $95,000 of owner salary, $22,000 of depreciation, $12,000 of interest, $18,000 of "personal expenses" and $15,000 of "one-time" repairs, for $342,000 of SDE. Starting from the tax return and accepting only the documented items (salary, depreciation, interest and half the personal expenses), SDE is $142,000 + $95,000 + $22,000 + $12,000 + $9,000 = $280,000. Same business, $62,000 less SDE. Ask the broker politely for the support for each line; good brokers expect it.
Questions to ask a broker about a listing
- How long has it been listed, and has the price changed?
- Have other buyers made offers or walked away, and why?
- Is the cash flow figure from tax returns or internal books, and what's added back?
- What matters most to the seller besides price: timing, staff, a role after the sale?
- Would the seller carry part of the price as a note, and on what terms?
- Has the landlord been approached about the lease?
- How did you arrive at the asking price?
Red flags in how a deal is brokered
- Pressure to offer before you've seen tax returns.
- A recast that starts from an internal P&L and won't reconcile to the return.
- "Other buyers are about to offer" with no change in the timeline when you ask for documents.
- Dual agency without clear disclosure of who the broker represents.
- Refusal to let your lender or CPA talk to the seller's accountant.
Working the relationship over a long search
Most buyers look at many deals before closing one, often through the same few brokers. Brokers remember who signs NDAs quickly, asks sensible questions, makes decisions, and closes. A few habits help: reply within a day, even to say no; tell the broker why you passed in one honest sentence; if you're interested, send a written list of document requests rather than a stream of emails; and if you make an offer, explain how you got to the number. When a deal doesn't work, a broker who understood your reasons is more likely to send you the next one that does. None of this changes who the broker works for: the seller.
What a broker can and can't legally do for you
In most deals the broker works for the seller and is paid by the seller. Some states require business brokers to hold a real estate licence, especially when real estate or a lease is involved, and licensing rules set duties to the client. Ask the broker whom they represent, in writing, and whether they are licensed where the business is. Don't expect advice on price, tax or legal terms in your favour; that is what your own accountant and attorney are for. A few buyers hire their own buy-side adviser; if you do, agree how they are paid so their incentives match yours.
What to send a broker after a call
A short follow-up email after each call keeps you at the top of the list and creates a record of what you were told. Include:
Thanks for the call about [business]. To confirm what I understood: revenue of [amount] and SDE of [amount] for [year], the seller is willing to stay [period], and the lease runs to [date]. Could you send the tax returns for the last three years and the add-back schedule? I'm pre-qualified with a lender and can move to an LOI within [days] of reviewing them.
If the broker corrects any of your summary, you've learned something before you spent money on diligence.
Frequently asked questions
Do buyers pay business broker fees?
Usually not. The seller pays the broker's commission under the listing agreement. If you hire a buy-side adviser or search firm, you pay them.
Will a broker tell me if the earnings are inflated?
Don't expect it. Brokers present the seller's recast. Some flag weak spots to keep deals alive, but checking add-backs and deposits is on you.
Can a broker represent both buyer and seller?
Some states and arrangements allow dual agency with disclosure. Ask directly who the broker represents in your deal.
What is a buyer's broker?
An adviser who represents the buyer, usually paid by the buyer through a retainer, a success fee or both. They help search, screen and negotiate. Ask exactly how they're paid, whether any compensation comes from sellers, and what they do that you couldn't do with an attorney, CPA and lender.
Should I sign a broker's buyer agreement or pay a buyer fee?
Read it carefully. Some brokers ask buyers to sign agreements that include non-circumvention terms (you can't go around the broker to the seller) or, occasionally, buyer fees. Non-circumvention is common and usually reasonable; fees paid by the buyer to a seller's broker are worth questioning. Have your attorney review anything that creates an obligation.
How do I get brokers to take me seriously as a first-time buyer?
Send a one-page buy box, show proof of funds and a lender pre-qualification, sign NDAs quickly, ask specific questions, and give clear yes or no answers. Brokers prioritize buyers who are likely to close.
Sources
Related guides
General information, not legal, tax, financial or investment advice. Rules and lender practices change; check the linked sources and talk to your attorney, CPA and lender about your deal. Examples with named numbers are illustrations, not real businesses. OKtoBuy's Deal Check does not value businesses or give price opinions.