A business broker mainly works for the seller: the broker values the business, markets it, screens buyers and negotiates toward a closing, and the seller usually pays the fee. Buying directly from the owner skips that middle layer. You may face no other bidders, but you run the process, the paperwork and the diligence yourself, with less structure. This primer is for first-time buyers, searchers and buyers using a Small Business Administration (SBA) loan who are deciding which route to take, and it treats brokers fairly: many are skilled, and many sellers need one.
The short answer
- Business brokers and mergers and acquisitions (M&A) advisors generally help sellers. Ask any broker in writing who they represent in your deal.
- A seller usually pays the broker, commonly through a success fee at closing and sometimes an upfront retainer. Fees vary, and this primer does not give a typical percentage.
- A direct deal can mean less competition and a more personal conversation, but nobody packages the records or runs the timeline for you.
- Either route needs the same diligence, an attorney and an accountant, and, with an SBA loan, the same lender underwriting.
- Ask for insurance records by name in either route: a schedule of policies, loss runs and any open claims. In a direct deal, put them on your request list in week one.
What does a business broker actually do?
A broker or advisor typically values the business, writes the marketing materials, screens buyers, negotiates and supports diligence through closing. Business brokers generally serve smaller ("Main Street") deals, while investment banks and advisory firms handle larger ones. Some brokers also work with buyers, so the label does not tell you whose side a person is on.
The financial summary in a listing was prepared on the seller's side. It is a starting point for your accountant, not a conclusion.
Channel facts, market size and broker credentials are in where to find businesses for sale. This primer is about what each route means for you as the buyer.
Who does the broker work for, and how are they paid?
Start with one question: who does this broker represent? The answer depends on the written agreement and on state rules, and some states require a written agency disclosure. A broker hired by the seller is working for the seller's interests, even when the broker is friendly and helpful to you.
- Payment. Brokers are commonly paid mainly by a success fee at closing, sometimes with an upfront retainer. The seller pays, but the fee can shape the asking price. Published descriptions of fees differ and none is a neutral survey, so ask each broker for the terms in writing instead of trusting a rule of thumb.
- Exclusive agreements. Listing agreements often give one broker the exclusive right to sell. Many include a tail: a set period after the agreement ends in which the broker is still owed a fee if the business sells to someone the broker introduced. If you approach a seller who has a broker, ask whether you must go through that broker.
- Licensing varies by state. Rules for business brokers differ, and a real estate transfer in the deal can change them. Check with the state's regulator rather than assuming.
Ask any broker in writing:
- Who do you represent in this deal?
- Does the listing agreement have a tail, and does it cover me if I approach the owner myself?
- Who prepared the financial summary, and what was it based on?
- What will you share with my lender, accountant and insurance broker, and under what nondisclosure agreement (NDA)?
- Which records can you request from the seller, including policies and loss runs?
How does buying directly from the owner work?
A direct deal starts when you find an owner yourself, by industry, size and location, and write, call or visit. Off-market deals attract buyers because there may be fewer rival bidders. That is a reason to try outreach, not proof that the price or terms will be better.
What you gain is access and sometimes less competition. What you give up is structure. No one has prepared a summary of the business, no one is coordinating the data requests, and the owner may never have sold a company or hired an attorney. You will probably need to explain the process, and each side should have its own attorney. SBA's own guide for buyers of existing businesses tells them to investigate thoroughly and to consider hiring an attorney and an accountant.
Price needs extra care in either route, and more in a direct deal, where no competing bids test it. If you use an SBA loan, the lender must generally obtain an independent business valuation (with a narrow exception for smaller deals). If the price is above the value that the valuation and any quality of earnings report support, the gap has to be covered with additional buyer funds, and SBA's text allows those funds to be on full standby. Ask your lender how it would treat the difference before you agree on a number. See how SBA 7(a) acquisition loans work and how small businesses are valued.
Which route fits the risk I am most worried about?
Use this as a decision guide, not a recommendation. Many buyers use both routes at once, and the rows key on the risk you are trying to manage, not on the kind of buyer you are.
| Deal risk | Broker-led | Direct | What to do |
|---|---|---|---|
| Price discovery | Competing bids test the number, but the asking price was set on the seller's side | Nobody tests the price but you, so it rests on your valuation work and your lender's | Ask your lender and accountant how the price will be supported |
| Owner sophistication | The seller has an advisor who knows the process | The owner may never have sold a company or hired an attorney | Plan to explain the steps, and have each side hire its own attorney |
| Confidentiality | Brokers screen buyers and control what is shared | Talks stay small, but there may be no NDA unless you propose one | Check that the NDA lets you share records with your lender, accountant and insurance broker |
| Record quality | A seller-prepared summary and often an online data room | You request statements, returns and bank records and chase them | Verify against tax returns and bank records in either route |
| Introductions and scheduling | The broker coordinates calls and visits | You arrange them with the owner | Agree a schedule for calls and visits in the first week |
| Insurance records | Ask the broker to request policies and loss runs | Ask the owner directly, and early | Name the records you want: a policy schedule, loss runs and open claims |
| Lender timeline | A package and an offer deadline can line up with lender steps | No deadlines unless you set them, and the lender's valuation and underwriting still take time | Tell your lender early which route you are on |
When does each route tend to fit?
No neutral study shows that either route is cheaper or safer by default, so treat these as tendencies, not rules.
- A broker-led purchase tends to fit when you want a defined process and deadline, have funding lined up and are comfortable competing with other offers.
- A direct approach tends to fit when you have a narrow target (industry, size, region), can spend months on outreach, and have an attorney and an accountant ready to carry the process for an owner who has never sold.
- Many buyers do both at once. Whichever you choose, tell your lender early which route you are on.
What changes in checking out the business (diligence) and the paperwork?
Less than buyers expect. A business that looks good in a listing has to survive the same questions as one a friend recommends, and an SBA lender underwrites the deal whichever way you found it. The lender's checks are covered above and in the FAQ below. What changes is who does the legwork.
Two cost points are worth knowing. SBA does not let advisory fees or agent fees count as eligible prepaid expenses toward your equity injection, so a fee you pay to an intermediary does not help your required equity. And if you plan to pay anyone who introduces a deal, ask your attorney first, because licensing and disclosure rules vary. The checklists in due diligence checklist for buying a small business and questions to ask a seller work the same in both routes.
What does month one look like with a listing versus a letter?
A hypothetical example. A buyer is choosing between two similar businesses, each priced around $800,000. One is listed with a broker. The other belongs to an owner the buyer wrote to. These timelines are illustrative, not typical.
| Week | Listed with a broker | Reached by a letter |
|---|---|---|
| 1 | The buyer signs an NDA and receives a summary package | The owner calls back and agrees to a meeting |
| 2 | The buyer asks for three years of statements and returns. The broker relays the request | The buyer asks for the same records. The owner has to find them |
| 3 | Two other buyers are also reading the package. The broker sets a deadline for offers | The owner and the buyer talk price. No one else is bidding |
| 4 | The buyer submits a letter of intent. The seller picks among offers | The buyer proposes a letter of intent and asks the lender and an accountant how the price will be tested |
The broker-led buyer gets a package and a deadline but competes with other offers. The direct buyer has fewer rivals but does more of the work and carries more of the price risk. Real timelines vary widely, and neither route removes the need for an attorney, an accountant and a lender's view of the numbers.
Where does insurance come in, whichever way you buy?
Insurance records are among the first documents worth asking for, because they are factual and come from third parties. Once you have an NDA, ask for a schedule of policies, loss runs (the carrier's record of claims) for several years and any open claims. Make sure the NDA allows you to share them with your lender, accountant and insurance broker. A listing package is a marketing summary and may not include insurance records, so ask for them by name. Loss runs come from the carriers and usually need the seller's authorization, so ask for recently dated ones.
In a direct deal, there is no data room, so build your own request list and send it in the first week. A quick read of loss runs can show claim frequency, open claims with large reserves or a business that has changed carriers often. The documents list and the insurance checklist for buying a business show what to request. Morrow can review the records you receive and flag gaps, and a review is not coverage. Morrow is an insurance agency, not a business broker, so it does not find businesses for sale or represent either party in the deal.
Keep reading
- Where to Find Businesses for Sale
- Questions to Ask a Seller Before You Buy a Business
- Due Diligence Checklist for Buying a Small Business
- How Small Businesses Are Valued: SDE, EBITDA and Multiples
- Red Flags When Buying a Business
- All guides for new business owners
Frequently asked questions
Do I pay the business broker's fee as a buyer?
Usually the seller pays the broker under the listing agreement, though the fee can shape the asking price. If you hire your own adviser, you agree that fee with that adviser. Read anything you sign, and ask your attorney about any fee you are asked to pay to someone who introduces a deal.
Can one broker represent both the buyer and the seller?
It depends on the written agreement and on state agency rules, and some states require a written disclosure of who represents whom. Ask the broker in writing who they represent in your deal and what conflicts they see.
Is buying directly from the owner a better deal?
No neutral study shows that direct deals cost less or work out better. Price depends on the business, the terms and an independent view of value. A direct deal can mean less competition, but it also means you run the process and carry more of the price risk.
Do I need a broker to get an SBA loan?
The lender underwrites the deal whether or not a broker is involved. SBA's rulebook generally asks the lender to obtain an independent valuation, verify the seller's tax returns against IRS transcripts and keep the purchase agreement in the file. Ask your lender what it needs.
How do I judge whether a business broker is credible?
Ask who they represent, how they are paid and for references from recent buyers and sellers. Check whether your state requires a business broker license and confirm it with the regulator. Some brokers hold credentials such as a Certified Business Intermediary designation. A credential is one data point, and it does not predict results.
Should I hire my own advisor if the seller has a broker?
Some buyers do, and they agree the fee in writing. Others work only with the seller's broker, who is working for the seller. Before you sign anything with an advisor, ask who they represent, how they are paid and whether their fee depends on the deal closing. SBA's guide for buyers also suggests an attorney and an accountant.
References
- Morgan & Westfield: Acquired, Ch. 11, M&A Advisors (sell-side advisory firm, 2026)
- U.S. Small Business Administration: Buy an existing business or franchise
- U.S. Small Business Administration: SOP 50 10 8.1, Lender and Development Company Loan Programs (effective Oct 1, 2026), Appendix 15
Just bought a business? Get your insurance reviewed.
Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.
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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.