Business Broker vs Buy-⁠Side Advisor: Who Works for You

A business broker usually represents the seller and is paid by the seller, often around 10% of the sale price for small businesses. A buy-side advisor represents the buyer and is paid by the buyer, so its job is to find, test and negotiate the right deal for you. On most listed businesses you will deal with a broker; a buy-side advisor sits on your side of that table.

Both roles are legitimate. The point is not that brokers act in bad faith, but that each professional works for whoever engages and pays them.

What does a business broker do?

A business broker is engaged by an owner who wants to sell. Under a listing agreement, the broker values the business for marketing purposes, prepares a confidential information memorandum, advertises the listing, screens buyers, collects non-disclosure agreements and offers, and manages the process to closing.

The broker is usually paid a success fee at closing, often around 10% of the price for small businesses and a lower percentage for larger deals. Some charge an upfront marketing or valuation fee as well. Because the fee depends on closing and grows with the price, the broker’s incentive is a completed sale at a strong price, which is exactly what the seller hired them for.

What does a buy-⁠side advisor do?

A buy-side advisor, sometimes called a business acquisition consultant or acquisition advisor, is engaged by the buyer. Typical work, as in our acquisition process, includes:

• defining search criteria: budget, industry, location, role, E-2 fit;
• sourcing deals from brokers, off-market outreach and networks;
• screening and valuing candidates;
• running financial and business due diligence, and coordinating legal review with counsel;
• supporting negotiations on price, structure, LOI and purchase agreement terms;
• coordinating closing with attorneys, CPAs and escrow agents.

Buy-side advisors are paid by the buyer, commonly through a retainer, a success fee, or both. Fee models vary between firms; ours are described on the cost page.

How do brokers, M&A advisors and buy-⁠side advisors compare?

The term “M&A advisor” covers a wide range, from boutique firms to investment banks. In the lower middle market most M&A advisors work on sell-side mandates; buy-side mandates are more common for private equity and corporate buyers than for individual investors.

Where do conflicts of interest arise?

Conflicts appear when the person guiding a buyer is paid by, or loyal to, the seller. Examples:

• A broker suggests the business is worth more than the verified numbers support, because the commission rises with price.
• Add-backs in the marketing package are presented as fact, without supporting documents.
• A “buyer’s consultant” also collects a referral fee from the seller or the broker.
• Dual representation, where one firm acts for both sides, which some states allow with disclosure but which limits what each side can rely on.

None of this requires bad intent. It is structural. Ask every professional in the deal: whom do you represent, who pays you, and do you receive anything from the other side?

Are business brokers regulated?

Regulation of business brokers is light compared with securities or real estate. Requirements vary by state: some states require a real estate license when a business sale involves real property or, in certain cases, the business itself, while others have no specific license for business brokers. Industry associations offer voluntary credentials and codes of ethics.

For a buyer, this means the quality of information in a listing depends heavily on the individual broker and on what the seller provided. A well-run brokerage will share tax returns, financial statements and bank statements once an NDA is signed and the buyer is qualified. A listing that offers only a one-page summary and an asking price is a starting point, not a basis for an offer.

How should a buyer work with the seller’s broker?

Brokers screen buyers carefully, because unqualified buyers waste the seller’s time. You will usually be asked for a signed NDA, a short buyer profile and proof of funds before receiving the full information package. Prepared buyers get faster answers and are taken more seriously when several offers arrive.

A few habits keep the relationship productive without giving away your position:

• Share what is needed to qualify you, but not your maximum budget or your deadline.
• Request source documents (tax returns, bank statements, payroll reports) rather than summaries.
• Put questions in writing and keep a record of the answers.
• Treat the broker’s valuation as the seller’s opening position.
• Keep your own analysis, and your own advisors, separate from the seller’s team.

When should a buyer use a broker, and when an advisor?

You will work with brokers on most listed businesses whatever you decide; they control access to the listings and the sale process. Treat the broker as a professional counterpart, ask for documents, and keep your own analysis separate from their marketing materials.

A buy-side advisor is most useful when:

• you are buying from abroad and cannot easily visit, verify and negotiate on the ground;
• the purchase is large relative to your total capital;
• the deal must also support an E-2 visa, with its rules on ownership, investment at risk, escrow and source of funds;
• you want access to off-market deals, not only listed ones;
• you have not bought a U.S. business before and want a process that avoids the usual mistakes described in our guide on how to buy a business in the U.S..

Experienced buyers with a local team may need only an attorney and a CPA. First-time and cross-border buyers usually benefit from someone who coordinates all of it.

What should you ask before hiring a buy-⁠side advisor?

• Do you represent sellers or accept any compensation from sellers or brokers?
• How are you paid, and what is due if the deal does not close?
• Who on your team does the financial work, and how do you verify revenue?
• Which parts do you handle, and which go to attorneys, CPAs and escrow agents?
• If the purchase supports a visa, how do you work with the immigration attorney?

Clear answers to these questions tell you more than a list of past deals.

Next step

TealBridge is a buyer-side business consulting firm in Dallas, Texas. We do not represent sellers and do not take commissions from sellers. Our team, led by founder Mira Sariyeva with Anton Trunin as Partner for M&A and Investment Strategy, helps buyers with budgets from $100,000, and Anton leads the larger $500,000 to $10 million deals; read more about us. We are not a law firm, CPA firm, broker-dealer or escrow agent, and visas are filed by independent immigration attorneys. Contact us to discuss your criteria.