Definition
A business broker is an intermediary who sells businesses on behalf of their owners, typically helping to set the asking price, writing the listing and information memorandum, screening buyers, managing NDAs and relaying offers. Brokers are usually paid by the seller, largely through a success fee when the sale completes and sometimes an upfront fee too. In the UK you may also see the term business transfer agent, while larger deals tend to use M&A or corporate finance advisers. Licensing and conduct rules for brokers vary by country and, in the US, by state.
The asking price is the price a seller or broker puts on a business when it is listed. It is an opening position, not a valuation, and what it includes varies from listing to listing.
An information memorandum is a detailed sales document about a business, usually prepared by the seller's broker or adviser and shared after an NDA. It is written to present the business well, not to test it.
Worked example
Copperbeech Business Sales is a fictional UK broker. It lists The Gilded Teaspoon, a fictional café, at £350,000.
Before sending the information memorandum, the broker asks you to sign an NDA and complete a buyer profile with evidence of funds. After two meetings you offer £300,000. The broker takes it to the seller and comes back with a counter-offer of £330,000.
Why buyers care
The broker usually works for the seller and is paid when a deal completes. Treat their figures, valuations and descriptions as the seller's case, not independent verification.
That does not make brokers obstacles. A good broker keeps the process moving, helps set realistic expectations on both sides and steers the seller towards buyers who can complete. Be organised, answer promptly and do what you say you will do.
Check the key figures yourself before you spend money on advisers. Loupe's valuation tool gives an indicative range from the figures you enter, and the red flag screen shows which areas to question first.