Buy Side Advisor vs Business Broker: Who You Hire to Buy a Company

Short answer: the business broker attached to a listing is engaged and paid by the seller, so that broker works for the other side of your transaction. A buy side advisor is engaged and paid by you, and represents only you. Brokers cost the buyer nothing directly because the commission comes out of the seller's proceeds. A buy side mandate costs a monthly retainer plus a success fee and is realistically only available above roughly $2.5 million of enterprise value. Educational only, not legal, tax or investment advice.

Most first-time buyers meet a broker before they meet anyone else, and the meeting feels like representation. Somebody experienced is answering questions, sending financials, explaining the process and generally being helpful. It is easy to leave that call believing you have picked up an ally. You have picked up a counterparty's agent who is being professional with you, which is a different thing, and the difference shows up the first time you ask for a price reduction.

Who does a business broker actually work for?

The seller, in almost every case. The seller engages the intermediary, the seller signs the listing agreement, and the seller pays the commission out of the proceeds at close. That relationship sets the broker's duty: market the business, qualify buyers, hold confidentiality and get the best available terms for the person who hired them. None of that is hidden and none of it is improper. It simply is not the same as having someone in your corner.

The practical consequence is narrow but sharp. Anything you tell the broker, you are telling the seller. Your maximum price, your financing contingency, how badly you want it, the fact that you have looked at nothing else for four months. A broker who is good at the job will be pleasant about collecting all of it. Treat the conversation as negotiation with the other side, because that is what it is, and keep your ceiling to yourself.

What is a buy side advisor?

An advisor you hire and pay to acquire on your behalf. The scope usually runs from defining acquisition criteria, through building and working a target list, approaching owners who are not publicly for sale, evaluating what comes back, coordinating due diligence, and negotiating to close. The defining feature is not the task list, which overlaps a broker's, but the direction of the loyalty. You pay them, so they answer to you.

That is also why buy side engagements lean on retainers more heavily than sell side ones. A sell side broker has one business and a reasonable chance of selling it. A buy side advisor may contact two hundred owners and close nothing, so the retainer funds a search that might not produce a deal at all.

Who pays the buy side advisor, the buyer or the seller?

You do, in full. The buyer bears one hundred percent of buy side advisory fees. This is worth stating plainly because a lot of buyers assume the two intermediaries split the seller's commission the way residential real estate agents do, and that assumption is where the money goes wrong.

Fee sharing between a buy side and a sell side intermediary happens, but it is negotiable rather than customary, and the decision does not belong to you or your advisor. It is the sell side broker's call whether to share a commission at all. If they decline, your advisor still expects to be paid, and the source of that payment is you. Ask the question in writing before anyone starts work, not after an offer is accepted.

What does each one cost?

The seller's commission is not free money just because it leaves the seller's column. It is priced into the asking price the same way a listing agent's fee is priced into a house. On a sliding Lehman scale of 5% of the first million, 4% of the second and so on down, a $5,000,000 sale carries about $150,000 of commission, and middle market deals often run on a double Lehman of 10, 8, 6, 4 and 2. Somebody paid that, and the somebody is the buyer, indirectly, through the price. The full picture of what business brokers charge to sell a company and how the Lehman formula prices a larger deal is worth reading before you decide the seller's side is irrelevant to your budget.

What is the minimum deal size for a buy side advisor?

Around $2.5 million of enterprise value. The constraint is the minimum success fee rather than the percentage: at a floor of $35,000 to $50,000, a 2% engagement stops making sense below roughly that price, because the percentage no longer clears the minimum. Below the line the issue is not whether you can afford an advisor. It is that the advisor will not take the mandate.

That threshold does more to shape small acquisitions than any other number in the industry, and almost nothing written about advisory fees leads with it. We broke the published scales apart firm by firm, with the author and date on every row, in what a buy side advisor actually charges. The short version is that the 0.5% to 2% figure repeated across the internet describes deals of $10 million and up, and quoting it to somebody buying a $600,000 business understates the real cost by a factor of five.

Do I need a buy side advisor to buy a small business?

Under about $2.5 million you generally cannot hire one at the published rates, so the useful question is what replaces the function. In practice it splits three ways. Sourcing moves to marketplaces and direct outreach you run yourself. Verification moves to an accountant engaged for a defined scope. Documents move to an attorney engaged by the hour.

That last one carries a detail worth knowing before you budget. Every other intermediary in a deal is paid at close, which means they are paid only if the deal happens. The attorney is paid regardless of whether the deal closes. Two dead deals with real legal review behind them can cost more than the legal work on the one that completes, and buyers who have never walked away from anything are consistently surprised by it.

Can the same broker represent both sides?

It happens, and the roles usually stay separate even inside one brokerage precisely because the goals conflict. A broker representing a seller wants the highest price the market will bear. A broker representing a buyer wants the lowest. One person cannot pursue both with equal energy, whatever the disclosure form says. If a broker offers to handle both sides of your purchase, the question to ask is who pays them and how much, and then to read the answer against the price you are being encouraged to accept.

What should a buyer do under $2.5 million?

Do the advisor's job in the three places it actually earns its fee, and skip the rest. Sourcing is the part small buyers most often outsource and least need to: curated marketplaces publish the deal flow, and the work is filtering rather than finding. Verification is the part they most often skip and least should. Negotiation sits in between and is learnable.

Verification is where an unadvised buyer is genuinely exposed, because the seller's numbers arrive in whatever shape the seller keeps them. The reliable move is to stop reading the profit and loss statement and start reading the bank. Pull twenty four months of statements, convert the PDFs into a spreadsheet, and reconcile deposits against the revenue that was reported to you month by month. Where those two lines diverge is where the real conversation about price begins, and no advisor is required to run the exercise.

On the deal flow side, the reason a marketplace substitutes reasonably well for a sourcing mandate is that the filtering can be done before you ever speak to anyone. Buyouts publishes verified MRR, ARR, growth and churn on every listing before it goes live, so the screening an advisor would charge a retainer to perform is already in front of you. Browsing is free and buyer membership starts at $99 a month. It is not a substitute for proprietary outreach to owners who are not selling, which is the one thing a buy side advisor does that nothing else replicates. Below $2.5 million, though, that outreach is not on offer at any price you can pay.

How is this different from using a marketplace instead of a broker?

A buy side advisor and a broker are both people you deal with on a single transaction. A marketplace is the venue the transactions sit in, so the comparison runs on different axes: cost per deal against cost per month, one negotiated relationship against many filtered options. We work through that trade separately in whether a broker or a marketplace fits your sale, and the reasoning inverts cleanly for the buy side.

The decision for most buyers under a few million dollars is not really advisor against broker. It is whether to accept that the only professional in the room being paid by you is the attorney, and to build the rest of the process around that fact rather than assume somebody else is looking after your side of it.