Broker or investment banker, by deal size
| Deal size | Who usually runs the sale | Likely buyers | Process | Fees |
|---|---|---|---|---|
| $1M enterprise value | A business broker. Few investment banks take mandates this small. | Individual owner-operators, first-time acquirers, small local competitors. Many finance with an SBA 7(a) loan. | A listing marketed to a broad pool of buyers, with a blind teaser and NDAs before details are shared. | Success fee at closing. A 2025 fee guide put broker success fees at 5% to 12% of the sale price [5]. Some brokers add an upfront or marketing fee. |
| $5M enterprise value | The overlap. Larger business brokers, M&A advisors and boutique investment banks all compete for these mandates. | Experienced individual buyers, search funds, independent sponsors, private equity add-ons and strategic acquirers. | Either a broker's listing or an advisor's targeted outreach to a selected list of strategic and financial buyers, ideally with more than one offer. | In a survey of 189 US sell-side advisors, the average success fee on a $5 million deal was 6.3% [4]. Most advisors also charge an engagement fee [4]. |
| $20M enterprise value | A lower middle market investment bank or M&A advisory firm. Few business brokers run deals this size. | Private equity platforms and add-ons, family offices, strategic and sometimes international acquirers. | A structured, competitive process: confidential information memorandum, staged bids, management meetings and a negotiated letter of intent. | The same survey found an average success fee of 3.9% on a $20 million deal, with three-fifths of answers between 2.5% and 5.0% [4], usually alongside a monthly or upfront retainer. |
The $5 million case, in detail
A business worth about $5 million is the hardest size to call, because it is where business brokers stop and investment banks start, and the two overlap. Larger brokerage firms sell businesses this size every year. So do boutique investment banks and M&A advisory firms that focus on the lower middle market. Neither title tells you much on its own; what matters is who your buyers are likely to be and what kind of process will reach them.
Lean toward an investment bank or M&A advisor when your earnings are large and steady enough to interest private equity or strategic acquirers, when you have a management team that can stay on, or when the deal may involve rollover equity, an earn-out or a recapitalization rather than a simple cash sale. A banker's value is a targeted, competitive process: a list of the buyers most likely to pay for what you have, outreach to each one, and a negotiation that plays bids against each other.
Lean toward a business broker when the business still depends heavily on you, when the most likely buyer is an individual or a search fund using an SBA 7(a) loan, or when the buyer pool is local or regional. At this size, look for a broker who has closed deals in your range, not one whose listings are mostly much smaller.
Either way, interview at least two firms of each kind if you can. Ask each to name recent deals in your size range and sector, how many buyers they would contact, and how they would keep the sale confidential. The answers usually make the choice for you.
What a business broker does, and what an investment banker does
A business broker lists and sells smaller, owner-operated companies. The broker prices the business, writes a listing and an offering summary, markets it on listing sites and to its own buyer list, screens buyers, and carries the deal through the letter of intent and closing. Many broker deals are asset sales to individuals.
An investment banker (often called an M&A advisor at this size) runs a sale for larger companies. The bank prepares a confidential information memorandum and a financial model, builds a targeted list of private equity and strategic buyers, manages a staged bidding process, and negotiates structure as well as price: cash at closing, rollover equity, earn-outs, working capital and the purchase agreement terms that move value between the parties.
Both work for you, the seller, under a written agreement, and both are mostly paid by a success fee at closing. The differences are deal size, buyer type, depth of process, and how they are licensed.
Licensing: broker-dealers, the M&A broker exemption, and state rules
Investment banks are broker-dealers. Under federal securities law, most brokers and dealers must register with the SEC and join a self-regulatory organization [1], and the self-regulatory organization for broker-dealers is FINRA. Bankers who work at those firms hold FINRA registrations. You can look up a firm and its people on FINRA BrokerCheck before you sign.
Selling a company by selling its stock is a securities transaction, so an intermediary paid a success fee on a stock sale has historically needed to be a registered broker-dealer. The SEC's own guide lists people who find buyers and sellers of businesses among those who may need to register [1]. Since 2023, a federal exemption lets an M&A broker facilitate the sale of an eligible privately held company without registering, if the buyer takes control and will be active in managing the company [2]. A company is eligible if, in the fiscal year before the engagement, its EBITDA was under $25,000,000 or its gross revenues were under $250,000,000 [2], which covers almost every $5 million business.
Business brokers are licensed by the states, not by FINRA. Depending on the state, a business broker may need a real estate license, may rely on a securities exemption, or may need no specific license at all, because licensing laws for securities, business brokers and real estate vary by state [6]. Ask any broker or banker which license or exemption they operate under, and in which states.
Typical engagement terms, by description
Whichever you hire, you will sign a listing agreement (broker) or an engagement letter (banker). The terms that matter most are not always the headline percentage. In a 2024 survey of US sell-side advisors, roughly half used a sliding scale where the percentage falls as the price rises (a Lehman formula), and three-quarters charged a minimum success fee [4]. Monthly work fees of $5,000 to $10,000 were the most common answer among advisors charging one [4]. For how each structure works, see business broker fees.
- Exclusivity and term. Most agreements are exclusive for a set period, with a notice period to end them. Ask what happens at the end of the term if no deal has closed.
- Success fee. A flat percentage, a sliding scale, or a scale that rises above a target price. Confirm whether it is calculated on enterprise value, on cash at closing, or on total consideration including earn-outs and seller notes.
- Minimum fee. A floor that applies even when the percentage would produce less. On a smaller deal the minimum, not the percentage, may set the real cost.
- Retainer or work fee. Upfront, monthly, or paid at milestones. Ask whether it is credited against the success fee.
- Tail clause. A period after the agreement ends during which a sale to a buyer the firm introduced still earns a fee. Ask for a list of those buyers, and exclude any buyer who approached you first.
- Expenses. Travel, data rooms, marketing and printing. Ask for a cap.
- Timing on earn-outs and notes. Whether the fee on deferred payments is due at closing or when you are actually paid.
What the fee difference looks like at $5 million
Percentages alone can mislead, because the structure and the minimum change the result. Ask every firm you interview for the total fee in dollars at three outcomes: a low price, the expected price, and a strong price. That one request makes broker and banker proposals comparable.
How to choose: questions to ask both
Use the same questions with every broker and banker you meet, so the answers line up:
- How many deals near my size have you closed in the last three years, and in which sectors?
- Who would you contact about my business, and roughly how many buyers? Individuals, private equity, strategics?
- Who at your firm does the work day to day, and how many other mandates do they have?
- Which license or exemption do you operate under, in which states? Can I see your FINRA BrokerCheck record?
- What is the total fee in dollars at a low, expected and strong price? Is there a minimum, a retainer, a tail?
- How will you protect confidentiality with employees, customers and competitors?
- What would you expect my business to sell for, and what is that based on?
Where direct buyer introductions fit
Not every sale starts with hiring a broker or banker. Many owners first hear from a buyer directly, or from a firm the buyer has hired to find businesses like theirs. That is what Axia Growth does: buyers such as private equity firms, search funds, strategic acquirers and holding companies set acquisition criteria, and Axia introduces them to owners whose businesses fit. Axia is typically engaged and paid by the acquirer, does not represent sellers, and does not provide, arrange, or receive compensation for transaction financing [6]. Owners pay Axia nothing.
A direct introduction is a way to hear what a qualified buyer thinks before committing to an exclusive agreement with anyone. It is not a substitute for representation. Axia does not value businesses, negotiate terms, structure deals, or take part in due diligence or closing, and it holds no business-broker, real estate or securities license [6]. If the conversation turns serious, you can still hire a broker or banker to test the offer, or run the sale yourself with your own attorney and CPA. See should I use a business broker? for that choice, selling a business without a broker for an owner-run sale, and who pays for how Axia is paid.
Know your number before you interview anyone
Brokers and bankers will each suggest a value when they pitch for your business. You will judge those pitches better if you already know roughly what businesses like yours sell for. The multiples index shows median EBITDA and SDE multiples by sector and size band [3], and the value range calculator applies them to your earnings in about a minute. For which earnings figure fits your size, see SDE vs EBITDA, and for owner pages by industry, start at Axia for owners.