What to Expect From a Business Broker

A business broker's job is to get the seller the best price and terms the market will support, keep the seller informed throughout the process, protect confidentiality, and bring the transaction to a successful close. In return, the broker needs a seller who is committed to selling and who shares accurate, current information about the business. The relationship works best when both sides treat it as a partnership.

What sellers can expect from a business broker

In most transactions, the business broker lists the business and represents the seller. That means the broker:

• Represents the seller honestly and fairly and works to obtain the highest possible price and the best overall deal
• Provides regular updates on the status of the listing and buyer activity
• Takes every reasonable step to keep the sale confidential
• Guides the seller through offers, negotiation, due diligence, and closing

The broker cannot set the price. No matter how hard a broker works, the market ultimately determines the price and terms a business will sell for.

What the broker needs from the seller

Selling a business is a two-way effort. The broker needs to know about changes in the business as they happen, including sales trends, major equipment purchases, inventory swings, the loss or gain of a major customer, or any issue a buyer would want to know about. Surprises that reach a buyer before they reach the broker are hard to recover from.

Representation and licensing

In most cases, the broker represents the seller but still owes the buyer honest and fair dealing. In California, a broker may represent both parties only with the informed written consent of both.

In California, business brokers are generally required to hold a real estate license issued by the Department of Real Estate. Sellers can confirm a broker's license status through the DRE's public license lookup.

What buyers can expect from a business broker

Buyers benefit from working with a broker as well. Many buyers start with a specific type of business in mind without knowing the full range of what is available. A broker can show them businesses that fit their budget and can still provide the income they need, which saves time on both sides.

Buyers want candor about the business they are considering. Because the broker sits between buyer and seller, questions and misunderstandings can be resolved quickly. For more on the buyer side, see How a Business Broker Works With Buyers and Sellers.

What the broker expects in return

Brokers need a seller who genuinely intends to sell and a buyer who genuinely intends to buy. When both sides are honest with the broker and with each other, the transaction has the best chance of closing on terms everyone can accept.

What is typically included in the sale of a business

Most business sales include these components:

• Furniture, fixtures, and equipment
• Inventory
• Goodwill, meaning the reasonable expectation of future earnings from the business's reputation and customer relationships
• The lease
• Leasehold improvements

Depending on the business, a sale may also include:

• A franchise
• Customer or mailing lists
• Patents, trademarks, or copyrights
• Proprietary recipes or processes
• Proprietary software or other technology

Each of these can raise or lower both the asking price and the final selling price. Defining clearly what is and is not included avoids disputes later. See Common Mistakes in Business Valuation.

Owners in Southern California who want to understand what their business could sell for can start with a confidential valuation from BusinessQuest Brokers. Request a valuation.

Frequently asked questions

Does a business broker need a license in California?

Business brokers in California are generally required to hold a real estate license from the Department of Real Estate. You can verify a license on the DRE website.

What does goodwill mean in a business sale?

Goodwill is the value attributed to the reasonable expectation of future earnings, based on the business's reputation, customer relationships, and other intangible assets.

What should I tell my broker during the sale?

Any material change in the business, including sales trends, major purchases, inventory changes, customer gains or losses, and anything a buyer would reasonably want to know.