Business brokers, M&A advisors, and investment bankers all do the same core job: they sell companies. The practical differences are deal size and method. Brokers list Main Street businesses on marketplaces for individual buyers, M&A advisors run competitive processes for lower-middle-market companies, and investment banks serve larger transactions, usually as registered broker-dealers, with percentage fees that fall as deal size rises.
One job, three playbooks
None of these titles is legally protected in most of the country. A two-person shop can call itself an investment bank, and a large regional firm can call itself a brokerage. What matters is the work behind the label: how the intermediary finds buyers, how much competition it creates among them, what it is licensed to do, and what it charges. Each model works well inside a particular size range and poorly outside it.
Where each operates by deal size
Business brokers: Main Street
Business brokers dominate what the industry calls Main Street: restaurants, service companies, small distributors, single-location retailers. Sale prices typically run from under $100,000 up to a few million dollars. Buyers are usually individuals who plan to run the business themselves, often with bank financing, and most sales are structured as asset sales rather than stock sales.
Good brokers earn their fee at this size. They price small companies realistically, usually on seller's discretionary earnings rather than EBITDA, screen out unqualified inquiries, keep the sale confidential from employees and competitors, and walk first-time buyers through financing and closing. For a $900,000 landscaping company, no investment bank will return the call. A competent local broker will get it sold.
M&A advisors: the lower middle market
M&A advisors, sometimes called intermediaries or boutique advisory firms, cover the ground between Main Street and traditional investment banking. Deal values commonly range from a few million dollars to $50 million or more, which often maps to roughly $1 million to $10 million of EBITDA. Buyers at this size are mostly institutions: strategic acquirers, private equity funds, and family offices. Selling to them takes prepared financials, a credible growth story, and a process that makes them compete.
Investment banks: the middle market and up
Middle-market and national investment banks focus on larger companies, generally well above $50 million in value, and offer services beyond a sale, such as capital raising and fairness opinions. They typically operate as SEC-registered broker-dealers with licensed personnel. The regulatory line does not follow the marketing label, though. Plenty of boutique firms that call themselves advisors are also registered broker-dealers, and some brokerages occasionally handle larger deals.
Side-by-side comparison
Boundaries overlap in practice and firms compete across categories, but the typical patterns look like this.
| Business broker | M&A advisor | Investment bank | |
|---|---|---|---|
| Typical deal size | Under a few million dollars | Roughly $5M to $100M enterprise value | Generally $50M and up |
| Typical buyer | Individual owner-operators | Strategic acquirers, private equity, family offices | Corporations, large sponsors, occasionally public markets |
| Process | Confidential listing on marketplaces plus the broker's buyer list | Targeted outreach to a researched buyer list on a set timetable | Broad or targeted auction, often with financing workstreams |
| Fee pattern | Flat commission on the sale price, sometimes with minimum fees | Lehman-style or flat success fee, often with a monthly retainer | Negotiated success fee at lower percentages, plus retainer and minimums |
| Regulatory posture | State rules vary; some states require a real estate license | Federal M&A broker exemption or broker-dealer registration | Typically SEC-registered broker-dealer |
Listing a business vs. running a process
The listing model
Brokers work much like real estate agents, in the best sense. The business is priced, packaged into a confidential summary, and posted to business-for-sale marketplaces alongside the broker's own buyer network. Interested buyers sign a nondisclosure agreement, review financials, meet the owner, and negotiate. The model is reactive by design: the listing pulls in buyers over weeks or months, and price discovery happens one buyer at a time.
That fits Main Street because the buyer pool is diffuse. Thousands of individuals are searching listings at any given moment, and no advisor could identify them in advance. Reach beats targeting at this size.
The run-process model
Advisors and bankers invert the sequence. They build materials first (a confidential information presentation, a financial model, a data room), research and rank likely buyers, then contact dozens or even hundreds of them at once on a schedule. Indications of interest arrive by a set date, management meetings follow, and final bids land together, so buyers price the company against each other instead of negotiating alone. The product is competitive tension.
A run process takes months of preparation and senior attention, which is why it makes economic sense once a company is large enough to draw institutional buyers who will bid against one another.
Licensing and regulation, in plain English
Two questions drive the rules: does the deal involve real estate, and are securities changing hands?
Securities law. A stock or equity sale is a securities transaction. The SEC's guide to broker-dealer registration lists finding buyers and sellers of businesses, where securities are involved, among the activities that may require a person to register as a broker. Investment banks address this by registering as broker-dealers, which brings SEC oversight, self-regulatory membership, and licensing exams for individual bankers.
The federal M&A broker exemption. Since March 29, 2023, Section 15(b)(13) of the Securities Exchange Act has exempted qualifying M&A brokers from SEC registration. As of 2026, it covers brokers facilitating a change of ownership in a privately held company with less than $25 million of EBITDA or less than $250 million of gross revenues in the prior fiscal year, provided the broker reasonably believes the buyer will control the company and be active in its management after closing. Exempt brokers cannot hold client funds or securities, cannot assist public offerings or most shell-company deals, cannot provide financing through affiliates, and cannot represent both sides without written consent from each. Brokers barred or suspended by regulators do not qualify. State registration requirements can still apply and vary from state to state.
State licensing. Seventeen states, including California, Florida, Georgia, and Illinois, require business brokers to hold a real estate license. Others have no broker-specific license at all. A deal that includes the sale or lease of real property brings real estate licensing rules into play regardless.
Voluntary credentials. The Certified Business Intermediary designation from the International Business Brokers Association signals completed training and an ethics commitment. It is a useful screen rather than a legal requirement.
What each one costs
The figures below come from published intermediary fee surveys (see Sources) and are general educational ranges, not quotes. Individual engagements vary widely.
- Smaller deals: success fees are often a flat percentage of the price, commonly in the range of 6 to 12 percent, and many firms set minimum fees, so a percentage quote can understate the true cost on a very small sale.
- The Lehman formula: the classic scale pays 5 percent of the first $1 million of value, 4 percent of the second, 3 percent of the third, 2 percent of the fourth, and 1 percent of everything above $4 million. In one 2024 survey, about 44 percent of firms used a Lehman-style declining structure, 26 percent charged a flat percentage, and 20 percent used an accelerator that rises with price.
- Mid-sized deals: survey data puts the average success fee at just over 4 percent on a $10 million sale and around 3 percent at $20 million. On deals above $50 million, flat percentages can fall to as low as 1.5 percent.
- Retainers: monthly work fees most commonly land between $5,000 and $10,000, roughly a quarter of firms charge no upfront fee, and retainers are usually credited against the success fee at closing.
Fee structure shapes incentives. An accelerator scale rewards stretch outcomes, while a flat fee pays the same rate for closing at any price. The fee at several different sale prices is commonly spelled out in the engagement letter before an engagement begins.
Which one fits your company
- Under roughly $1 million to $2 million in likely value: these sales are usually handled by business brokers. The buyer is typically an individual searching listings, and a broker's marketplace reach and closing experience tend to matter more than auction mechanics.
- Roughly $2 million to $5 million: the honest gray zone. If the natural buyer is another local operator or an individual, a strong broker fits. If strategics or small private equity funds would plausibly bid, an M&A advisor running even a limited process can change the outcome.
- Above roughly $1 million of EBITDA: institutional buyers appear, and a run process with prepared financials and staged competition typically justifies its higher cost.
- Above roughly $50 million in value, or with capital-raising needs: a registered investment bank brings the licensing, staffing, and buyer relationships the situation calls for.
Across all three models, the useful signals are similar: closed transactions near a given size in the past few years, the buyer types the firm reached, and how its fee behaves across outcomes. A broker who quietly closes eight Main Street deals a year tends to be a better fit for a small company than a banker who has never sold one.
Your CPA, attorney, and wealth advisor still matter
An intermediary runs the sale. Your existing advisors make it hold up. A CPA who tightens the financials before diligence prevents price erosion later and can model the after-tax result of competing offers. A deal attorney papers the transaction and protects you on indemnities and escrows. A wealth advisor helps you plan for the proceeds before the wire arrives, when planning options are widest. Owners who assemble that team early tend to have calmer processes, and these professionals are also excellent sources of intermediary referrals because they see who actually performs.
Educational note: this article is for general education only. It is not tax, legal, or investment advice, and it does not recommend any strategy, structure, or intermediary. Rules, thresholds, and fee practices change and vary by state. Consult your own qualified attorney, CPA, and financial advisor about your specific situation.
Sources
- SEC: Guide to Broker-Dealer Registration
- Sidley Austin: U.S. Congress Exempts Certain Merger and Acquisition Brokers From SEC Broker-Dealer Registration
- BizBuySell: Business Broker Licenses, Registrations, and Certifications
- Axial: M&A Fee Guide 2024-2025
- Axial: How Much Do Brokers Charge to Sell a Business?
- Axial: What Does an M&A Advisor Charge?
Frequently asked questions
- What is the difference between a business broker and an investment banker?
- Mostly deal size and method. Business brokers list Main Street companies, often worth under a few million dollars, on marketplaces and sell mainly to individual buyers through asset sales. Investment bankers are typically SEC-registered broker-dealers who run competitive multi-buyer processes for much larger companies and can also raise capital. M&A advisors sit between the two, running structured sale processes for lower-middle-market businesses.
- How much does a business broker charge to sell a business?
- Small-business commissions are usually a flat percentage of the sale price. Published intermediary surveys put flat success fees on smaller deals at roughly 6 to 12 percent, and many firms add minimum fees. Larger deals shift toward Lehman-style declining scales or negotiated percentages, often with a monthly retainer that is credited against the final fee. The exact calculation is commonly documented in the engagement letter.
- Do business brokers need a license to sell a business?
- It depends on the state and the deal structure. Seventeen states, including California, Florida, and Illinois, require business brokers to hold a real estate license, while others have no broker-specific license. If the sale transfers stock rather than assets, federal securities law applies; many intermediaries rely on the Section 15(b)(13) M&A broker exemption, though state securities registration rules may still apply.
- At what size should I hire an M&A advisor instead of a business broker?
- A common inflection point is around $1 million of EBITDA, or a few million dollars of likely value, because strategic acquirers and private equity funds start bidding at that size and a competitive process can move the price meaningfully. Below that, a capable local broker with real buyer traffic often delivers better economics. Comparing each firm's recent closed deals near a given size is a common way owners weigh the tradeoff.
- What is the Lehman formula for M&A fees?
- The classic Lehman formula pays the intermediary 5 percent of the first $1 million of transaction value, 4 percent of the second, 3 percent of the third, 2 percent of the fourth, and 1 percent of everything above $4 million. Many firms now use modified versions with larger breakpoints or different percentages. In one 2024 industry survey, about 44 percent of firms used a Lehman-style declining scale.
Considering a sale in the next few years? See what a prepared process looks like.
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