Business broker vs. M&A advisor: which one should sell your company?

The two titles get used interchangeably, and some firms use both on the same business card. They are different jobs, paid differently, aimed at different buyers. The size of your company decides most of it, and the state of your books decides the rest. This article is the version of that answer we give across the desk, with the numbers, so you can tell which kind of firm you are talking to before you sign an engagement letter with either one.

What does a business broker actually do?

A business broker lists a company for sale and finds a buyer for it, the way a real estate agent lists a building. The work is marketing: a blind profile, a listing on the broker marketplaces, a buyer list, NDAs before financials go out, screening the people who respond, and steering the deal from offer to closing. Most of the businesses a broker sells are owner-operated and worth under about $2 million, and most of the buyers are individuals, often financing the purchase with an SBA loan, which is why brokers care so much about clean books.

The price is set on seller's discretionary earnings (SDE): profit, plus the owner's salary, plus documented add-backs. Owner-operated businesses under about $2 million sell for roughly 1.6 to 3.6 times SDE depending on industry and size; owner-run manufacturing and distribution companies commonly 2.7 to 3.1 times. The broker is paid a success fee at closing, in Chicago usually 8 to 12 percent of the price, sometimes with a minimum. The full picture is in business broker fees in Chicago.

What does an M&A advisor do differently?

An M&A advisor does not list a company. They run a process. The buyers are found before the company is shown to anyone: a curated list of strategic acquirers, roll-ups and private-equity-backed platforms that already own something like your business, each approached directly and quietly. The financials are rebuilt into a quality-of-earnings package before the first buyer sees them, because these buyers have their own accountants and will rebuild them anyway. Several buyers are brought to the same deadline so that the price is set by competition rather than by one negotiation.

That process pays for itself when the buyer changes. From about $5 million in revenue, or roughly $1 million of EBITDA, the person on the other side of the table stops being an individual with a loan and becomes a company with a deal team. Companies with $1 million to $10 million of EBITDA trade at about 3.7 to 4.5 times EBITDA, and the difference between the low end and the high end of that range is usually worth more than any fee. The advisor's job is to get you to the high end. What that looks like for a Chicago company is on M&A advisor in Chicago.

How is each one paid?

This is the fastest way to tell which kind of firm you are talking to. Brokers are paid a flat percentage at closing and, with some exceptions, nothing before it. M&A advisors are paid a monthly retainer while the engagement runs, then a success fee on a sliding scale. The two common scales are the Lehman formula (5 percent of the first million, 4 of the second, 3 of the third, 2 of the fourth, 1 of everything above) and Double Lehman (10, 8, 6, 4, 2). Some advisors quote a flat percentage with a minimum fee instead.

A $3 million sale under Double Lehman costs $240,000 (10 percent of the first million, 8 of the second, 6 of the third). At a flat 10 percent it is $300,000, and at 8 percent, $240,000. Above about $5 million the sliding scales get cheaper than a flat fee; below it they cost about the same or more. Retainers of a few thousand dollars a month add up over a six- to nine-month process, and most advisors credit them against the success fee, which is worth confirming in writing.

Which one do I need?

Use the buyer, not the title, to decide. If the likely buyer is an individual who will run the business day to day, you need wide marketing and a broker's process. If the likely buyer is a company that will fold yours into something larger, you need a curated, competitive process and an advisor's. The size of the company predicts the buyer well enough to use as a rule.

• Under about $1 million in revenue. A main-street broker, or no intermediary at all if the buyer is already known. A 10 percent fee on a $400,000 sale is $40,000, and that math matters more than the choice of firm. The case for and against hiring anyone is in should I hire a business broker to sell my company.
• $1 million to $5 million in revenue. Broker territory, and the range where the quality of the broker matters most, because the buyer's accountant will rebuild your earnings and the price moves with what survives. A broker who prices on verified numbers gets a better result here than an advisor running a process for buyers who will not show up at this size.
• $5 million to $15 million in revenue. The overlap. Roll-ups and platforms buy here, and so do larger individuals and small strategics. What decides it is whether the earnings survive a rebuild and whether the company runs without you; if both are true, a structured process to corporate buyers gets the higher multiple. If not, a year of preparation is worth more than either firm.
• Above about $15 million in revenue, or with outside investors or several share classes, an investment bank. A bank's staffed deal team and national buyer reach are what that sale needs, and its fee scale is cheaper than a broker's percentage at that size.

One more rule. In any bracket, the business that gets the better price is the one whose numbers were rebuilt before the buyer's accountant got to them. That is the part of the work that has nothing to do with the title on the engagement letter, and it is the part most firms of either kind leave to you.

Does the title mean anything legally in Illinois?

Some of it. Illinois regulates business brokers under the Business Brokers Act of 1995, administered by the Secretary of State, which is why you will see the registration line at the bottom of every page on this site. Federal law since 2023 exempts M&A brokers from SEC broker-dealer registration when the company sold is privately held and below $25 million of EBITDA or $250 million of gross revenue (Securities Exchange Act, Section 15(b)(13)), which covers nearly every Chicagoland company that changes hands. Neither rule tells you anything about competence. We are not lawyers and this is not legal advice; what the rules do give you is a public registry to check a broker against, and a question to ask an advisor who sells stock rather than assets.

Where does a CPA-led firm fit?

Lakeshore is a business broker by registration and an M&A advisor by method, and the honest answer is that for a $1 million to $15 million company the distinction matters less than what happens to the books. Our fee is the same across the range, 10 percent of the price, agreed in writing before going to market, with no retainer. For a company with $1 million of EBITDA we run the same curated buyer process an advisor would, to the same roll-ups and platforms, and we still take it to strategics and qualified individuals if the fit is there. For a $1.5 million machine shop we market it the way a broker should, and we rebuild the earnings first the way a buyer's accountant will. Because we also acquire Chicagoland businesses ourselves, we have sat on the buyer's side of the diligence table and know what is coming.

Where we send owners elsewhere: above $15 million in revenue, to a bank; under about $1 million, to an insider sale or a main-street broker; and when the earnings will not survive a rebuild, to the two-week readiness review rather than to market. A manufacturing owner in the collar counties often sits right on the line between the two kinds of firm, which is why we wrote that page separately.

What should I ask before I sign with either one?

1. Who are the last five buyers you closed with, by type?

   Individuals with SBA loans, or platforms and strategics. The answer tells you which process the firm actually runs, whatever the title says.

2. What is the fee, in writing, on a $2 million sale and a $6 million sale?

   Make them do the arithmetic on the scale they quoted, including any retainer and whether it is credited.

3. Who rebuilds the earnings before a buyer sees them?

   If the answer is "your accountant", price in that cost and that delay. If the answer is "the buyer's accountant", expect the price to drop after the letter of intent.

4. What are the term, the tail and the carve-outs in the listing agreement?

   Twelve months, a 12- to 24-month tail, and a written carve-out for any buyer you name are normal. Anything longer or vaguer, ask why.

5. What did you tell the last owner to wait?

   Every firm of either kind should have sent someone home to fix something first. If they have never done it, the process starts with your listing, not your number.

The first step is the same whichever firm you end up with: know what the business would sell for today, on verified earnings, before anyone markets it. Ours is free and comes back within two business days. Start with how much is my business worth, or ask for the range directly below.