How to start a data broker business

Becoming a broker is about skills: finding data, judging it, bringing buyers. Starting a broker business is about structure: a legal entity to sign contracts, a way to receive commissions, protection if a deal goes wrong, and a routine that keeps deals moving.

Sellers and buyers will ask who they are contracting with before they share anything, so the structure is part of how you earn trust.

Nothing here needs much capital. A broker owns no inventory; the main costs are setup fees, insurance, legal review and your time.

1. 1

   Form a legal entity

   Most solo brokers in the US choose an LLC. The SBA notes that an LLC protects owners from personal liability in most cases, which matters when you sign agreements about other people's data. Ask an accountant how it will be taxed.

2. 2

   Get an EIN and a business bank account

   An Employer Identification Number from the IRS is free, and you can apply online if the business is US-based. Keep commission payments in a separate account from day one.

3. 3

   Buy the right insurance

   Ask a broker about professional liability (errors and omissions) and cyber cover. You will handle samples and confidential documents, and a claim of negligence or a leak is the realistic risk.

4. 4

   Prepare reviewed templates

   You need four documents: a mutual NDA, a letter of intent, a data licence agreement and a broker or commission agreement with each seller. Have a lawyer review them once, then reuse them.

5. 5

   Check registration before your first deal

   If you will sell personal data about consumers you have no relationship with, California, Vermont, Texas and Oregon may require you to register. Most business-data deals don't trigger this, but check each deal.

6. 6

   Set up your tools

   A CRM or spreadsheet for leads, a secure way to share samples (a data room with access logs), e-signature, and a place to keep each deal's documents.

DataBroker's app covers several rows: the lead finder for building the seller list, the CRM for the pipeline, estimations for a first value range, and contract templates in sending order. The course walks through each stage in more depth.

In the usual data broker business model, the seller pays the broker a commission or finder's fee when a deal closes: a share of the deal value or a fixed fee.

Some take a share only of the seller's net proceeds after platform fees, so the agreement should say which.

Put the terms in writing

Put the rate, what it is calculated on, when it is due and what happens with repeat sales to the same buyer into the signed broker agreement before any introduction.

Why we don't quote earnings

We don't publish typical earnings. What a broker business brings in depends entirely on the deals found and closed, and early months often bring none.

• Income is lumpy. Deals close irregularly, so keep costs low and plan for months without a commission.
• Rights problems end deals late. Front-load the rights check, even when it slows the first conversation.
• Some niches are regulated. Health, finance, children's data and precise location bring rules this guide doesn't cover.
• Tax and entity advice depends on where you live. Use an accountant; this guide is general.