Business brokers make money on success: a commission paid at closing, typically 8–12% of the sale price on main street deals, usually with a minimum fee. Above roughly $5M, M&A advisors replace the flat percentage with a scaled Lehman-style success fee plus a retainer. Almost nothing is paid until the deal closes.
The structure tells you how your advisor is incentivized, so it is worth reading closely before you sign anything.
The short answer, by deal size
| Deal size | Who handles it | Typical fee structure |
|---|---|---|
| Under ~$1M ("main street") | Business broker | Commission at closing, commonly 8–12%, with a minimum fee |
| ~$1M–$5M | Business broker or M&A advisor | Commission or a Lehman-scale fee, sometimes a small retainer |
| $5M+ (lower middle market) | M&A advisor / intermediary | Lehman or Double Lehman success fee, plus a retainer or monthly work fee |
Every reputable structure has one thing in common: the bulk of the compensation arrives only when the deal closes. That alignment is the point.
Commission on main street deals
For smaller businesses, the broker's compensation is straightforward: a percentage of the final sale price, paid at closing out of the proceeds. Around 10% is the common figure, and most brokers set a minimum fee so that very small transactions are still worth the months of work a sale takes.
The seller typically pays it. The listing agreement states the percentage, the minimum, and the exclusivity period — read all three before signing, and ask what happens if you find the buyer yourself. How long a broker listing contract runs is its own decision, and it binds you for longer than most owners expect.
The Lehman formula, explained
Once deals get bigger, a flat percentage stops making sense — 10% of a $20M company is not a defensible fee. The lower middle market's answer is the Lehman formula, a sliding scale:
- 5% of the first $1M
- 4% of the second $1M
- 3% of the third $1M
- 2% of the fourth $1M
- 1% of everything above $4M
On a $5M transaction that's $150,000. Many firms today use a Double Lehman (double each percentage) or a modified scale, because the original formula dates to an era of smaller deal values. Most also set a minimum success fee — six figures is common at this level — so the economics work on smaller closes.
The practical consequence is easy to miss: below roughly $4M of transaction value, the minimum fee, not the percentage, is usually what you actually pay. Run the scale against your own expected range before you spend a call negotiating basis points that will never apply.
A worked example: the same $2M sale, three ways
The numbers below are the published scales applied to one hypothetical price. They are arithmetic, not a survey.
| Structure | Math | Fee |
|---|---|---|
| Main street commission at 10% | 10% of $2,000,000 | $200,000 |
| Lehman formula, no minimum | 5% of the first $1M + 4% of the second $1M | $90,000 |
| Lehman formula with a $100,000 minimum | The minimum applies | $100,000, plus any retainer |
The spread explains who works which deals. A $2M business is a commission deal for a business broker and a minimum-fee deal for an M&A advisor, which is why the two rarely compete for it. It also explains what to ask first. An owner in this range should ask about the minimum before the percentage, because the minimum is the number that will actually be on the closing statement.
Retainers, work fees, and engagement fees
Most lower middle market advisors don't work purely on contingency. Alongside the success fee you'll usually see one of:
- An upfront engagement fee — a one-time payment when the advisor takes the mandate, covering valuation work and marketing materials.
- A monthly retainer or work fee — commonly a few thousand dollars a month through the engagement.
- A credited retainer — the fairest version for the client: what you've paid in retainers is subtracted from the success fee at closing, so on a normal transaction the retainer effectively costs nothing.
An advisor with zero upfront fee is either very confident in the deal or spreading thin effort across many mandates — ask which. An advisor whose retainer credits back at closing has aligned the structure honestly.
What the commission is calculated on
"Purchase price" sounds unambiguous. In a listing agreement it rarely is. Most agreements define the fee base as total consideration, which usually means cash at closing plus any seller note, plus liabilities the buyer assumes, and sometimes the value of a consulting agreement or non-compete payment made to the owner. Earnouts are commonly included as well, either calculated at closing on the projected amount or charged as each payment arrives.
Two items are often handled separately. Real estate that transfers with the business is frequently carved out and charged at a lower rate, or handled by a real estate agent under a different agreement. Inventory may be inside or outside the fee base depending on the market and the broker.
Three questions settle it before you sign:
- What counts? Ask for the definition of purchase price or total consideration in the agreement, not a verbal summary of it.
- When is the fee on a note or earnout due? At closing on the full amount, or as the cash actually arrives. If your deal is likely to include seller financing, this timing question matters more than the rate.
- How are real estate and inventory treated? Both can move a fee materially on a business that owns its building or carries heavy stock.
Co-brokering: when two brokers split one fee
When two brokers are on one deal, one holding the seller's listing and one who brought the buyer, the seller still pays one commission. The listing broker offers a share of it to the buyer's broker under a co-brokerage arrangement, and the split is between the two of them. The buyer does not pay a second fee, and the seller does not pay more than the listing agreement says.
Ask a broker whether they co-broke before you sign. Some do not, or offer a share small enough that other brokers will not bother showing the listing. Either way the buyer pool shrinks, and a wider buyer pool is most of what you hired them for.
Co-brokering is a main street convention. In the lower middle market, a buyer's advisor is more often paid by the buyer under a separate buy-side engagement, which is the model the next section covers.
Buy-side fees: when the buyer pays
Everything above describes sell-side engagements. Buy-side is its own model: acquirers pay for deal sourcing and coverage, usually as a retainer or membership plus a success fee at close — again, commonly on a Lehman scale with a minimum. This is how BizNexus works with acquirers: a membership fee, a success fee documented at signing (2% flat or Lehman, the buyer's choice), and no surprises at closing.
The buy-side structure matters to sellers and their brokers too. When the buyer is the one paying for sourcing, the intermediary holding the listing can receive introductions matched against a documented mandate without a second fee on the deal. The buyer pays the BizNexus fee, so the broker's commission stays whole.
What the fee structure tells you
- Success-fee-heavy means the advisor only wins when you close — strong alignment, but confirm they have the capacity to actually work your deal, not just list it.
- Retainer-heavy with a small success fee means you're paying for effort rather than outcome — reasonable for complex mandates, but watch the incentive to prolong engagements.
- Whoever pays, get the number in writing before you sign. Percentage, minimum, what credits against what, and what happens if you bring your own counterparty. A good advisor will put all four in plain language on the first call.
Fee structure is one input. Which broker you pick — and specifically who they can actually reach — is the one owners underweight.
Where to go from here
If a buyer has already approached you, fees are the second question — start here instead.
If you're weighing a sale, start with what the business is worth and what your timeline looks like, or see how to choose a business broker in Boston and Massachusetts for the questions worth asking before you sign.
If you're the advisor rather than the owner, the advisor partner network and the BizNexus Marketplace send you mandate-matched buyers for deals you already have. The buyer pays our fee, so your commission stays whole.
