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.
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.
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, because a buyer-paid model means an advisor can receive buyer introductions matched against a documented mandate at no cost — the buyer side is carrying the fee, and the intermediary keeps their own.
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 — buyer-paid, with no claim on your fee.
