Business brokers make money through a success-based commission paid at closing — on most main street deals, typically around 10% of the sale price, often with a minimum fee. Larger deals in the lower middle market work differently: M&A advisors there usually charge a scaled success fee (the Lehman formula or a variant), frequently combined with a retainer or engagement fee. If you're selling or buying a business, the fee structure tells you a lot about how your advisor is incentivized — so it's worth understanding 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.
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.
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 qualified, mandate-matched buyer introductions at no cost — the buyer side is carrying the fee.
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.
FAQ
Do sellers or buyers pay the business broker? On a sell-side listing, the seller pays the commission out of proceeds at closing. On buy-side engagements, the buyer pays for sourcing and coverage. In some deals both sides have their own advisor, each paid by their own client.
What is a typical business broker commission? Around 10% on main street deals is the most common figure, usually with a minimum fee. Rates of 8–12% are all within the normal range depending on deal size and market.
What's a fair minimum fee? It scales with the market. Main street brokers commonly set minimums in the low five figures; lower middle market M&A advisors often set six-figure minimums — a $100,000 minimum success fee is a normal number at that level, because the work is the same whether the deal is $3M or $8M.
Can I negotiate the fee? The percentage, sometimes; the structure, usually. Credited retainers, fee caps on very large outcomes, and carve-outs for buyers you sourced yourself are all commonly negotiated. Minimums rarely move.
