How much does a business broker charge?

Business broker commissions range from 5–12% of the final sale price depending on deal size. Smaller businesses (under $1M) typically pay 10–12%, while mid-market businesses ($1M–$5M) pay 6–10%. Some brokers also charge an upfront retainer of $2,500–$15,000 for CIM preparation, which is usually credited back at closing.

How long does it take to sell a business?

Most small to mid-market business sales take 6–12 months from broker engagement to close. The stages include CIM preparation (4–8 weeks), buyer outreach and qualification (4–12 weeks), due diligence (30–90 days), and closing (2–4 weeks). SBA-financed deals add 30–60 days to the timeline.

What is seller's discretionary earnings (SDE)?

Seller's Discretionary Earnings (SDE) is the standard valuation metric for small businesses. It equals net profit plus owner salary, owner benefits, non-recurring expenses, and depreciation/amortization. SDE represents the total economic benefit to a single owner-operator. Most small businesses sell at 2–4× SDE.

Do I need a business broker to sell my business?

While you can technically sell without a broker, data consistently shows brokered transactions close at 15–25% higher prices and at higher completion rates than unrepresented sales. The exception is if you already have an identified buyer at an agreed price. In any other scenario, professional representation pays for itself many times over.

What is an IBBA-certified business broker?

The International Business Brokers Association (IBBA) is the professional body for business brokers. IBBA-certified brokers hold designations like CBI (Certified Business Intermediary) or M&AMI (Merger & Acquisition Master Intermediary), which require transaction history, continuing education, and adherence to a code of ethics. These certifications signal professional commitment and deal experience.

What is the difference between a business broker and an M&A advisor?

Business brokers typically handle Main Street and lower-middle-market transactions — businesses selling for $100K to $10M. M&A advisors operate in the middle market ($10M to $500M+) with larger teams, investment banking capabilities, and institutional buyer relationships. For businesses under $5M, a CBI-certified business broker is usually the right choice.

What percentage do business brokers charge?

Business brokers typically charge 8–12% on businesses selling under $1M, and 5–8% on deals from $1M to $5M. The commission is paid entirely at closing — brokers only earn when the deal closes.

What is the Lehman Formula for broker fees?

The Lehman Formula structures commissions in tiers: 5% on the first $1M, 4% on the second $1M, 3% on the third, 2% on the fourth, and 1% on amounts above $4M. It is most commonly used for deals above $3–5M.

Do business brokers charge upfront fees?

Some brokers charge an upfront retainer of $2,500–$15,000 to cover CIM preparation and marketing expenses. This is most common on larger or more complex deals. Retainers are typically credited back to the seller at closing.

What is a tail clause in a broker listing agreement?

A tail clause (also called a carry-over clause) requires the seller to pay the broker's commission if they sell to a buyer the broker introduced, even after the listing agreement expires. Tail periods typically run 12–24 months.

Business Broker Fees: What You'll Pay (and Why)

Broker fees are the most common question business sellers ask. Here is what you'll actually pay, what the market rate is for your deal size, and how to evaluate whether a broker's fee is justified.

Standard Commission Rates by Deal Size

Business broker commissions are almost always structured as a percentage of the final sale price. The commission rate is inversely correlated with deal size — smaller deals carry higher percentage fees because the work involved is similar regardless of price.

Typical Commission Ranges

Under $250K sale price

10–15%

Minimum fee often applies (~$10–15K)

$250K–$1M

8–12%

Standard Main Street range

$1M–$5M

6–10%

Lower middle market

$5M–$20M

4–7%

Middle market, often with tiered structure

$20M+

2–5%

Investment bank territory, retainer + success fee

The Lehman Formula

For larger transactions, many brokers and M&A advisors use a tiered structure called the Lehman Formula. Instead of a flat percentage, the fee steps down as the deal gets larger. The original version, dating to a 1960s Lehman Brothers standard:

First $1M of sale price

5% ($50,000)

Second $1M

4% ($40,000)

Third $1M

3% ($30,000)

Fourth $1M

2% ($20,000)

Above $4M

1% of remainder

On a $3M deal under this structure, the fee would be $120,000 — a 4.0% blended rate. Under a flat 10% commission, it would be $300,000.

For Main Street deals under $5M, most brokers use the Double Lehman instead — every tier doubled: 10% / 8% / 6% / 4% / 2%. On that same $3M deal, Double Lehman comes to $240,000 (8.0% blended) — still less than a flat 10% commission, but meaningfully more than the original scale, which most brokers now consider too low for smaller deals. "Modified Lehman" schedules also exist — brokers customize the tiers or breakpoints, so always get the exact schedule in writing rather than assuming a standard one applies.

Compare flat-fee, Lehman, and Double Lehman on your own numbers →

Upfront Retainers

Some brokers — particularly for more complex or larger deals — charge an upfront retainer to cover the cost of preparing the Confidential Information Memorandum (CIM), conducting initial market analysis, and starting the buyer outreach process. Retainers typically range from $2,500 to $15,000.

This is not inherently a red flag, but you should confirm:

→The retainer is credited against the success fee at closing (most reputable brokers do this)

→The retainer covers defined deliverables (CIM, buyer list, valuation report)

→The arrangement is exclusive — you're not paying a retainer to a non-exclusive broker

What the Fee Actually Covers

Business broker fees cover a significant amount of work that sellers often underestimate. Over the course of a 6–12 month engagement, a working broker will typically:

Business valuation and pricing analysis

2–3 weeks

Confidential Information Memorandum preparation

2–4 weeks

Buyer outreach (often 50–200+ contacts)

Ongoing, months 1–4

Buyer screening and NDA execution

Ongoing

Offer negotiation and LOI

Weeks–months, depending on interest

Due diligence management

2–3 months

Close coordination (lender, attorney, landlord)

1–2 months

Is the Fee Worth It?

The most useful way to evaluate a broker fee is to ask: what does proper representation add in value, and how does that compare to the fee?

Research consistently shows that brokered business sales close at 15–25% higher prices than unrepresented or DIY sales, even after accounting for the broker fee. The drivers: competitive buyer processes, professional CIM preparation, proper valuation, and skilled negotiation on deal structure. On a $1.5M business, 20% is $300,000 — against a 9% broker fee of $135,000, the net gain from representation is still $165,000.

The math on a $1.5M deal

Unrepresented sale (estimated)$1,200,000

Brokered sale (20% premium estimate)$1,440,000

Broker fee (8%)– $115,200

Net gain from representation$124,800

Business Broker Fees: What You'll Pay

Standard Commission Rates by Deal Size

The Lehman Formula

Upfront Retainers

What the Fee Actually Covers

Is the Fee Worth It?

Get matched with brokers who earn their fee