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.

Earnouts Explained: When They Make Sense (and When to Avoid Them)

An earnout ties a portion of your sale proceeds to the future performance of the business after you've sold it. Buyers use them to bridge valuation gaps. Sellers accept them to close deals at higher headline prices. The devil is entirely in the details.

How Earnouts Work

In a typical earnout structure, the seller receives a base payment at closing — say, 70–80% of the agreed enterprise value — with the remaining 20–30% contingent on the business hitting agreed performance targets over 12–36 months post-close.

Example Earnout Structure

Agreed total value$2,500,000

Paid at close$1,750,000 (70%)

Earnout potential$750,000 (30%)

Earnout period24 months post-close

Earnout metricRevenue ≥ $1.8M/year

Payout trigger$375K/year if target met

Why Buyers Propose Earnouts

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Valuation disagreement

The seller believes the business is worth $3M; the buyer thinks it's worth $2.5M. An earnout lets both parties be right — if performance justifies the seller's number, they get it.

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Key-man risk

If the business's value depends heavily on the seller's relationships or expertise, a buyer will want the seller economically tied to the success of the transition. An earnout keeps the seller motivated post-close.

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Unproven revenue streams

A business that recently added a new product line or entered a new market carries uncertainty. Buyers use earnouts to tie partial payment to whether the new revenue actually materializes.

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Financing constraints

Sometimes a buyer can't get full financing for the agreed price. An earnout fills the gap without requiring the buyer to raise more capital upfront.

The Core Risk: You Don't Control the Business

Once you sell the business, the buyer is making the decisions. If the earnout is tied to revenue or EBITDA, the buyer can legally make decisions that reduce your earnout — changing pricing, cutting marketing, pulling salespeople, or simply deprioritizing your former business within their larger portfolio.

Unless your purchase agreement has specific protective provisions, you may have limited recourse even if the buyer clearly undermined the earnout targets. This is the central risk sellers underestimate.

⚠ Earnout reality check

Studies consistently show that 50–60% of earnouts are not fully paid. The reason is usually not fraud — it's that the buyer makes different operational decisions post-close that happen to reduce performance against the earnout metrics. Without strong contractual protections, the seller bears this risk.

Seller-Protective Earnout Provisions

If you're accepting an earnout, negotiate hard for these provisions in the purchase agreement:

Revenue-based metric, not EBITDA

Buyers control costs more easily than revenue. A revenue earnout is harder for a buyer to manipulate than an EBITDA or net income earnout.

Buyer operating covenants

The buyer agrees to maintain minimum marketing spend, staffing levels, or pricing — the inputs that drive the earnout metric. These are harder to negotiate but worth pushing for.

Acceleration clause

If the buyer sells the business during the earnout period, or undergoes a change of control, the full remaining earnout becomes immediately payable. This is standard in well-negotiated deals.

Independent accountant verification

You should have the right to have your own CPA verify the earnout calculations — using agreed-upon accounting standards — before any earnout period closes.

Dispute resolution mechanism

Define what happens if you and the buyer disagree on whether earnout was achieved. Arbitration is faster than litigation; agree to it in advance.

When to Accept an Earnout (and When to Push Back)

Consider accepting an earnout when: the valuation gap is meaningful but bridgeable, you'll stay involved in the business post-close (reducing sabotage risk), the earnout metric is based on revenue, the period is short (12–18 months), and you have strong operating covenants in the agreement.

Push back hard or walk away when: the earnout is more than 30% of total value, the metric is EBITDA or net income (easily manipulated), the buyer will have no operational covenants, the earnout period exceeds 24 months, or you have no role in the business post-close.

Earnouts Explained: When They Help (and When to Run)

How Earnouts Work

Why Buyers Propose Earnouts

The Core Risk: You Don't Control the Business

Seller-Protective Earnout Provisions

When to Accept an Earnout (and When to Push Back)

Negotiate from a position of strength