Selling a business is not as simple as putting up a “For Sale” sign and waiting for buyers to show up. It’s a complex process that involves financial analysis, market research, legal paperwork, negotiations, and confidential marketing. For this reason, many business owners choose to work with a business broker.
But before hiring a broker, one of the first questions any business owner asks is:
“How much do brokers charge to sell a business?”
Understanding the fee structure of business brokers is essential. It helps you evaluate whether the cost of hiring a broker is worth the service and ensures you are financially prepared for the sale. In this article, we’ll break down how much business brokers typically charge, the different types of fees involved, what services they offer, and whether hiring a broker is the right decision for your situation.
What is a Business Broker?
A business brokers is a professional who helps people buy and sell privately-owned businesses. They act as intermediaries between buyers and sellers and often bring valuable experience and market knowledge to the table.
Key responsibilities of a business broker include:
- Valuing the business
- Marketing it confidentially
- Finding and screening buyers
- Negotiating the terms of sale
- Coordinating with legal and financial professionals
Now that we understand what a business broker does, let’s dive into how they get paid.
How Much Do Business Brokers Charge?
1. Commission-Based Fees (Success Fees)
The most common method brokers use to charge for their services is through a commission on the final sale price. This is often referred to as a success fee because brokers only get paid if the business is sold.
Standard Commission Rates:
- 10% on businesses under $1 million
- 8% on businesses between $1 million and $5 million
- 5% to 7% on businesses over $5 million
For example, if you sell your business for $800,000, and the broker charges 10%, the fee will be $80,000. If you sell a business for $2 million and the broker charges 8%, they earn $160,000.
The Lehman Formula (or Modified Lehman Formula):
For high-value or M&A (mergers and acquisitions) deals, brokers often use a tiered commission structure like the Lehman Formula:
- 5% on the first $1 million
- 4% on the second $1 million
- 3% on the third $1 million
- 2% on the fourth $1 million
- 1% on the amount above $4 million
This approach reduces the effective percentage as the deal size increases.
2. Upfront Fees or Retainer Fees
Some brokers charge an upfront fee or retainer fee to begin work. These fees typically range from $2,000 to $20,000, depending on the size and complexity of the business.
Why are upfront fees charged?
- To show commitment from the seller
- To cover marketing and preparation costs
- To avoid wasting time on unqualified sellers
Note: Not all brokers charge an upfront fee. Many small-business brokers operate on commission only, especially for businesses valued under $1 million.
3. Monthly Fees
In some cases, particularly with M&A advisors or investment bankers, there may be a monthly engagement fee in addition to or instead of an upfront fee.
- Typical range: $1,500 to $10,000/month
- Usually lasts for a set period (e.g., 6 months)
These monthly fees are common for large, complex business sales that require deep market research, legal support, or international buyers.
4. Minimum Fees
Some brokers include a minimum fee in the contract to ensure a baseline earning.
- Typical minimum: $15,000 to $50,000, even if the commission would be lower
Example: If you sell your business for $100,000 and the broker has a minimum fee of $20,000, you’ll owe that even though 10% would only be $10,000.
5. Closing Fees or Administration Fees
A few brokers may charge an additional closing fee or document handling fee at the end of the transaction, usually to cover legal or administrative costs.
- These are generally low (a few hundred to a few thousand dollars) and clearly outlined in the contract.
Factors That Affect Broker Fees
The fees a broker charges can vary depending on several factors:
| Factor | Impact on Fees |
|---|---|
| Business Size | Larger businesses often have lower percentage fees |
| Industry | Niche industries may have higher fees due to difficulty in finding buyers |
| Profitability | Highly profitable businesses are easier to sell and may command lower fees |
| Urgency | A faster sale may require more aggressive marketing, increasing the fee |
| Broker Experience | Highly experienced brokers may charge more for their expertise |
| Geographic Location | Fees may vary by region or city |
What Services Are Included in the Fee?
Business brokers typically provide a range of services as part of their fee:
- Business valuation and pricing strategy
- Preparation of marketing materials
- Listing on business-for-sale websites
- Confidential outreach to buyers
- Screening and qualifying buyers
- Managing negotiations
- Assistance with due diligence
- Closing support
Some brokers also offer premium services like legal documentation, tax advice, and transition planning (especially in higher-end M&A deals).
Should You Hire a Business Broker?
Pros of Hiring a Broker:
- Access to a larger pool of buyers
- Expert guidance in valuation and negotiation
- Confidential marketing
- Reduced stress and time commitment
- Higher likelihood of closing the sale
Cons of Hiring a Broker:
- Costly (up to 10% of sale price)
- Less control over the process
- Some brokers may lack transparency
If you’re selling a business worth more than $100,000, and especially if you don’t have experience in marketing or negotiation, hiring a broker can be worth the cost.
How to Choose the Right Business Broker
Here are some tips to find the right broker:
- Ask for Referrals – Get recommendations from other business owners or accountants.
- Check Credentials – Look for certification from IBBA (International Business Brokers Association) or similar bodies.
- Review Their Track Record – Ask about businesses they’ve sold in your industry.
- Understand the Contract – Read all terms, including fees, exclusivity, and duration.
- Interview Multiple Brokers – Compare their approach, fees, and personalities.
Conclusion
Selling a business is a major life and financial decision. Knowing how much brokers charge and what services are included helps you make an informed choice. Whether the broker charges a commission-only success fee or combines it with retainer and monthly fees, the total cost typically ranges between 5% and 10% of the sale price, sometimes with a minimum threshold.
However, the true value of a broker lies in their ability to sell your business faster, at a better price, and with less stress. For many business owners, that peace of mind is worth the investment.
So, before you list your business for sale, take the time to evaluate brokers not just by their fee, but by the value they bring. In the end, the right broker could help you turn a complex transaction into a profitable and successful exit.