What Do Business Brokers Charge for Commissions?

What Do Business Brokers Charge for Commissions?

Understanding Business Broker Commissions

If you’re planning to sell your business, you may be wondering: What do business brokers charge for commissions? This is a crucial question because broker fees directly impact your net proceeds from the sale.

While there are common industry standards, business brokers set their fees independently, and commission rates are not fixed by law. Brokers are prohibited from collectively deciding on commission structures, as this would constitute price fixing, which is illegal. Instead, commissions are based on factors such as business size, industry complexity, and broker expertise.

Standard Business Broker Fees

Here’s what you can generally expect in terms of commission:

• Businesses under $1 million: Most brokers charge 10% to 12% of the final sale price.
• Smaller deals: Brokers often have a minimum flat fee, usually no less than $10,000.
• Businesses over $1 million: Many brokers follow the Double Lehman commission structure, which scales as follows:
  • 10% on the first $1 million
  • 8% on the second $1 million
  • 6% on the third $1 million
  • 4% on the fourth $1 million
  • 2% on any amount over $5 million

For instance, if a business sells for $6 million, the commission breakdown would be:

• $1M x 10% = $100,000
• $1M x 8% = $80,000
• $1M x 6% = $60,000
• $1M x 4% = $40,000
• $1M x 2% = $20,000
• $1M x 2% = $20,000

Total commission: $320,000

Why Business Brokers Earn Their Fees

Selling a business is far more complex than selling a home or commercial property. Business brokers only get paid if the deal closes, meaning they invest substantial time, money, and resources upfront with no guarantee of payment.

A broker’s services typically include:
✅ Confidential marketing to find qualified buyers without disrupting the business.
✅ Business valuation expertise to price the company competitively.
✅ Skilled negotiation to maximize sale price and terms.
✅ Due diligence coordination to ensure a smooth transaction.
✅ Legal and financial navigation to overcome roadblocks.

Can You Negotiate Broker Fees?

Yes. Some business brokers reduce their commission in exchange for an upfront retainer fee. This retainer helps offset their costs and ensures the seller is serious. However, selecting a broker based solely on the lowest fee can be a mistake—an experienced broker often secures a higher final sale price, making their services well worth the cost.

Final Thoughts

While broker commissions may seem high at first glance, they reflect the complexity and risk involved in selling a business. Brokers do not get paid unless they successfully close a deal, making their fees a performance-based investment in a successful exit.

If you’re thinking about selling, working with a knowledgeable broker can make all the difference. Contact us today to discuss your goals and ensure you receive top dollar for your business.