Question 1

How much does a business broker charge?

Accepted Answer

Business brokers typically charge 8-12% of the final sale price for businesses under $1 million. For larger deals, the percentage decreases, often following a tiered structure like the Lehman formula. Many brokers have a minimum fee of $10,000-$25,000 regardless of sale price.

Question 2

What is the Lehman formula for broker fees?

Accepted Answer

The Lehman formula is a tiered commission structure: 5% of the first $1 million, 4% of the second $1 million, 3% of the third $1 million, 2% of the fourth $1 million, and 1% of everything above $4 million. The Double Lehman doubles each tier (10%, 8%, 6%, 4%, 2%).

Question 3

Do business brokers charge upfront fees?

Accepted Answer

Some brokers charge a retainer or marketing fee upfront ($2,000-$10,000), which may or may not be credited against the success fee at closing. Other brokers work purely on commission with no upfront cost. The fee structure should be clearly outlined in the listing agreement.

Question 4

Who pays the business broker's commission?

Accepted Answer

In most business sales, the seller pays the broker's commission from the sale proceeds at closing. If there are two brokers (buyer's and seller's), the commission is typically split between them. The total commission comes from the seller's side of the transaction.

Question 5

Are business broker fees negotiable?

Accepted Answer

Yes. Broker fees are always negotiable. Factors that influence negotiation include the deal size (larger deals often have lower percentages), the broker's track record, exclusivity terms, and market conditions. However, the cheapest broker is not always the best value.

Question 6

Is a business broker worth the commission?

Accepted Answer

Studies show that broker-assisted sales result in higher sale prices (typically 10-20% more) and faster closing times. A good broker handles marketing, buyer screening, negotiations, and deal structuring. For most sellers, the net proceeds after commission exceed what they would get selling independently.

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