Business Broker Fees | MidStreet University

how much do business brokers and m a advisors charge for their services great question in today's video we'll give you an overview of what you can expect to pay when selling your business let's get started [Music] hey everybody it's eric sullivan with midstream we help business owners in the southeast with revenues between 1 and 25 million sell their companies welcome to mid street university when understanding business broker and m a advisor fees there is no one-size-fits-all equation every firm and every broker are different that said there are some similarities in the industry that we can draw from to give you an idea of what your advisor will charge so let's start by looking at the two types of fees intermediaries generally charge those will include success fees and retainers a success fee is also referred to as a commission just like in the sale of real estate a commission is a percentage fee on the sale price of your business this fee is negotiated before you list with a broker and it's paid once the business is sold in other words your advisor doesn't get paid until you do a retainer is either a one-time flat fee or recurring monthly charge for representation with an advisor these can range from a small initial 500 valuation fee to a larger 50 000 retainer just to sign a listing agreement and get started now that you know the types of fees let's talk about the most likely fee structure you'll encounter based on the size of your business for companies doing less than one million in revenue what we'd classify as a main street business the general commission structure you'll encounter is a success fee of ten percent on the purchase price of the business and six percent on any associated real estate at this size range you are unlikely to encounter any upfront or monthly retainers for companies with revenues between 1 and 25 million in revenue the most common pricing method is referred to as double lehman pricing double lehman pricing is a scaled percentage rate it charges ten percent on the first million in sales price eight percent on the second million six percent on the third four percent on the fourth and two percent on any remaining transaction value some firms at this size range may also charge retainers but the majority do not for companies with revenues in excess of 25 million what we refer to as a middle market business most success fees drop to a flat percentage depending on the size we generally see anywhere from two to four percent and advisors at this level also tend to charge their clients retainers so let's recap business brokers and m a advisors charge success fees and retainers success fees are percentage commissions based on the purchase price of your business retainers are one-time upfront or recurring monthly fees and what you pay for the sale of your business will depend mostly on the size of your company with revenues below 1 million can expect to pay a 10 success fee with no retainers businesses with revenues between 1 and 25 million should use the double lehman scale to estimate their pricing and may encounter firms who charge retainers along the way and finally businesses with revenues higher than 25 million can expect a flat rate success fee anywhere from two to four percent with most firms charging either an upfront retainer or a monthly retainer now you've got a better idea of how much business brokers and m advisors charge for their services if you have any questions about what we covered reach out and let us know and if you're looking for more great content about selling your business visit the learning center on the website for more blogs and videos just like this thanks for watching and we'll see you in the next video here on mid street university [Music]