Broker Compensation

There are three forms of brokers’ compensation: hourly, retainer, and success fee (commission upon a closing). A broker may use any one, or combination of these when providing services. The most common form of compensation is a success fee commission where the payment of a commission to the brokerage is contingent upon finding a satisfactory buyer for the business for sale, the successful negotiation of a purchase contract between a satisfactory buyer and seller, or the settlement of the transaction and the exchange of money or other equity between buyer and seller. The retainer helps cover the upfront costs incurred by the broker to perform services and shows a commitment on the part of the client (seller or buyer) that they are serious.

A success fee commission ranges from 5% to 12% of the sale price and in some cases can even be as high as 15% due to various complexities. Commissions are determined between the client (seller or buyer) and are normally paid at closing.

Usually, the smaller the transaction or the more complicated the transaction, the larger the commission. “Main Street” businesses, those with enterprise value between $1,000,000 and $10,000,000 can expect commissions to average between 8-12%, in addition to a non-refundable retainer of $10,000 to $50,000 depending on the exposure that the seller wants. Advertising is expensive and it’s necessary to advertise the business for sale and expose it. Businesses selling in the tens or hundreds of millions of dollars may require a retainer fee in the tens of thousands of dollars or even hundreds of thousands of dollars to value, audit, analyze and market the business properly. It is practically impossible to sell a business without promoting it. We at TMFG are compensated only upon the successful sale of your business and we do not charge any advance fees.