Common Upfront Fee Arrangements For Business Brokers and M&A Advisors
Many business brokers (focused on selling smaller companies) do not charge up front fees, and instead base their compensation completely on a success fee. Many M&A Advisors (selling larger companies) do charge an upfront fee. A survey was done by the Business Brokerage Press, and this is what they found. (By the way, we at Compass Point do not typically charge a fee and when we do, because of intensive packaging or marketing costs, we give the client a choice of an upfront fee combined with a lower success fee, or no upfront fee).
The following are responses to the survey by those that charge an upfront fee.
“Time based at $125 to $200 per hour.”
“One percent of the value of the business.” “Administrative monthly fee for the first 12 months of the listing.”
“Minimum charge $2,000 to $5,000, depends on the seller’s need and desirability of the listing.”
“It is normally taken off the total commission at point of sale.”
“$750 to $5000 per valuation. Depends on the sales of the business we are engaged with.”
“We estimated time to value and package the business for sale. We use $175/hour, usually 40–60 hours = $7K–10K. If, for example, it's $10K, we ask for $5K upon agreement and the balance due with the deliverables. The up-front fee is usually credited toward the retainer at closing.”
“Our fee varies depending upon deal size but is always credited against the success fee at settlement.”
“$1000 retainer not applied to 10% success fee OR $2500 retainer that is applied toward 10% success fee.”
“If a custom marketing plan is needed, then an estimate of the costs is computed. The client will pay 75% or more of the costs, which are then available as a credit to the otherwise due brokerage commission.”
“If the seller demands us to sell it and we do not want the assignment, we may charge an up-front fee to cover the ads, etc. Minimum of $10,000.”
“Commitment fee upon signing of listing agreement, plus a monthly marketing fee.”
“Retainer Fee, usually $5,000 per month. Credited against success fee at closing.”
“Varies on size of company and whether statements are audited or reviewed by outside CPA firm. Ranges from $3,900 to $9,900.”
“$4500 non refundable retainer, credited against commission at closing.”
“Approximately 1.0% of anticipated value determined before the valuation is complete.”
“$5,000 commitment fee regardless of size. Occasionally, for a very small business, I will charge $1,500.”
“Approximately 1% of expected or estimated asking pricing.”
“Based on size of business: for main street—$500; for $1M to $5M—$5,000; over $5M—$9500.”
“It is normally based on a one-time unusual cost, such as listing a business in a specific multi-list site that I do not normally participate in on a regular basis.”
“Approx. 10 to 12% of the estimated success fee.”
“Only when listing cannot be obtained on reasonable terms. Then, maybe a marketing fee to cover initial expenses, plus a standard commission upon closing.”
“A small amount, e.g., $1000, to be applied against the success fee.”
“One half of one percent of last year’s sales. Example: sales of $5,000,000 would be a fee of $25,000.
“$500.00 to $1,000.00 for package prep fee.”
“1% of listed price paid at listing reduces commission from 12% to 8%.”
“50% upfront, then 50% upon delivery of the valuation report.”
“5% of the expected fee to be applied against commission, due upon closing.”
“Time and materials @ $100 per hour where the potential listing is such that it requires a ‘book’ type information package." Fee is deemed fully earned upon completion of first copy.”
“$250 administrative fee; if business sells, is refunded.”
“$795.00 fee deducted from commission when business sells.”
