When you’re ready to sell your business, one of the first questions that hits you is: how much do brokers charge to sell a business? The answer isn’t a simple number—it’s a mix of commissions, fees, and expenses that can significantly impact your bottom line. Let me walk you through exactly what you’ll pay and where those dollars go.
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Broker Commission Basics
Business brokers typically work on commission, meaning they only get paid when your business sells. This aligns their incentive with yours—getting the best deal possible. The commission is usually calculated as a percentage of the final sale price, and it’s paid from the proceeds at closing.
Here’s the critical part: brokers don’t charge a flat fee for this service. Instead, they negotiate a percentage rate that varies based on deal size, complexity, and market conditions. Think of it like selling a house through a real estate agent, except the stakes are much higher and the percentage is usually lower.
Standard Commission Rates
Most business brokers charge between 5% and 10% of the sale price as their commission. However, this isn’t a hard rule—it depends heavily on your situation.
Typical breakdown:
- Small businesses ($500K–$2M): 10% commission
- Mid-market businesses ($2M–$10M): 8–10% commission
- Larger businesses ($10M+): 5–8% commission
The bigger your sale price, the more negotiating power you have. A $5 million business selling at 8% means the broker takes $400,000. That’s real money, and it’s worth fighting for a lower percentage.
Some brokers use a tiered structure. For example, they might charge 10% on the first $1 million and 8% on anything above that. Always ask for the exact structure upfront.
Retainer and Upfront Fees
Beyond commission, many brokers require an upfront retainer fee, typically ranging from $2,500 to $15,000. This covers their initial work: valuing your business, preparing marketing materials, and listing your company.
Some brokers are more aggressive with retainers. High-end firms might charge $25,000 or more. Here’s the thing—most brokers credit this retainer against their final commission. So if you pay $10,000 upfront and the broker earns $100,000 in commission, they take $90,000 at closing.
However, not all retainers are refundable if the sale doesn’t go through. Read the contract carefully. Some brokers will refund the retainer if they don’t sell your business within a set timeframe, while others keep it regardless. This is a major negotiation point.
Transaction Costs Breakdown
Beyond the broker’s commission and retainer, there are additional costs involved in selling a business. These aren’t the broker’s commission—they’re separate expenses you’ll encounter:
Legal fees: $5,000–$25,000+ depending on complexity. You need a business attorney to review contracts, handle due diligence, and protect your interests.
Accounting and tax preparation: $2,000–$10,000. Your accountant will prepare financial statements, verify tax returns, and identify tax implications of the sale.
Business valuation: $1,500–$5,000. If the broker doesn’t provide this, you may need an independent valuation for credibility with buyers.
Escrow and title services: $1,000–$3,000. These ensure funds transfer safely and documents are properly recorded.
Document preparation and due diligence: $2,000–$8,000. Preparing financial records, customer lists, contracts, and compliance documents takes work.
Total non-broker costs often run $10,000–$50,000 depending on your business size and complexity. For a business selling for $2 million, these costs might total $30,000 plus the broker’s 10% ($200,000) commission.
Earnout and Contingency Fees
If part of your sale price is structured as an earnout—where you get paid over time based on performance—the broker’s commission structure may change. Some brokers charge commission on the full sale price upfront, while others only charge on the cash received at closing and defer commission on earnout portions.
This matters significantly. If you’re selling for $2 million with $500,000 as an earnout over three years, the difference between paying 10% on the full $2 million versus just the $1.5 million cash can be $50,000.
Ask your broker explicitly: how do you calculate commission on earnout structures? Get it in writing.
Hidden Expenses to Watch
Brokers sometimes add fees beyond commission that aren’t immediately obvious. Watch for:
Marketing fees: Some brokers charge extra for professional photography, website listings, or advertising. Clarify whether these are included in the retainer or billed separately.
Travel and meeting expenses: If your broker travels to meet buyers or attend closing, they might bill you for mileage, hotels, or flights. Get this in writing.
Technology and platform fees: Some brokers use specialized software and pass those costs to you. Ask if these are included in your retainer.
Extension fees: If your listing agreement extends beyond the initial term, some brokers charge additional fees. Understand the renewal terms before signing.
The best practice: ask for an itemized fee schedule upfront. If something isn’t listed, request it in writing.
Negotiating Broker Fees
Here’s what many business owners don’t realize: broker fees are negotiable. You’re not locked into the standard 10%. Depending on your business, you have leverage.
Factors that strengthen your negotiating position:
- Profitable, growing business (easier to sell)
- Large sale price ($5M+)
- Clean financials and documentation
- Stable customer base and recurring revenue
- Multiple brokers competing for your business
If you have a $10 million business with strong EBITDA, you can absolutely negotiate from 8% down to 6%. That’s $200,000 in your pocket instead of the broker’s.
Strategy: interview multiple brokers. Tell each one what others are offering. Competition drives down fees. Also, consider whether you want a full-service broker or a broker who handles listing only and you hire your own attorney and accountant.
Comparing Brokers and Value
Don’t hire a broker based on the lowest fee alone. A cheaper broker who doesn’t attract serious buyers costs you far more than a higher-fee broker who sells your business for an extra $500,000.
When comparing brokers, evaluate:
- Track record: How many businesses have they sold in your industry? What was the average time on market?
- Buyer network: Do they have active relationships with strategic buyers, private equity firms, and competitors in your space?
- Marketing approach: How will they market your business? Online listings alone aren’t enough.
- Support services: Do they help with financial preparation, valuation, and due diligence coordination?
- Communication: Will they provide regular updates? How responsive are they?
A broker who charges 8% but sells your business for $1 million more than a cheaper broker is the better choice every time.
Real-World Example
Let’s say you’re selling a software consulting business for $3 million. Here’s what the numbers might look like:
Sale Price: $3,000,000
Broker Commission (8%): $240,000
Broker Retainer (credited): -$10,000 (paid upfront, credited at closing)
Legal Fees: $15,000
Accounting/Tax: $5,000
Valuation: $2,500
Due Diligence Prep: $4,000
Escrow/Title: $1,500
Total Costs: $257,000 (8.6% of sale price)
Net to You: $2,743,000
That $257,000 represents the cost of professional expertise and market access. For many sellers, it’s worth every penny because a good broker and professional team ensure you get the highest price and smoothest transaction.
If you’d like to understand more about financial planning after a sale, you might explore how to become an accredited investor to make strategic decisions with your proceeds.
Frequently Asked Questions
Do I have to use a broker to sell my business?
No. You can sell directly to buyers, but you’ll handle marketing, negotiations, and due diligence yourself. Most business owners use brokers because they have buyer networks and expertise that typically result in higher sale prices. The broker’s fee is often recovered through a better deal.
Can I negotiate the broker’s commission down?
Yes, absolutely. Commission rates are negotiable, especially for larger or more attractive businesses. Interview multiple brokers and use competition to your advantage. Even negotiating from 8% to 7% on a $5 million sale saves you $50,000.
What if the business doesn’t sell?
If your listing agreement includes a non-refundable retainer, you lose that money. If it’s refundable after a certain period (usually 6–12 months), you get it back. Always clarify this in writing before signing.
Are broker fees tax-deductible?
Broker commissions and professional fees related to selling your business are typically deducted from your sale proceeds, reducing your taxable gain. Consult your tax advisor about the specific treatment for your situation.
How long does it typically take to sell a business?
Most business sales take 3–9 months from listing to closing. Complex deals or niche businesses may take longer. Your broker should give you realistic timelines based on comparable sales in your industry.
What’s the difference between a business broker and an M&A advisor?
Business brokers typically handle small to mid-market businesses ($500K–$10M). M&A advisors work on larger, more complex deals. M&A advisors often charge retainers plus success fees and may have higher overall costs but more sophisticated buyer networks.
