In this article 6 sections
The short answer: advisors are paid mostly through a success fee, a percentage of the sale price paid at closing. It falls as deals get bigger: 8% to 15% for Main Street businesses under about $1M, around 6% on a $5M sale, about 4% on $20M and 2% on $100M. Most advisors also charge a retainer. Vanla Group charges a success fee only, with no retainer and nothing owed unless your business sells.
How is Vanla Group paid?
- Success fee only. We are paid a percentage of the sale price at closing, out of the proceeds.
- No retainer, no monthly fee, nothing upfront. The valuation and the first conversations are free.
- Nothing owed if it does not sell. If we do not close a deal, you owe us nothing.
- Agreed in writing first. The percentage depends on the size of the deal and is set in the engagement letter before any work starts. We walk through it on the first call.
Our only income is the closing, so our incentive is the same as yours: get the business sold, at the best price and terms we can. The team has closed $182M+ in transactions. You can see the deals on our closed transactions page.
What are typical success fees by deal size?
| Sale price | Typical success fee | In dollars, and source |
|---|---|---|
| Main Street, under about $1M | 8% to 15% | Sometimes with a minimum fee. IBBA guide. |
| $5M sale | 6.3% | About $315,000. Firmex 2023-24. |
| $20M sale | 3.9% | About $780,000. Firmex 2023-24. |
| $100M sale | 2.0% | About $2M. Firmex 2023-24. |
Lower middle market figures are the most common answers in the Firmex / Axial US M&A Fee Guide 2023-24, a survey of 189 US advisors. The Main Street range is from the IBBA guide to the business brokerage profession.
The percentage falls because the work to sell a $20M business is not four times the work to sell a $5M one. Many advisors also set a minimum fee, so on small deals the effective percentage can sit above these figures.
How does the Lehman formula work?
The most common structure is a tiered fee called the Lehman formula. In the 2023-24 Firmex survey, 48% of advisors used a Lehman-style formula, 31% a flat percentage and 15% an accelerator that pays more above a target price.
| Sale price | Classic Lehman (5-4-3-2-1%) | Double Lehman (10-8-6-4-2%) |
|---|---|---|
| $5M | $150,000 (3.0%) | $300,000 (6.0%) |
| $10M | $200,000 (2.0%) | $400,000 (4.0%) |
| $20M | $300,000 (1.5%) | $600,000 (3.0%) |
Each tier applies to one $1M slice of the price, and the last rate applies to everything above $5M.
Do M&A advisors charge retainers?
Three quarters of US middle-market advisors charge an engagement fee on top of the success fee, according to the 2023-24 Firmex survey:
- Fixed upfront fee: 37% of advisors
- Monthly fee: 28%, most commonly $5,000 to $10,000 a month, usually credited against the success fee
- Milestone fees: 6%, paid at stages such as the offering memorandum or a signed letter of intent
- No engagement fee: 25%
Engagement fees cover an advisor’s cost on deals that never close. That is a reasonable model, and many good firms use it. The trade-off for the owner is paying before anything has sold. Vanla Group is in the group that charges no engagement fee.
What should you ask before signing an engagement letter?
- What is the percentage, and is there a minimum fee? Ask for the fee in dollars at two or three realistic prices.
- What counts toward the sale price? Earnouts, seller notes, rollover equity, assumed debt, real estate and working capital adjustments can all be in or out.
- When is each part paid? A fee on an earnout should be paid when the earnout is paid, not at closing.
- Is there a retainer, and is it credited at closing?
- How long is the engagement, and what is the tail? A tail period means a fee is owed if a buyer the advisor introduced closes after the engagement ends. Tails of 12 to 24 months are common.
- Which expenses are billed to you? Travel, data rooms and marketing are sometimes passed through.
What other costs come with selling a business?
The advisor fee is one of several. Plan for these as well, all usually paid from proceeds or close to closing:
- Your M&A attorney for the purchase agreement and disclosure schedules
- Your CPA for tax planning, deal structure and diligence support
- A sell-side quality of earnings report on larger deals, if you choose to commission one
- Taxes on the gain, which depend heavily on deal structure and price allocation
To see how fees, debt and taxes turn a headline price into what you take home, use the net proceeds calculator.
Frequently asked questions
What does Vanla Group charge to sell a business?
Vanla Group works on a success fee only. There is no retainer, no monthly fee and nothing upfront. The fee is a percentage of the sale price, paid at closing from the proceeds, and it is set in writing before any work starts. If your business does not sell, you owe nothing.
How much do business brokers and M&A advisors charge?
Fees fall as deal size rises. Business brokers selling Main Street businesses under about $1M commonly charge 8% to 15% of the price. In the lower middle market, the 2023-24 Firmex fee survey put typical overall success fees at 6.3% on a $5M sale, 3.9% on a $20M sale and 2.0% on a $100M sale.
Do M&A advisors charge a retainer?
Most do. In the 2023-24 Firmex survey, three quarters of US middle-market advisors charged some kind of engagement fee: 37% a fixed upfront fee, 28% a monthly fee and 6% milestone fees. 25% charged no engagement fee at all. Engagement fees are often credited against the success fee at closing.
What is the Lehman formula?
The Lehman formula is a tiered success fee: 5% of the first $1M, 4% of the second, 3% of the third, 2% of the fourth and 1% of everything above that. Some advisors use a Double Lehman, which starts at 10% and steps down to 2%. In the 2023-24 Firmex survey, 48% of advisors used a Lehman-style formula and 31% a flat percentage.
Who pays the advisor fee, the buyer or the seller?
On a sell-side engagement the seller pays the fee, usually out of the sale proceeds at closing, so it does not come out of pocket beforehand. Buyers pay their own advisors, lawyers and accountants.
Is an M&A advisor fee negotiable?
Usually, yes. Percentage, minimum fee, what counts toward the sale price, the length of the engagement and the tail period are all commonly negotiated. Get every term in the engagement letter before you sign.
Find out what your business could sell for.
Start with an instant range, then get a confidential valuation from our advisors when you are ready. Success-fee only: nothing is owed unless your business sells. See the deals we have closed.