How to Evaluate Business Broker Fees: Lehman Scale, Retainers, Success Fees Explained (2026)

“What’s your commission rate?” is the wrong first question to ask a business broker. It produces a single number that’s missing 60% of the actual cost. The right first question is “what’s the total dollar cost of your engagement on a deal at my expected sale price, including retainer, success fee structure, tail provision exposure, and expense reimbursement?” That question produces a 4-5 component answer that you can actually compare across brokers.

This article is the framework for evaluating business broker fees properly. We’ll cover Lehman scale variants (standard, modified, double, custom), retainer mechanics (upfront, monthly, creditable), tail provisions (length, definition, leakage risk), expense reimbursement (capped, uncapped, marked-up), and how to compare proposals on net proceeds rather than headline rate.

If a broker won’t walk you through the math line by line, that’s the answer.

The variance among broker fee proposals on the same deal is enormous. On a $5M sale, total broker compensation can range from $150K (standard Lehman, low retainer, capped expenses) to $650K (modified Lehman, high monthly retainer, uncapped expenses, full markup). That’s a $500K spread on identical service. Most owners don’t realize how much room there is to negotiate — or how big the alternatives gap can be.

Disclosure: CT Acquisitions is a buy-side partner. We’re paid by buyers, not sellers. The seller pays $0 in our model. We have an obvious bias toward our own structure. We’re going to be honest about when sell-side broker fees are worth paying and when they’re not. The math is what matters.

“The broker fee question isn’t ‘what’s your commission rate?’ — it’s ‘what does this engagement cost on net proceeds?’ A buy-side partner at $0 fee, with the buyer paying the success fee, often nets more than a broker at 6-10% commission on the same gross sale price. Run the math before signing.”

Key Takeaways

• Two brokers can quote ‘6%’ and produce $300K fee difference. Headline rate is rarely full picture.
• Lehman scale variants matter: standard (5/4/3/2/1) vs modified (10/8/6/4/2) doubles total fee.
• Retainers compound over 9-12 month engagements. Negotiate creditability and monthly caps.
• Tail provisions are where fee leakage hides. Negotiate length (12 months) and scope (NDA-signed only).
• Expense reimbursement can add $25-200K. Negotiate caps and at-cost pricing on outsourced work.
• Compare proposals on net proceeds (gross minus fees minus tax), not headline rate.

The five components of broker fees: structure of the stack

Broker fees aren’t a single number. They’re a stack of five components: retainer (upfront or monthly), success fee (Lehman scale or flat percentage), tail provision (covers post-termination closes), expense reimbursement (marketing, CIM, data room, travel), and miscellaneous fees (sometimes including broker’s legal fees, valuation fees, success-fee minimums). Each component varies. Each is negotiable. Each can shift $25K-$500K of total cost.

Component 1: retainer. Range from $0 (rare for LMM) to $25-100K upfront for LMM advisors to $100-200K+ for investment bankers. Some brokers charge $5-25K monthly. Retainers are typically creditable against the success fee at close. If creditable, the effective cost is lower than headline. If not, it stacks on top. Always ask: ‘Is the retainer creditable against the success fee at close?’

Component 2: success fee. The percentage of sale price paid at closing. Main Street: 10-12%. LMM: 6-10% or Lehman scale (5/4/3/2/1) or modified Lehman (10/8/6/4/2). Investment bankers: 1-3% on $20M+. Sometimes minimum success fees apply ($300K minimum on smaller deals). The success fee structure (Lehman variant, flat percentage, or custom curve) drives most of the variance.

Component 3: tail provision. If you terminate the broker but later close with a buyer the broker introduced, you still owe the success fee. Typical tail: 12-24 months post-termination. The definition of “introduced buyer” is the high-leverage negotiation point — vague definitions capture far too many parties; tight definitions (NDA-signed buyers with written list) limit exposure.

Component 4: expense reimbursement. Marketing materials, CIM preparation (sometimes outsourced), virtual data room software, travel and accommodation, market research, business valuation. Range from $25K (low end) to $200K+ (sophisticated IB process). Some brokers include expenses in the retainer; others charge separately. Negotiate caps and at-cost pricing on outsourced work.

Component 5: miscellaneous fees. Sometimes brokers charge broker’s legal fees on engagement-letter side ($5-15K). Sometimes business valuation is charged separately ($5-20K). Sometimes success-fee minimums apply ($200-500K minimum even on smaller deals). These miscellaneous items can add another $25-50K of cost. Read the engagement letter carefully.

Fee component	Range (LMM advisor on $5M deal)	Negotiable?
Retainer (upfront)	$25-100K	Yes — ask for credit against success fee
Monthly retainer	$0-25K x 6-12 months	Yes — ask for cap or waiver after milestone
Success fee	$150K (std Lehman) to $400K (modified Lehman) to $400K (flat 8%)	Yes — structure is negotiable
Tail provision	12-24 months on introduced buyers	Yes — negotiate length and definition
Expenses (CIM, marketing, data room, travel)	$25-100K	Yes — negotiate caps
Misc (broker legal, valuation, minimums)	$0-50K	Yes — refuse or cap each

Fee structure	Math	Fee on $5M	% of deal
Standard Lehman	5/4/3/2/1 on first $1M / next $1M / etc.	$150K	3.0%
Modified Lehman (Double)	10/8/6/4/2	$300K	6.0%
Flat 8% commission	Common Main Street broker rate	$400K	8.0%
Flat 10% (sub-$2M deals)	Some brokers on smaller deals	$500K	10.0%
Buy-side partner	Buyer pays the partner; seller pays nothing	$0	0.0%

Lehman scale: standard vs. modified vs. flat percentage

Lehman scale is the most common LMM fee structure. But there are at least three major variants and several custom curves. The variant chosen drives most of the success-fee variance across brokers. On the same $5M deal, the difference between standard and modified Lehman is $150K of fees.

Standard Lehman scale. 5% on first $1M of sale price, 4% on next $1M, 3% on next $1M, 2% on next $1M, 1% on everything above. On a $5M deal: $50K + $40K + $30K + $20K + $10K = $150K. On a $10M deal: $50K + $40K + $30K + $20K + $50K = $190K. The structure flattens out quickly — on large deals, the marginal rate is just 1%.

Modified Lehman (a.k.a. double Lehman, dual Lehman). Doubles the standard rates: 10% on first $1M, 8% on next $1M, 6% on next, 4% on next, 2% on everything above. On a $5M deal: $100K + $80K + $60K + $40K + $20K = $300K. On a $10M deal: $100K + $80K + $60K + $40K + $100K = $380K. Many LMM brokers prefer modified Lehman because it’s much more lucrative on $1-10M deals.

Flat percentage. Some brokers charge a flat 6%, 7%, 8%, or 10% of total sale price — no tiering. Simpler but typically more expensive on smaller deals than Lehman, less expensive on larger deals than modified Lehman. On a $5M deal at 8% flat: $400K. On a $10M deal at 8% flat: $800K. On a $20M deal at 8% flat: $1.6M.

Custom curves. Some brokers propose custom structures: e.g., 7% on first $3M, 5% on next $2M, 3% above. Or break-points where the rate increases above target sale price (incentivizes broker to push for max). These are negotiable and sometimes better than standard structures. Always model the custom curve against standard and modified Lehman to see which produces the lowest fee on your expected sale price.

Negotiation tactic. If a broker proposes modified Lehman, ask for standard Lehman. If they propose flat 8%, ask for Lehman scale. If they propose Lehman scale, ask for break-points (e.g., reduced rates above target sale price, or capped fees on tier-1). Most brokers will negotiate; the difference between modified and standard Lehman alone is $150K on a typical $5M deal.

Sale price	Standard Lehman (5/4/3/2/1)	Modified Lehman (10/8/6/4/2)	Flat 8%
$1M	$50K	$100K	$80K
$2M	$90K	$180K	$160K
$5M	$150K	$300K	$400K
$10M	$190K	$380K	$800K
$20M	$290K	$580K	$1.6M
$50M	$590K	$1.18M	$4M

Retainers: upfront, monthly, creditable, and the math over 9-12 months

Retainers are the cost you pay before any deal closes. They compound over engagement length. On a 9-month engagement at $10K/month + $50K upfront, you’ve spent $140K before any buyer signs an LOI. If the deal doesn’t close, the retainers are typically gone. Understanding retainer mechanics is the difference between a $50K cost and a $200K cost on the same engagement.

Upfront retainer. Range from $0 (rare for LMM) to $25-100K typical for LMM advisors to $100-200K+ for investment bankers. Some brokers charge multiple upfront fees (engagement fee + valuation fee + setup fee). Negotiate consolidation into a single upfront retainer with full creditability against success fee.

Monthly retainer. Range from $0 to $25K per month. Compounds over engagement length. On a 9-month engagement, $5K/month = $45K, $15K/month = $135K. Negotiate monthly retainer cap (e.g., $50K total over engagement), or waiver after milestone (e.g., monthly retainers stop after first LOI signed), or scaled-down (e.g., $10K/month for first 3 months, $5K/month thereafter).

Creditability. Most LMM advisors credit retainers against the success fee at close. If retainers are $100K and success fee is $300K, the seller pays $300K total ($100K retainer + $200K incremental at close). If retainers are not creditable, the seller pays $400K total. Always ask: ‘Is the retainer creditable against the success fee at close, in full?’ If the answer is ‘partially’ or ‘no,’ that’s a $50-150K cost increase relative to standard.

What if the deal doesn’t close. Retainers are typically not refundable. On a failed engagement, the seller has paid $50-200K and received nothing in return except a stack of CIMs and a buyer list. Mitigations: shorter exclusivity (9 months over 12), milestone-based termination rights (terminate without further fees if no LOI in 6 months), reduced retainer on extended engagements.

Investment banker retainers. $100-200K upfront + $10-50K monthly is typical at the IB tier. On a 9-month IB engagement, retainer compensation alone can be $200-400K before any closing. Sometimes IB retainers are partially creditable; sometimes they’re not. The dollar amounts are large enough that creditability is a real negotiation point.

Tail provisions: where fee leakage hides

Tail provisions are the most under-negotiated part of broker engagement letters. If you terminate the broker but later close a deal with a buyer the broker introduced, you still owe the success fee. The provision protects the broker from sellers who fire them and then close with the buyer they were introduced to. Reasonable in concept; aggressive in execution.

Typical tail length: 12-24 months post-termination. Brokers often propose 24 months. 12 months is more reasonable. Negotiate down to 12. Beyond 12 months, the tail captures buyers whose interest may have evolved independent of the broker’s original introduction — the broker effectively becomes an ‘originator’ for any deal you do for years.

Definition of ‘introduced buyer.’ This is the high-leverage negotiation point. Vague definitions (“any buyer the broker mentioned to seller”) capture far too many parties. Tight definitions (“buyers who signed NDAs and received the CIM”) limit exposure to actual broker-driven introductions. Some brokers want even broader definitions (“any buyer the broker contacted on behalf of seller”) — resist these.

Written list of introduced buyers. Negotiate that the broker maintains a written, regularly-updated list of buyers who signed NDAs during the engagement. The list defines the universe of buyers who trigger the tail. Without a written list, brokers can later claim “I introduced you to that buyer in a casual conversation 18 months ago” — and the seller has no documentation to dispute it.

Carve-outs for prior relationships. If you have buyers you knew before engaging the broker (a competitor that’s expressed interest, a customer that’s a strategic fit, an employee buyer), carve them out of the tail. Specifically list them in the engagement letter as ‘pre-existing relationships’ that don’t trigger broker compensation. Without this carve-out, brokers sometimes try to claim success fees on deals where they had zero involvement.

Tail-extension on engagement extensions. If the engagement extends beyond original term (e.g., 12 months becomes 18 months because the deal isn’t closing), tail provisions sometimes extend automatically. Negotiate that the tail period applies only to the original engagement term, not to extensions. Otherwise, every engagement renewal effectively resets the tail clock.

Expense reimbursement: the line items most owners don’t read

Expense reimbursement on a 9-12 month broker engagement can range from $25K to $200K+. The variance depends on what’s included, whether expenses are at-cost or marked-up, and whether expense caps apply. Most engagement letters bury this category in vague language — and the invoices arrive throughout the engagement at a pace that’s hard to dispute mid-deal.

Standard expense categories. CIM preparation (sometimes outsourced to third-party CIM writers at $5-20K). Virtual data room software ($5-15K typical for a 6-month engagement). Marketing materials (teaser document, presentation graphics, website pages: $5-15K). Travel and accommodation for buyer meetings ($10-30K depending on number of in-person meetings). Market research ($5-10K). Sometimes business valuation ($5-20K). Sometimes outside legal fees on broker side ($5-15K).

At-cost vs. marked-up. Some brokers pass through outsourced costs at-cost (CIM writer charges $10K, broker bills you $10K). Others mark up outsourced costs (CIM writer charges $10K, broker bills you $15K). Negotiate at-cost pricing with itemized invoices. The markup over a 9-month engagement on $50K of outsourced work can be $15-25K.

Expense caps. Negotiate a total expense cap ($50K total over engagement, or 1-2% of expected sale price). Negotiate individual-item approval threshold ($10K per item requires seller approval). Negotiate travel-class limits (coach airfare, $300/night hotels, no first-class or premium accommodations). Without these caps, expenses can exceed the upfront retainer in scope.

Hidden expense categories to watch. Long-distance phone charges. Conference registration fees (broker attending industry events). Subscription fees (database access, market research subscriptions). Broker’s out-of-pocket meals during business meetings. Most are reasonable individually but compound to $5-15K over 9 months. Cap or itemize each.

Comparing proposals on net proceeds (the only metric that matters)

The right comparison metric is net proceeds, not headline rate. Net = gross sale price minus broker fees minus other transaction costs minus tax. Different brokers can produce different gross prices and different fees, so the only fair comparison is dollars in seller’s pocket after closing.

Worked example: 3 broker proposals + 1 buy-side partner alternative on a $5M expected sale. Proposal A (Main Street broker): $50K upfront + $5K/month x 9 + 12% success fee + $30K expenses. On $5M: $50K + $45K + $600K + $30K = $725K total fees. Net to seller: $4.275M (pre-tax).

Proposal B (LMM advisor with modified Lehman). $50K upfront + $0/month + modified Lehman (10/8/6/4/2) + $50K expenses. On $5M: $50K + $0 + $300K + $50K = $400K total fees. Retainer creditable, so $300K net of credit + $50K expenses = $350K total. Net to seller: $4.65M.

Proposal C (LMM advisor with standard Lehman). $25K upfront + $5K/month x 9 + standard Lehman (5/4/3/2/1) + $30K expenses. On $5M: $25K + $45K + $150K + $30K = $250K total fees. Retainer creditable, so $150K net of credit + $30K expenses = $180K incremental + $70K retainers = $250K total. Net to seller: $4.75M.

Proposal D (buy-side partner direct intro). $0 retainer + $0 success fee + $0 expenses (paid by buyer). On $4.8M direct sale (slightly lower because no auction premium): $0 total fees. Net to seller: $4.8M.

Comparison. Proposal A: $4.275M net. Proposal B: $4.65M net. Proposal C: $4.75M net. Proposal D: $4.8M net. Differences: $525K between worst and best. The buy-side path produces highest net even at slightly lower gross. The Main Street broker produces lowest net — their fees consume $725K on a deal where the auction premium isn’t large enough to justify.

When the auction premium changes the math. If the LMM advisor with modified Lehman (Proposal B) produces a $5.6M sale instead of $5M (12% auction premium), then: net = $5.6M – $400K – tax = $5.2M before tax. Better than Proposal D at $4.8M. The advisor earns their fee when the auction premium exceeds the fee. Predict the premium honestly before signing.

Industry-specific fee considerations

Broker fees vary by industry as well as by deal size and tier. Some industries have unusually deep buyer pools that command higher broker compensation (because the auction dynamics produce real uplift). Others have unusually narrow pools where broader outreach adds little value (and fees are harder to justify).

Industries where broker auction dynamics typically justify fees. Manufacturing (50% of LMM buyers active — deep, fragmented pool). Distribution (34% — deep but tier-sensitive). Business services (25% — specialty niches matter). Healthcare services (16% — specialty practices premium). In these industries, a competitive auction across 30-50 buyers can produce 10-20% gross uplift — justifying $300-500K of broker fees.

Industries where broker fees are harder to justify. HVAC, plumbing, electrical (active PE roll-up but narrow pools of 10-15 specific consolidators — auction adds less). Pest control (consolidating but narrow pool). Specialty manufacturing (sometimes only 5-8 strategic acquirers). In these industries, a buy-side partner with direct relationships often produces equal or higher net proceeds than a sell-side advisor with broader auction.

Industries with thin buyer pools (under 10% of LMM buyers active). Restaurants, retail, automotive services, fitness, construction services. Brokers will often quote standard fees but produce limited bidder interest. Net proceeds are often disappointing even after fees. Managing expectations is critical — the same broker fee structure on a thin-buyer-pool industry produces much lower-quality outcomes than on a fragmented LMM industry.

How industry affects negotiation. If your industry has narrow buyer pools (HVAC, plumbing, pest control), you have leverage to negotiate down broker fees because the broker isn’t adding the auction-premium value that justifies modified Lehman. You can credibly say: ‘I’m comparing this against a buy-side partner who already has direct relationships with 4-7 of the 10-15 acquirers in my industry.’ That’s a real alternative that constrains broker pricing power.

Red flags in broker engagement letters

Some terms in broker engagement letters are red flags — signals of either inexperience or aggressive structuring. Watch for these and either negotiate them out or walk away.

Red flag 1: Vague tail definitions. “Any buyer the broker mentioned to seller during engagement.” “Any party with whom broker had any contact regarding the transaction.” These definitions capture far too many parties. Insist on tight definition: “Buyers who signed NDAs and received the CIM, listed on attached Schedule B, updated quarterly during engagement.”

Red flag 2: Auto-extending exclusivity. “This engagement renews automatically for additional 6-month periods unless terminated 90 days in advance.” This locks you into a perpetual engagement unless you actively manage the renewal cycle. Insist on clear end date with affirmative renewal required.

Red flag 3: Termination-without-cause penalty. Some engagement letters charge a termination fee even when terminating without cause — typically equal to retainers paid plus 50% of expected success fee. This is aggressive. Negotiate that termination without cause owes only retainers paid plus reasonable transition costs.

Red flag 4: Uncapped expense reimbursement. “Seller will reimburse all reasonable out-of-pocket expenses incurred by broker during engagement.” “Reasonable” is subjective and undefined. Insist on cap ($50K total or 1-2% of expected sale price), individual-item approval threshold ($10K), and at-cost pricing on outsourced work.

Red flag 5: Marked-up outsourced work. “Broker may engage third-party service providers (CIM writers, valuation experts, marketing firms) at broker’s discretion and bill seller for actual costs plus reasonable markup.” “Reasonable markup” can mean 50%+. Insist on at-cost pricing or capped markup (10% maximum).

Red flag 6: Success-fee minimums. Some brokers impose minimum success fees ($300-500K) regardless of sale price. On a $3M deal, a $300K minimum is effectively 10% — much higher than the headline rate suggests. Either remove the minimum or negotiate it down to a level that reflects reasonable compensation on smaller-than-expected outcomes.

Red flag 7: Required co-listing or sub-broker fees. Some Main Street brokers require sellers to pay additional fees if the buyer comes through a co-listing broker or sub-broker network. Effectively double-dipping. Negotiate that broker fees are a fixed percentage of total sale price regardless of how the buyer is sourced.

Red flag 8: Confidentiality breach without remedy. Engagement letters should specify what happens if the broker breaches confidentiality (e.g., lists your business publicly without permission). Reasonable: termination right plus damages. Aggressive: no remedy specified. Insist on clear remedies for confidentiality breaches.

Net proceeds comparison: 4 model worked example on $5M deal

The most important comparison is net dollars to seller, not headline rate. Below is a worked example across all four advisor models on the same $5M expected sale. The net proceeds spread is $525K — the difference between a Main Street broker engagement and a buy-side partner intro on the same business.

Model A: Main Street broker. $50K upfront retainer + $5K/month x 9 months + 12% success fee + $30K expenses. On $5M sale: $50K + $45K + $600K + $30K = $725K total fees. Retainer creditable, so $50K + $45K credit applied = $725K – $95K credit = $630K incremental at close + $95K already paid = $725K total. Net to seller: $5M – $725K = $4.275M (pre-tax).

Model B: LMM advisor with modified Lehman. $50K upfront retainer + $0/month + modified Lehman (10/8/6/4/2) success fee + $50K expenses. On $5M sale: $50K + $300K + $50K = $400K total. Retainer creditable. Net to seller: $5M – $400K + $50K credit applied = $4.65M before tax.

Model C: LMM advisor with standard Lehman. $25K upfront retainer + $5K/month x 9 + standard Lehman (5/4/3/2/1) success fee + $30K expenses. On $5M sale: $25K + $45K + $150K + $30K = $250K total. Retainer creditable. Net to seller: $5M – $250K = $4.75M before tax.

Model D: buy-side partner direct intro. $0 retainer + $0 success fee + $0 expenses (paid by buyer). On $4.8M direct sale (slightly lower because no auction premium): $0 total fees. Net to seller: $4.8M before tax.

Comparison summary. Model A: $4.275M net. Model B: $4.65M net. Model C: $4.75M net. Model D: $4.8M net. Range: $525K spread. The buy-side path produces highest net even at slightly lower gross. The Main Street broker produces lowest net — their fees consume $725K on a deal where the auction premium isn’t large enough to justify.

When the math flips toward sell-side advisor. If the LMM advisor with modified Lehman (Model B) produces a $5.6M sale instead of $5M (12% auction premium), then: net = $5.6M – $400K = $5.2M before tax. Better than Model D at $4.8M. The advisor earns their fee when the auction premium exceeds the fee. The honest question: in your specific industry and deal profile, will the multi-buyer auction produce 10-15% gross uplift over a buy-side direct intro? If yes, advisor wins. If not, buy-side wins.

How to negotiate broker fees: scripts and tactics

Most owners don’t negotiate broker fees because they don’t know the playbook. Brokers expect negotiation; the ones who refuse are signaling rigidity. Below are specific scripts and tactics for each fee component, drawn from how sophisticated sellers structure these conversations.

On success fee structure. “You’ve proposed modified Lehman. I’m comparing against [Proposal B] which offers standard Lehman, and against a buy-side partner option at $0 to seller. Help me understand why modified Lehman is justified given the buyer pool size in my industry.” Most LMM brokers will move from modified to standard Lehman on this kind of pressure — that’s $150K saved on a typical $5M deal.

On retainer. “The $50K upfront + $10K/month is $140K over the engagement. If we can’t get the retainer fully credited against success fee, that’s a meaningful incremental cost. Can you confirm full creditability and waive the monthly retainer after first LOI signing?”

On exclusivity and termination. “9 months exclusive instead of 12. Termination right at 6 months if no LOI received. The buy-side partner I’m comparing against requires no exclusivity at all, so I’m looking for a structure that lets me reassess if the engagement isn’t producing.”

On tail provision. “12-month tail instead of 24. Limited to buyers who signed NDAs only, with written list maintained quarterly. Carve-outs for [list of pre-existing relationships]. These are standard for LMM engagements; not aggressive.”

On expenses. “Total expense cap of $50K. Individual items above $10K require my written approval. Outsourced work at cost (no markup). Travel at coach airfare and reasonable hotel rates.”

Walk-away leverage. “If we can’t reach acceptable terms on the engagement letter, I’ll proceed with the buy-side partner intro path and reassess at 90 days. The buy-side path is $0 to seller and 60-120 days from intro to close. The decision is whether your engagement produces enough auction-premium uplift to justify the $300-500K in fees over the buy-side alternative.” This is a real alternative; brokers who hear it become more flexible.

Conclusion

Evaluating business broker fees is not about asking ‘what’s your commission rate?’ It’s about understanding the full stack — retainer, success fee structure (Lehman variant), tail provision, expense reimbursement, miscellaneous fees — and computing total dollar cost on your specific deal. Two brokers can quote ‘6%’ and produce $300K of fee difference because of differences in retainer mechanics, Lehman variants, tail definitions, and expense markups. The right comparison metric is net proceeds (gross price minus fees minus tax), not headline rate. The right negotiation playbook is line-by-line on each component, with credible alternatives (other brokers, buy-side partners, direct outreach) as leverage. The right time to evaluate is before signing the engagement letter, because most terms become non-negotiable once exclusivity is locked. And if you want to compare any sell-side broker proposal against a buy-side partner alternative at $0 to seller, we’re a buy-side partner — the buyers pay us, not you, no contract required.

Frequently Asked Questions

How are business broker fees structured?

Five components: retainer (upfront or monthly), success fee (Lehman scale or flat percentage at closing), tail provision (covers post-termination closes), expense reimbursement (CIM, marketing, data room, travel), and sometimes miscellaneous fees (broker legal, valuation, success-fee minimums). On a $5M deal, total broker compensation typically ranges from $150K to $650K depending on tier and structure. Always evaluate the full stack, not the headline rate.

What is Lehman scale and how does it work?

Lehman scale is a tiered success-fee structure. Standard Lehman: 5% on first $1M, 4% on next $1M, 3% on next $1M, 2% on next $1M, 1% on everything above. On a $5M deal, standard Lehman = $150K. Modified Lehman (a.k.a. double Lehman) doubles the rates: 10/8/6/4/2 = $300K on the same deal. Many LMM brokers prefer modified Lehman because it’s much more lucrative on $1-10M deals.

What’s the difference between standard and modified Lehman scale?

Standard Lehman: 5/4/3/2/1 (5% on first $1M, 4% on next, 3%, 2%, 1% above). Modified Lehman: 10/8/6/4/2 (doubles all rates). On the same $5M deal: standard = $150K, modified = $300K. Difference: $150K. On a $10M deal: standard = $190K, modified = $380K. Difference: $190K. Always ask for standard Lehman over modified during negotiation.

Are broker retainers refundable?

Generally no. Most retainers are non-refundable but creditable against the success fee at close. If the deal closes, the retainer effectively becomes part of the success fee. If the deal doesn’t close, the retainer is gone. Mitigations: shorter exclusivity (9 months over 12), milestone-based termination rights (terminate without further fees if no LOI in 6 months), reduced retainer on extended engagements.

Are broker retainers credited against success fees?

Usually yes for LMM advisors. Most credit upfront retainers and monthly retainers in full against the success fee at close. Some advisors credit only partially (e.g., 50%). Some don’t credit at all. Always ask: ‘Is the retainer creditable against the success fee at close, in full?’ If the answer is ‘partially’ or ‘no,’ that’s a $50-150K cost increase relative to standard.

What’s a fair tail provision length?

12 months post-termination is reasonable for LMM engagements. Brokers often propose 24 months; negotiate down to 12. Beyond 12 months, the tail captures buyers whose interest may have evolved independent of the broker’s introduction. Also negotiate the definition of ‘introduced buyer’ tightly — only buyers who signed NDAs, with a written list maintained throughout the engagement.

How do I negotiate down a broker’s success fee?

Get competing proposals from 3-5 brokers across different fee structures. Use them against each other. Specifically: ask for standard Lehman over modified Lehman ($150K savings on typical $5M deal). Ask for break-points (reduced rates above target sale price). Ask for caps. Mention buy-side partner alternatives at $0 to seller as walk-away leverage. Most LMM brokers will negotiate; the ones who won’t signal rigidity that hurts you over a 9-12 month engagement.

What should I cap broker expenses at?

$50K total expense cap is reasonable for a typical LMM engagement, or 1-2% of expected sale price. Negotiate individual-item approval threshold ($10K per item). Negotiate at-cost pricing on outsourced work (CIM preparation, valuation, market research) with no markup. Negotiate travel-class limits (coach airfare, $300/night hotels). Without these caps, expenses can exceed the upfront retainer in scope.

Are broker fees negotiable?

Yes, almost every term. Success fee structure (Lehman variant). Retainer (amount, monthly cadence, creditability). Exclusivity period (9 vs. 12 months). Termination rights (milestone-based vs. for-cause-only). Tail length (12 vs. 24 months). Tail definition (NDA-signed buyers vs. anyone who received teaser). Expense caps. Outsourced-work pricing. Travel-class limits. Most LMM brokers will negotiate; the ones who refuse signal rigidity you don’t want over a 9-12 month engagement.

How do I compare broker proposals on net proceeds?

Compute net = gross sale price – broker fees (all components: retainer + success fee + expenses + miscellaneous) – tax. Compare proposals on net dollars to seller, not on headline percentages. A broker at 6% + $50K retainer producing $5M sale yields $4.65M net. A broker at 8% + $25K retainer producing $5M sale yields $4.55M net. The first wins despite higher percentage retainer because the lower success fee outweighs the difference. Run the math on your specific expected sale price.

What’s a reasonable retainer for a $5M expected sale?

$25-75K upfront is reasonable for an LMM advisor on a $5M deal. $5-15K/month is reasonable. Total retainer compensation over 9 months should be $50-150K, fully creditable against success fee at close. Above $150K total retainer, you’re paying IB-tier retainers without IB-tier resources. Below $50K, the broker may not have aligned incentives. Negotiate within the range and ensure full creditability.

What red flags should I watch for in a broker engagement letter?

Vague tail definitions (‘any buyer broker mentioned’ instead of ‘NDA-signed buyers’). Auto-extending exclusivity. Termination-without-cause penalty. Uncapped expense reimbursement. Marked-up outsourced work. Success-fee minimums. Required co-listing or sub-broker fees. Unspecified remedies for confidentiality breach. Each is negotiable; if a broker refuses to address red flags, walk away.

How is CT Acquisitions different from a sell-side broker or M&A advisor?

We’re a buy-side partner, not a sell-side broker. Sell-side brokers represent you and charge you 8-12% of the deal (often $300K-$1M) plus monthly retainers, run a 9-12 month auction process, and require 12-month exclusivity. We work directly with 76+ buyers — search funders, family offices, lower middle-market PE, and strategic consolidators — who pay us when a deal closes. You pay nothing. No retainer, no exclusivity, no contract until a buyer is at the closing table. You can walk after the discovery call with zero hooks. We move faster (60-120 days from intro to close) because we already know who the right buyer is rather than running an auction to find one.