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This article is one of a series that offers insight and guidance into the process of buying selling or valuing a business. Whether you want to buy, sell, or appraise the valuation of a going-concern business, these articles provide specific guidance and references to help you accomplish your goal.

Up-Front Broker Fees for the Business Seller
by Tom West

Up-front fees are always a subject of interest among business brokers. As you will see from the following comments gathered from our last BBP Survey, the up-front fees are all over the place in both the amounts charged and the structure of these fees. We still feel that an up-front fee of one percent of the asking price makes a lot of sense. We also feel that this fee should be offered as a choice along with a contingent success fee. Let the seller decide which works for him or her. Here are just a few of the ways some brokers and intermediaries are dealing with up-front fees: 

“Time-based at $125 to $200 per hour.”   

“One percent of the value of the business as an administrative monthly fee for the first 12 months of the listing.”   

“Minimum charge of $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 estimate 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.”   

“One percent of the asking price as a retainer applied to a reduced fee of 8% versus a fee of 10% with no retainer.” 

“$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.”   
“$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.”   

“Approximately 10 to 12% of the estimated success fee.”   

“Only when the 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 preparation 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 the business sells, it is refunded.”   

About the Author

Mr. Tom West is the editor/publisher of The Business Broker, a monthly newsletter for the business brokerage field. He has written or co-written numerous books including the The Business Reference and Pricing Guide and The Resource Handbook for Business Brokers. He is a founder, past president, and former executive director of the International Business Brokers Association (IBBA). He is a frequent lecturer and seminar leader on all aspects of buying, selling, or appraising a business. Mr. West is probably the most knowledgeable individual in the country today concerning the issues of buying or selling small to mid-sized businesses.

If you're considering buying, selling, or determining the value of a business, please take a look at some of the excellent books, reports, and software we have at Business Book Press to help you achieve success. For example:

The Business Reference and Pricing Guide is the bible of the business brokerage world. If you're a shrewd business buyer or seller, you will want this book to learn what just what the business broker knows. It will pay you big dividends throughout every aspect of the purchase and sale process. Learn more about it...

BizPricer™ Business Valuation Software is an accurate and inexpensive resource for prospective business buyers and sellers (and business brokers) who want to know the fair market value of a business. No financial expertise or specialized knowledge is needed. Save hundreds to thousands of dollars over hiring an appraiser to provide you with a similar result. Learn more about it...

Preparing A Business for Sale provides business owners with an understanding of the process they need to know to sell their business for the most money. Contains hundreds of little known tips, ideas and strategies to maximize the selling price of a business. Learn more about it...

Strategies for Successfully Buying or Selling a Business is our bestselling book. It has been recommended by Kiplingers Personal Finance Magazine, the BottomLine Personal Newsletter, and has been awarded the Best Business Book of the Year Award from the North American Bookdealers Exchange (NABE). Learn more about it...

Anatomy of a Business Purchase Offer provides you with all of the practical hands-on knowledge you need to make a successful purchase offer to buy a business. The author uses an actual Purchase Offer form to show you exactly what needs to be written and why! He details all of his recommendations in a line-by-line format for each and every aspect of the purchase offer. Learn more about it...

The Business Buyer's How-to Kit: We've assembled a specially-priced Kit with all of the key information you'll need to know to successfully buy a business.

The Business Seller's How-to Kit: We've assembled a specially-priced Kit with all of the key information you'll need to know to successfully sell a business.

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BBP Resources

Business Valuation Software
BizPricer software to easily, quickly, accurately, privately and inexpensively value a business.

Business Valuation Rules of Thumb
Most complete source of business purchase and sale information available. Hundreds of valuation rules of thumb.

Buy/Sell Business Process
Strategies, tips, due diligence process and insider secrets for buying or selling a business.

How to Make a Purchase Offer
Detailed process including interactive form on CD for making a successful business purchase offer.

The Resource Guide for Business Brokers
Extensive information about the business brokerage field. Includes 45 different forms on CD.

Preparing a Business for Sale
This book provides 100's of strategies and tips to increase the selling price of a business.

Business Broker Professional Starter Kit
Get started in the lucrative field of business brokerage.

Business Buyer's Kit
Everything you need to successfully buy a business. Hard copy or download.

Business Seller's Kit
Everything you need to successfully sell a business. Hard copy or download.

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