How is a business broker paid?

Broker compensation on small-business sales is less standardised than in real estate, and the written agreement rather than convention decides what you owe. Three provisions in it matter more than the percentage.

The minimum fee, which binds on smaller deals

A percentage with a stated minimum means the effective rate on a small transaction can be far above the headline number. On a sale well below the broker’s typical range, the minimum is the fee. Work out what the minimum represents as a percentage of your likely price before signing, not after.

The tail clause, which outlives the engagement

A tail provides that if the business sells to a buyer the broker introduced, within a set period after the agreement ends, the commission is still payable. That is reasonable in principle — it stops a seller waiting out the term to avoid paying for an introduction. Its length and the definition of who counts as introduced are where sellers get caught, particularly where a list of named prospects is never delivered.

What triggers the fee

Most agreements trigger on completion. Some trigger on an unconditional agreement, which can leave a seller owing a fee on a deal that later collapses. And many define a sale broadly enough to include a share sale, an asset sale, a merger or a lease of the business — worth reading if you might restructure rather than sell outright.

Exclusivity and term

Most engagements are exclusive for a fixed term. A long exclusive term with no performance obligations on the broker is the weakest position a seller can take; a shorter initial term that renews by agreement keeps both parties honest. Ask what marketing the broker will actually do and whether the agreement requires any of it.