A broker's commission is quoted as a rate and is built from four things, and an owner who compares only the rate is comparing one of them. There is the rate itself. There is the base it is applied to, which is not always the number you have in mind. There is a minimum fee, which frequently overrides the rate on a smaller sale. And there is the retainer, which may or may not be deducted from what is due at the end. All four are in the contract and all four are negotiable.
The rate, and what it is applied to
A rate means nothing until you know the base. Is it applied to the headline price, to the price net of debt, to what you actually receive including or excluding deferred consideration, or to the enterprise value however the contract defines it. Two brokers quoting the same rate on different bases are quoting different fees, and the definition is in the document rather than in the conversation.
The minimum, which usually decides smaller sales
Most engagements carry a minimum fee, and on a smaller business the minimum is often larger than the rate would produce. When that happens the rate is not the rate, and the effective cost is the minimum expressed against your own expected price. Working that out is one division and it is the single most useful calculation an owner can do before signing anything.
The retainer, credited or not
An up-front payment is common and the important word is whether it is credited against the final fee. Credited, it is a cash-flow arrangement. Not credited, it is an additional cost paid whether or not anything sells. The wording is short, easy to skim, and worth real money, and it is the clause owners most often misremember afterwards.
Questions people ask about business broker commission
What is a normal commission rate?
This site does not publish a figure, because a rate quoted without its base, its minimum and its retainer is not comparable, and any average would be repeated as though it were. Ask two or three brokers, work each contract into money at your own expected price, and compare those.
Is the commission negotiable?
Usually something in the structure is, even where the headline rate is not: the minimum, the retainer treatment, the length of exclusivity or the tail period. Knowing which of the four matters most for your size of sale is what makes the conversation productive.
When is it paid?
Typically at completion out of the proceeds, which is why it rarely feels like a cheque you write. Deferred consideration complicates it, and how your contract treats a price paid in instalments is worth reading before you sign.