When it comes time to sell your business, understanding the fee structures behind business brokers and investment bankers is critical. We spoke with Robert Bezede, Partner at Harmony Succession Partners, who specializes in selling Ontario-based lower mid-market companies, to help break down the true costs, clarify industry norms, and share insider advice on how to choose the right advisor.
Robert: Great question. Unlike lawyers or accountants who bill hourly, brokers and investment bankers largely work on a contingent fee basis with a nominal amount paid upfront. That means most of their compensation is only received once the deal is closed—similar to how a real estate agent is paid after a sale is completed. This model aligns their success with yours: if they don’t close a deal that meets your needs, they don’t get paid.
Robert: While the bulk of the fee is contingent, many firms—including our firm—charge a non-refundable retainer upfront which covers the upfront work required to put together the financial information and prospectus used to market the business. These retainers typically range from $10,000 for companies worth several millions of dollars to $75,000 for companies worth tens of millions of dollars. Ultimately this fee depends on the size of your business, complexity of the transaction, the type of firm and level of involvement they can offer you. Ultimately, the advisor is not trying to make a profit on this upfront fee—it’s really about ensuring the seller is serious and that both sides are committed to the process. Some brokers also charge monthly fees, which are almost always credited against the success fee to ensure the seller remains invested in the process.
Robert: Think of a good broker as your insurance policy. The reality is more than 50% of small businesses don’t sell so investing in the right broker increases the chances of a successful exit. They manage and protect confidential information by limiting what is shared and qualifying buyers, especially when speaking to competitors who may be able to pay top dollar for your business but also pose the greatest threat to tipping off customers and employees. They will also save you time by running the sales process while you can focus on running your business. They also support your lawyers and accountants during due diligence reducing the amount of hourly cost incurred by your team of advisors in preparing the due diligence information. Most importantly, a skilled broker creates competitive tension, an “auction effect”, by tapping into a wide network of financial and qualified buyers. This generates more interest and offers, which often drives up the sale price by +10%. So even if the broker charges a 5% success fee, if they are doing their job right, you’re likely to come out ahead because the added value they bring can more than offset their fee, leaving you with a better deal than you would have achieved on your own.
Robert: There are several, but the two common models are:
Robert: Yes. The two biggest are 1) the term of the contact and 2) the tail clause on any buyers introduced by the broker. Some brokers have a fixed term on their contract (say 12 months) with limited ability to cancel, so its important to commit to the right advisor because you can end up being stuck with a poor advisor delaying your exit. For our firm for example, we believe in letting our performance speak for itself so you can cancel our agreement within 15 days of the first month if you really wanted to. For the trail clause, this is the period after you terminate the agreement where, if you end up selling to a buyer that your broker was in contact with, you still owe them a fee. Tail clauses are standard and we usually see them last between 1-2 years but watch for brokers who try to sneak in a longer, more punitive tail of 3+ years—that’s excessive. Hiring a qualified and capable broker is the best mitigate to manage these risks so confirm what their deal experience is in your industry and what their close rate is. Make sure to ask for at least three past client references as well.
Robert: According to Firmex’s Fee Guide, which gathers the average fees from the top 100 M&A firms in Canada, success fees usually fall in the 2–8% range for companies valued between $2MM to $50MM. The higher the value of the deal, the lower the fee. For example, a $5M business might have a 6% fee, while a $40M deal may only carry a 2% fee. At Harmony, we always benchmark our fees to be in line with the market average.
Robert: Don’t underinvest in your advisors. You only get to sell your business once so its important to get it right the first time. With proper pre-sale planning and the right broker, you can increase your business’s value by millions. Also, find someone whose firm size matches your business size. A $10M company won’t get the attention it deserves from a national investment bank so picking the biggest company is not always best. Look for someone who sees your deal as a priority, not a side project.
Thank you, Robert, for sharing practical, transparent insights on a topic that often feels overwhelming for business owners. Whether you’re actively planning to sell or simply exploring your options, understanding fee structures and what to look for in a broker can make a major difference in the outcome of your deal. For owners looking to make a smart, confident exit, Robert’s advice is a must-read foundation.
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