TL;DR: Standard broker commissions on sub-$1M deals run 8 to 12 percent of the sale price, with a $10K to $25K minimum. On deals over $1M, most brokers use a Modified Lehman scale: 10 percent on the first million, 8 percent on the second, 6 percent on the third. That cost gets priced into the asking number. Here is how to read it, and how to recover it in the offer.
Most buyers think the broker works for them. Most buyers are wrong.
The broker works for the seller, paid out of the sale proceeds at closing. Which means the asking price you are reading has the commission baked into it. Standard rates on a small business sale run 8 to 12 percent for deals under $1M, with a minimum fee somewhere between $10K and $25K to protect the broker on smaller transactions. On larger deals, most brokers use a Modified Lehman scale: 10 percent on the first million, 8 percent on the second, 6 percent on the third, 4 percent on the fourth, 2 percent thereafter. Understanding this math changes what an asking price actually means.
Once you see it, you cannot unsee it. And it changes how you write every offer from there forward.
What the Broker Is Incentivized to Do
Brokers are paid on success and on price. Both incentives shape what they tell you and what they do not.
Paid on success means brokers want the deal to close. That is actually good for buyers in one specific way. A broker who has worked the deal for six months and is staring at a 10 percent commission disappearing if the deal dies will push the seller harder than most buyers can. When the seller balks at a concession in week 10, the broker is your unintentional ally. They want the deal closed almost as badly as you do, and they have leverage with the seller you will never have.
Paid on price means brokers want the asking number as high as the market will tolerate. The pitch to the seller is built around the highest defensible number. A broker will not list a healthy plumbing business at 2.5x SDE when the asking-price comparables are running at 4x, even if 2.5x is closer to what it will actually sell for. They list it at 4x because that is what wins the engagement against the broker down the street who would have listed it at 3.5x. The inflated multiples in any sector start at the broker pitch, not at the seller's kitchen table.
The Number Behind the Number
Here is the math that matters. On a $1M asking-price business, the seller probably nets between $880K and $920K after the broker's commission. If the seller's number, meaning the amount they need to walk away with after fees, taxes, and any unpaid debt, is $900K, the asking price needs to clear roughly $1M to get them there.
Now flip the lens. If you offer $900K on that listing, you are not offering the seller a $100K discount. You are offering the seller their net number with the broker absorbing some of the gap. The broker still gets paid on the lower number. The seller still walks with close to what they planned. The deal closes.
I had a buyer call me on a service business listed at $1.4M last quarter. He was going to offer $1.25M and stop there. We walked through the broker math. At $1.4M the seller's net was probably around $1.25M. At $1.25M his net would drop to roughly $1.12M. The seller would not have accepted that. We restructured the offer at $1.30M with stronger terms on the seller note and a price reduction triggered if a key contract did not renew. The seller signed. The deal closed in 60 days.
This is one of the reasons the Bulletproof method caps purchase multiples at 3.0x SDE. The 3.0x ceiling forces you to anchor on what the business is worth as a cash-flowing asset, not on what the broker decided to ask. The Bulletproof calculator at DealScore Pro will tell you in 60 seconds whether the asking price is in the same zip code as the math. Most of the time it is not. The broker pitched the number that won the engagement. The math is somewhere else.
The Offer Pattern That Works
After 35 years of running deals, three principles separate the offers that close from the offers that get rejected without a counter.
First. Anchor your offer on stress-tested DSCR, not on asking price. The best offers I have written started with the question of what your numbers say you can afford to service at 20 percent revenue decline, then worked backward to a price. The seller might say yes. The seller might say no. Either way you have protected your downside. The offers that fail are the ones where the buyer started with the asking price and worked toward it. That is the broker's anchor, not yours.
Second. Leave room for the broker to negotiate against you. If you offer 90 percent of asking and the broker takes that to the seller, the broker has nothing to push back against and the seller will usually counter at 95 percent. If you offer 78 percent with a clear letter explaining your math, you have given the broker a number they can defend a counter from, probably landing in the 85 to 88 percent range. That is closer to where the deal should close anyway. Read between the lines and you see the broker is trying to find a number both sides can live with. Your job is to give them one to defend.
The asking price is the broker's marketing number. The closing price is the math. Your job is to write the offer that bridges them.
Third. Name the seller note and the standby clause in the LOI. The broker will tell you what the seller's bottom line is. Take that information and use it to structure terms, not just price. A seller who will not move on price will often move on payment terms, on inventory adjustments, on a longer training period, on a non-compete carve-out. That is how you recover the broker's commission without ever fighting about it. The broker keeps their fee. The seller gets their number. You get a structure that protects your downside. Everybody walks.
That is the work. Most buyers think a deal is won at the offer. The seasoned buyers know it is won at the structure. The price is just the headline. The terms are what you live with for the next 10 years.
If you want the full Bulletproof framework on how to write offers like this, the free Masterclass below walks through the method end to end.
What This Means For You
If you are writing an offer on a broker-listed deal in the next 30 days, anchor your number on your stress DSCR and leave room for the broker to negotiate the seller toward you.
— Mike
Want to see how I stress-test every deal against cost shocks, revenue dips, and hidden liabilities before I'd put a dollar at risk? I walk through the entire Bulletproof method in a free 28-minute masterclass.
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