There are two primary business models employed by sell side representing business brokers and mergers & acquisitions intermediaries for compensation.  The first, the one selected by IBA for 51 years, only seeks compensation upon successful completion of a transaction.  The second charges upfront retainers and ongoing consulting fees with an additional success fee paid upon project completion.  In theory, a business owner will pay approximately the same amount if a company is sold by a firm seeking compensation by either method.  Axial , a mergers & acquisitions platform that connects buyers and sellers (12,000+ last year) recently published their annual fee guide for the industry which compiled data through engaging with a large number of respected firms.  That document can be downloaded from this link (https://www.axial.net/forum/ma-fee-guide-2025-2026/) and is referenced multiple times in this article.

At its core, business brokerage is a sales profession.  The objective in every transaction is to get the parties to “YES”.  “YES” will need to be achieved on price, financial terms, a purchase & sale agreement, non-competition agreement, tax allocation, transition support employment/consulting, and a spectrum of other issues on the road to successful completion of a transaction.   The best salespeople, regardless of industry, in the world do not need bases or retainers.  They have the skill and confidence to know that it is not if, but when they will be paid for their performance.  According to Axial, 29% of M&A firms charge no fees until project completion. Common sense says that these business sale intermediaries achieve successful results for their clients. They would not be in business if they were not.  An interesting corollary data point is that approximately 20% of businesses actively marketed for sale actually sell (I have heard the figures of between 15 – 25% consistently during my 32 years as a business broker).  The following is a Forbes article supporting that number (https://www.forbes.com/sites/liendepau/2025/04/09/why-80-of-owners-cant-sell-a-business-when-they-want-to/).  IBA annually sells 80 – 90% of our engagements. The ones that we fail to sell traditionally are in unique industries, less attractive locations, and/or experience a material change after they are brought to market (e.g., a large customer is lost or market share declines versus competition).  It is my view that plain and simple, business brokerage firms that charge retainers and consulting fees need the money to support their operations because they are not consistently completing sales.

This brings us to the question are objectives in 100% alignment between a business owner desiring to sell and their business broker when retainers and consulting fees are charged.  If only 20% of businesses on the market sell and an upfront fee is paid who profits from failure the entrepreneur or M&A intermediary?  Personally, my desire has been since I entered the industry at 27 to only be paid by happy customers, something I have had occur over 300 times as a direct business sale intermediary and 1000’s of times in an executive management capacity as the President & CEO of IBA.  I would not sleep at night if I was paid for not completing a task assigned to me.  Imagine doctors being paid when 80% of their patients die in the operating room or auto mechanics being paid when 4 out of 5 of the vehicles they work on need to return to the shop.

Most business sale processes start with the intermediary providing a professional opinion of the market value of a privately held company or family business.  This is a time consuming activity that requires substantial knowledge, experience, and skill to do correctly.  Firms that charge for this assessment justify their fees (Traditionally Five Figures) based on this fact.  IBA looks at the evaluation process differently.  We believe the activity provides benefits for both the business owner and IBA.  On the entrepreneur side, the market value opinion allows them to assess the knowledge, experience, and customer service of IBA while learning what we believe is possible in terms of an exit value in the marketplace without any obligation to use our firm.  My multiple decade mental image when presenting a business evaluation to a client has always been John Lennon’s famous quote at the end of the Beatles run about hoping he passed the audition (https://youtu.be/u2WW261vqvQ?si=lnLVQeVvgB1GGdkp).  I STRONGLY believe if we cannot educate business owners on WHY IBA, then they should go with the firm that was more persuasive about their knowledge, experience, and skill. On the IBA side of the assessment, we are determining if we believe in the future of the business model, can work collaboratively with company ownership, and if the party is realistic related to the value that can be achieved in the marketplace.  It should be noted that IBA is commonly recognized as one of the most selective business brokerage firms in the nation in terms of the projects we take on, statistically we pass on 2 out of 3 business sale projects offered to us by business owners.  We are selective because our paid on performance business model does not work if we are not completing sales.

Returning to the concept of whether a business owner is in alignment with a M&A intermediary, professional opinions of value can be a failure point in congruity between the parties.  In the case of a firm utilizing a paid on performance business model, the company has a vested interest in being honest with their potential client as why would they start a sale process with a diminished probability of achieving success and/or the highest possible value, if they are paid a percentage of the sale price.  Conversely, unfortunately there are business brokerage firms who look to generate revenue from business valuations with little regard (Remember 20% of businesses sell that are brought to market) for whether they ever get to closing.  Collecting multiple five figure fees a month for providing a data entry generated assessment of value can produce a good income, but does not mean a sale can be completed to anyone other than a trusting entrepreneur who is trying to navigate an unfamiliar path toward retirement.  Annually, IBA finishes projects started by other business brokerage firms where they overpromised and underdelivered costing business owners valuable time that could have been spent with grandchildren, traveling, and embracing their golden years rather than putting in another year managing their business. I also believe that entrepreneurs should be wary of firms that are unable or unwilling to price businesses.  If a M&A intermediary is an expert in an industry sector or geographic area they should be able to price a business with a significant degree of accuracy.  IBA consistently sells businesses within 10% of our “go to” market value. The values can be lower than the asking price because we sought the high end possible for the company or above the asking price because we have successfully created a competitive marketplace.  The following article provides an overview of why it is in the best interest of a business owner to price a company (Business Brokerage Strategy: Pricing a Business for Sale vs. Selling via Auction).

It should also be noted that business buyers commonly prefer to purchase businesses from business brokerage firms that are paid on performance.  They recognize that the M&A intermediaries at the firm are motivated to complete transactions.  Conversely, business brokers who were paid up front may not be motivated to provide superior customer service and/or would rather milk a client for monthly fees rather than actually seek to complete a sale in timely manner.

A final metric from the Axial survey that entrepreneurs should reference when selecting a business broker is the size of the firm they are hiring.  24% of business brokerage companies have eleven or more employees.   Why does company size matter?  First, it documents success.  Businesses do not grow in scale unless they are successful. People do not affiliate with firms unless they are compensated fairly and like the corporate culture.  Second, a business brokerage of scale will have more specialized knowledge (IBA has specialists in over 20 industries: https://ibainc.com/industries-served/), experience, and resources.

The decision to sell a privately held company or family business is one of the most significant decisions an entrepreneur can make in their life.  Selecting professional advisors to support the process whether an attorney or business sale intermediary should be done with thought and research.  I encourage all entrepreneurs to interview three potential professional advisors before making a choice to comparison shop.  A wrong decision in terms of a business broker can cost a business owner both time and money.   Three quality introductory questions when assembling a list of who to interview are how do you get paid, how many businesses in my industry have you sold, and how large is your firm.  If you are considering a sale of a privately held company or family business in Washington or Oregon, IBA would welcome the opportunity to audition for the job of business broker on your team.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, legal, and accounting communities on subjects relevant to the purchase & sale of privately held companies and family businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.