What a broker commission actually costs an owner

Consider a manufacturing services company with $1.8M in revenue and $340K in seller's discretionary earnings. At a 3.5x multiple the business supports a headline price of about $1.19M. That headline number is not what the owner keeps.

Where the money goes in a brokered process

Sell-side fees on lower middle market deals commonly land in the 8% to 12% range of transaction value, sometimes with a monthly retainer and a minimum fee floor on smaller deals. At 10%, that is roughly $119K. Legal and accounting work on the seller's side typically adds $15K to $40K depending on how clean the books are. The owner's own time across a nine to fourteen month process is real but rarely counted.

What that leaves

On a $1.19M price, fees and professional costs can absorb $135K to $160K before taxes. The owner nets somewhere around $1.03M to $1.05M, on a timeline measured in quarters rather than weeks, with the business's confidentiality exposed to every buyer who signs an NDA.

What a broker is genuinely providing

Reach and process. A good broker markets to a wide buyer pool, runs a competitive dynamic, and can push the price above what a single buyer would have offered. If a business is attractive to many buyers, that competition can more than pay for the fee. That is a real argument and worth weighing honestly.

Where a direct buyer changes the math

When an owner already knows the buyer they want to talk to, the marketing function is not adding much. There is no listing, no commission, no success fee, and no wide circulation of financials. Diligence still happens and lawyers are still involved, but the process is measured in 60 to 90 days rather than a year, and the value that would have gone to fees stays with the seller.

The honest test is simple: if a competitive auction is likely to raise your price by more than the fee, run one. If not, a direct conversation is usually the better trade.