Success Fee

A success fee is the contingent commission paid to a business broker or M&A advisor only when a transaction closes successfully. It is calculated as a percentage of the transaction value — typically using a tiered formula such as the Lehman Formula — and represents the primary compensation for brokers on commission-only engagements.

For Canadian business brokerage transactions under $4 million, success fees commonly range from 8–12% of the sale price, often with a minimum fee floor (typically $15,000–$25,000) to protect the broker on lower-value transactions. For mid-market M&A advisory (above $5 million), success fees are typically lower on a percentage basis (1–5%) but much larger in absolute dollar terms, and they are paid in addition to an upfront retainer.

The success fee structure aligns the advisor's financial interests with the seller's — both benefit from a higher sale price and a completed transaction. However, sellers should be aware that commission-only structures may discourage advisors from investing time in deals with lower probability of closing.

See also: Retainer, Lehman Formula, M&A Advisor, Business Broker, Engagement Letter.