Six things determine what an M&A advisor actually costs you. The percentage on the cover page is only one of them.
- Retainer plus success fee is the default: common across the lower middle market, though some advisors use fixed billing or charge only at closing
- Retainers run upfront or monthly: one lower middle market benchmark reports a common range of $5,000 to $25,000, and advisors often credit them against the closing fee
- Hourly and fixed fees cover readiness work: the public sources cited here do not disclose standard hourly rates, so no reliable market range exists
- Lehman formulas step down by bracket: the classic schedule runs 5% down to 1%, and advisors freely change both the percentages and the brackets
- Pure success fee means no upfront payment: that is the model we use at Salt Creek for standard engagements, and it carries its own tradeoff
- Headline percentages mislead: minimum fees and the fee base often matter more than the rate itself
Who This Guide Is For
This is written for owners of established private companies who are comparing M&A advisors before making an initial call, including owners who have already started choosing an M&A advisor and want to understand cost before that conversation. Salt Creek typically serves founder-owned and family-owned businesses with roughly $2 million to $75 million in annual revenue and at least $500,000 in adjusted EBITDA, meaning earnings before interest, taxes, depreciation, and amortization after reasonable adjustments.
What follows covers the common lower middle market fee models on their own terms. It is not framed as a choice between Salt Creek and a named competitor, because the useful comparison here is between structures, not logos.
Monthly and Upfront Retainers
A retainer paired with a success fee is a common M&A advisor fee model for privately held middle-market sales. An advisor may invoice the retainer upfront or over time, on a monthly schedule or against defined milestones. Engagement letters also call it a work fee or an engagement fee, and the label carries no meaning of its own.
Published estimates vary because the sources cover different company sizes and transaction complexity. Founders Advisors reports total retainers of $50,000 to $100,000, typically paid monthly. Livmo's summary of the 2024–2025 Firmex M&A Fee Guide puts the most common lower middle market engagement fee between $5,000 and $25,000, while 38% of firms charge more than $26,000 for larger or more complex assignments. Read each proposal against its expected transaction size rather than treating either range as universal.
M&A Community describes retainer credits against the closing fee as a common market practice. Under that arrangement, each retainer payment reduces the remaining closing fee rather than adding to it. Common practice is not the same as a guarantee, so the engagement letter should state whether the credit is full, partial, or unavailable.
A retainer pays for work that happens before a single buyer hears about your business: financial analysis, marketing materials, buyer research, and diligence preparation. It also gives the advisor some compensation if you pause the process or no transaction closes.
Ask what the retainer purchases and when each deliverable arrives. Without a defined scope, a recurring payment quietly becomes an access fee with little connection to completed work. A clear engagement letter identifies the work covered, the billing schedule, any pause provisions, and the amount credited at closing.
Hourly and Fixed-Fee Billing for Readiness Work
Hourly billing rarely appears as the primary fee model for a sell-side M&A mandate. Auxo Capital's fee comparison lists retainers, milestone payments, success fees, minimum fees, and reimbursed expenses, and does not identify hourly billing as a standard structure.
Where a fixed fee does show up is a defined readiness or valuation engagement before you decide to sell. An advisor reviews your financial records and estimates market value, including any preparation the business needs first. You can complete that project without committing to a full sale process.
The cited sources do not disclose hourly rates, so a reliable market range is unavailable, and we are not going to invent one. A sale mandate also fits hourly billing poorly because transaction workload does not scale down with company value. Buyer outreach, negotiations, diligence, and closing support can run for months on a smaller transaction just as they do on a larger one. Retainers and success fees compensate the advisor across that long process without producing an open-ended invoice.
The Lehman Scale and Its Modern Variants
The classic Lehman scale applies declining rates to successive $1 million portions of transaction value: 5% on the first $1 million, 4% on the second, then 3%, then 2%, and 1% on everything above $4 million, according to Auxo Capital Advisors.
On a $5 million transaction, that is $50,000 plus $40,000 plus $30,000 plus $20,000 plus $10,000, for a total of $150,000. The blended rate across the full transaction is 3%. The 1% tier applies only to the final $1 million, which is why quoting “1%” as the fee on a deal this size would be wrong by a factor of three.
Double Lehman doubles each tier to 10%, 8%, 6%, 4%, and 2%. The same $5 million transaction would produce a $300,000 fee. Venture First describes Double Lehman as more common in middle-market deals, where longer timelines and greater complexity can require more advisor work. Auxo notes it also appears on smaller or difficult transactions where the expected workload is high relative to transaction size.
Reverse Lehman raises the fee percentage above a defined value threshold, which gives the advisor a larger incremental reward for exceeding an agreed valuation target. That only aligns incentives if the threshold reflects a credible expected value rather than a number set low enough to clear on any outcome. Modified Lehman simply changes the percentages or bracket sizes to fit modern transaction values. There is no standard Modified Lehman schedule, so the only way to know what one costs is to read the actual calculation in the engagement letter.
Lehman-style formulas remain widely used, though flat percentages have gained ground. Axial's 2026 survey found that Lehman-style and flat-percentage structures together accounted for 79% of surveyed advisors.
Check published examples against the fee schedule they claim to use. CT Acquisitions reports a $160,000 fee on one $10 million example and $190,000 on another, while describing the classic schedule in both. Recalculate the total fee and the blended rate yourself for every proposal rather than trusting its headline percentage or its worked example.
Pure Success-Fee Arrangements
A pure success-fee arrangement carries no upfront retainer, and the advisor earns a fee only when the transaction closes. Axial's 2026 survey found nearly one third of respondents offered this structure, up from 19% in 2024.
Advisors on this model fund the preparation and sale process themselves, which means they screen engagements carefully before accepting them. You pay no advisory fee if the transaction does not close. The honest counterargument, made by Praxis Rock, is that an advisor without a retainer may have less financial commitment to a particular process when other engagements compete for attention.
There is a second tradeoff worth naming. An advisor paid only at closing has a structural reason to favor advice that keeps a transaction moving. Auxo Capital explains that dependence on a closing can create pressure to preserve momentum after exclusivity, or to accept weaker terms rather than lose the deal. The right question to ask any success-fee advisor is how they evaluate buyers and what they do when diligence turns up a problem that makes walking away the correct call.
Salt Creek's standard M&A engagements use a pure success-fee structure with no upfront retainer. You pay an advisory fee at closing, and no advisory fee if the transaction does not close. If you would rather fund preparation through recurring payments and hold the advisor to a delivery schedule for that work, the retainer model discussed above may suit you better.
Comparing the Four Fee Models
Each model allocates upfront cost and transaction risk differently between you and the advisor. Two proposals with similar headline fees can produce different total costs, so compare the full engagement terms rather than the models in the abstract.
| Model | Upfront Cost | How Payment Shapes Incentives | Typical Use Case |
|---|---|---|---|
| Retainer plus success fee | Upfront or recurring payments, which may be credited at closing | Funds preparation before a sale, but you may pay even if no transaction closes | Common among middle-market investment banks and M&A advisory firms |
| Hourly or fixed fee | Payment for time, deliverables, or a defined project | Ties fees to completed work rather than to a closing | Valuation, sale readiness, or strategic planning engagements |
| Lehman or modified Lehman | Depends on whether the advisor also charges a retainer | Connects compensation to transaction value through a tiered success fee | Investment banks and advisors, applied to completed transactions |
| Pure success fee | No retainer, though approved expenses may apply | The advisor earns only if a transaction closes, which can increase pressure to reach closing | Some boutique advisors and business brokers, including Salt Creek |
How to Compare Advisor Fees
Headline percentages rarely reveal the full cost. Four terms decide it, and all four sit in the engagement letter rather than the pitch deck.
- Retainer credit. A non-creditable retainer adds to your total cost. A creditable one reduces the amount due at closing. Ask which it is, in writing, and whether the credit is full or partial.
- Minimum fee floors. A minimum overrides the quoted percentage on a smaller transaction. A 3% quote with a $250,000 floor is a 5% fee on a $5 million deal.
- Tail period. A tail requires a success fee if you close with a covered buyer after the engagement ends. Review its length and, more importantly, which buyers it covers.
- The fee base. Enterprise value generally includes debt assumed by the buyer, while equity value reflects what is attributable to owners after debt and cash. Depending on the contract, “purchase price” may also include deferred or noncash consideration such as earnouts or rollover equity. Our business valuation overview explains how these value definitions are typically calculated.
For each proposal, calculate the total fee at the same assumed transaction value, then divide that fee by the applicable fee base. Auxo Capital Advisors recommends this blended-fee comparison for exactly this reason: rates, brackets, retainers, minimums, and fee definitions can make similar headline percentages produce very different costs.
Where Salt Creek Advisory May Fit
Salt Creek Advisory is a family-owned lower middle market investment bank founded by two brothers, working with businesses in the $2 million to $75 million revenue range ($500,000 to $5 million EBITDA). Our standard M&A engagements carry no retainer and no monthly work fee. We are paid a success fee at closing, which means there is no bill unless the deal actually closes, and one of us, Jack or Connor Pitts, is on the phone with you throughout.
Where that model is not the right answer, plainly: if you want preparation work funded on a schedule with deliverables you can hold an advisor to, a retainer engagement gives you a contractual lever we do not. If you need a certified appraisal for a tax filing or a courtroom rather than a sale, hire a credentialed appraiser, which our guide to the best business valuation firms in the lower middle market covers. And if you are still weighing a broker against an investment bank at all, start with sell-side advisor vs. business broker before you compare anyone's fee schedule.
Read the Engagement Letter, Not the Percentage
Your circumstances and your preferred payment timing should drive the choice of fee model, not the number on the cover page. A low headline percentage can still produce a higher total cost once retainers, minimum fees, and the fee calculation method are applied.
Before signing, read the full engagement letter. Confirm payment timing and any retainer credits. Confirm how the success fee is calculated and on what base. Confirm which obligations survive termination. Those contract terms are what you are actually comparing, and they are the source of the specific questions worth asking each advisor.