We recently got an email from a business broker asking us what type of finders fee structure we typically use. Our standard finder's fee structure is based on the Lehman structure. Since that post has gotten a nice response from the business broker community we thought it might be helpful to walk through a detailed example of how the Lehman structure works. For this example let's assume we have a finder's fee agreement with a Lehman structure with a business broker, and we end up buying a business that they introduced to us for $10 million. This is is how the agreement would pay out:
$1 million x 5% = $50,000
$1 million x 4% = $40,000
$1 million x 3% = $30,000
$1 million x 2% = $20,000
$6 million x 1% = $60,000
The total fee for this transaction would be $200,000 (or 2% of the sale price) and it would be payable at closing.This fee structure was created in the early 1970's by Lehman Brothers and it is a very common fee structure for small business acquisitions. We have used this structure with many of our existing portfolio companies. If you are a business broker and you have a business that meets our criteria, please contact us.
