Khaled Azar 
Most founders read the percentage in an engagement letter and stop there. The percentage is the least useful number on the page.
What matters is what that percentage demands of the person charging it. In the US the going rate on a $5 million sale is about 6.3%, which is $315,000, according to the annual M&A Fee Guide survey of 189 advisors. So an advisor has to raise your price by more than $315,000 before they’ve cost you nothing. Whether 6.3% is fair isn’t the question. Whether anyone can beat it is.
Fair warning. Fee guides are written by firms selling the thing they’re pricing. I can’t publish our own rate card here, our rules bar it. What I can give you is the structure, benchmarks from a survey nobody in this industry paid for, and the cases where hiring one of us is the wrong call.
The numbers, and the 2 fees hiding inside them
Every engagement letter contains 2 separate fees under 1 heading.
There’s a work fee, paid monthly while the process runs, and a success fee, paid once when the money lands. The work fee pays for months of work on a process that might not close. Our older piece on why advisors ask for money up front covers what that buys, and I won’t repeat it here.
The success fee is the real number. Nearly all of the compensation sits there.
Everything below comes from the M&A Fee Guide, an annual survey run by a data-room vendor rather than an advisory firm. The US edition drew 189 respondents, most of them senior people at their firms.
| Sale price | Typical success fee | What that is in dollars |
|---|---|---|
| $5 million | 6.3% | $315,000 |
| $20 million | 3.9% | $780,000 |
Most bootstrapped SaaS companies sell inside that band, so those 2 rows are the ones that matter to you. The same survey puts a $100 million deal at 2.0%, which shows where the rate is heading but describes somebody else’s exit.
The rate falls as the price rises. That’s the Lehman formula, a sliding scale where each further slice of the price is charged less than the slice below it.
The work fee sits on top, typically $5,000 to $10,000 a month in the same survey. Whether it really is on top depends on one clause, and it’s the clause most sellers skim.
Just over half of firms surveyed deduct the work fees you’ve already paid from the success fee at closing. The other 43% keep both. Same headline percentage, materially different bill.
The Advisor Break-Even
One line of arithmetic that tells you whether to sign.
Turn the fee into the price increase it demands. That’s the whole test.
Say your company sells for $5 million. The success fee is $315,000. The process runs 8 months at $7,500 a month, another $60,000.
Now work backwards. To end up with $5,000,000 in your hand after the fee, the price has to reach about $5,336,000. That’s a 6.7% lift, not 6.3%, because the advisor also takes a cut of the increase they created.
And that’s the good version. If your letter is one of the 43% that doesn’t credit the work fee back, you need $5,400,000, which is an 8.0% lift.
Break-even is always higher than the fee. On a $5 million sale at 6.3% it’s a 6.7% lift if the retainer is credited, 8.0% if it isn’t. Get 10% and you keep $153,500 more than selling alone. Get 3% and you’re $174,450 worse off than if you’d never hired anyone.
Run that before you read another clause. The number you want from an advisor isn’t their rate. It’s what they think they can add, and whether it clears 8%.
3 places the fee stops pointing the same way you do
1. The rate you agree is an average, not the rate on the last dollar. That 6.3% is the effective rate across the whole price. Under a sliding scale the final stretch is charged at the lowest tier in the schedule, so the advisor earns least on exactly the part that is worth most to you. You keep nearly all of that last stretch, which sounds good until you notice it also means they have the least reason to fight for it. Ask what the marginal rate is above a number you pick, and ask for it to go up there rather than down.
2. Ask what the minimum is, because most letters don’t have one. Only about a quarter of middle-market firms in that survey write a minimum success fee into the agreement. If yours is in that quarter, and your deal comes in small, the minimum can quietly become a large percentage of a modest price. Ask what it works out to against your realistic low case, not your hoped-for one.
3. The fee is usually charged on the headline, not on what you receive. If a third of your price is an earn-out you may never collect, and the fee is calculated on the full number and paid at closing, you’re paying today on money that isn’t yours yet. Ask for the fee on contingent money to fall due when the money does.
None of these are dishonest. They’re defaults, and defaults are written by the people who benefit from them. That’s exactly why they’re negotiable.
When an advisor is not worth it
3 situations where I’d tell you to keep your money.
You already have the buyer, the price and clean terms. If a credible buyer has made an offer you’d accept and the structure is straightforward, most of what an advisor adds has already happened. Pay a transaction lawyer instead. You’ll spend a fraction of it and get the part you actually need.
The deal is small enough that the fixed cost dominates. In my judgment, below roughly $2 million of enterprise value, running a real process costs about the same as running a big one, and the fee stops being worth what it buys.
You aren’t willing to run a process. The mechanism by which an advisor raises your price is competition. That means talking to many buyers, holding a timeline, and being willing to walk. If you’ve already decided you’re selling to one particular person, you’re paying process money for paperwork.
There’s a middle option worth naming. SaaS marketplaces will list you for a success fee too, usually lower than an advisor’s, and you run the process yourself. Published rates move around, so ask for the number in writing rather than trust a range. Then run it through the same test. If the answer came back at 5%, that needs a 5.3% lift over selling direct, and the question is whether a listing on its own does that.
What tips it toward an advisor is having no natural buyer, a business whose value needs explaining, or a first sale where you don’t know what’s normal. That’s when the week-by-week work an advisor actually does is worth more than it costs, and it’s why starting the conversation early matters more than the rate you negotiate.
Frequently Asked Questions
What does an M&A advisor charge?
In the US, about 6.3% of the price on a $5 million sale and 3.9% on $20 million, per a survey of 189 US advisors. On top sits a monthly work fee, typically $5,000 to $10,000, which 57% of firms credit back against the success fee at closing.
How do I know if M&A advisor fees are worth paying?
Convert the fee into the price lift it requires. A 6.3% fee on a $5 million sale needs about a 6.7% lift to break even if the retainer is credited, and 8.0% if it isn’t, because the advisor also takes a cut of the increase. If you believe they can beat that, the fee pays for itself.
Do I still pay if the deal does not close?
You pay the work fees already paid month by month, and no success fee, because the success fee is payable at closing. That’s why the work fee exists, and why a firm charging nothing up front is carrying that risk somewhere else in its pricing.
Should the fee be charged on an earn-out I might never receive?
Ask for it not to be. If part of your price is contingent, the fee on that part should fall due when the money does. Otherwise you’re paying at closing on proceeds that may never arrive.
Next Steps
The break-even test needs one number you may not have yet, which is what the business is actually worth. Get that first, then run any engagement letter against it.