Guide
The minimum fee: what actually applies on a small deal
Updated
Every engagement letter in the lower middle market carries a minimum fee. On smaller deals it is the price, not a floor, so compare firms on their minimums.
Talk to a specialist Lehman and Double Lehman at your deal size, with the minimum fee, the retainer credit and the tail that decide what you actually pay.
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How this calculator works
- The Lehman formula and its Double Lehman variant are American conventions, not statutory rates: 5-4-3-2-1 percent on each successive million of deal value, and 10-8-6-4-2 percent on the doubled scale. Nothing obliges an advisor to use either, and larger deals are routinely quoted on bespoke scales that fall well below both.
- A MINIMUM FEE overrides the scale entirely below a certain deal size, and on small transactions it is usually the number that actually applies. Enter yours: on a $1,500,000 deal a $150,000 minimum is a 10 percent effective rate however gentle the published scale looks.
- Retainers may or may not be credited against the success fee, and the difference is the whole retainer. Ask which, in writing, before signing.
- This calculator prices the ADVISOR's fee only. Legal, accounting, quality of earnings and escrow costs sit outside it. The SBA's guidance on preparing a sales agreement tells sellers to note all adjustments, broker fees and any other aspects relevant to the terms.
- No US tax treatment is modelled. How a fee interacts with your proceeds depends on the deal structure. The IRS treats an asset sale as a transfer of separate assets requiring residual-method allocation. A stock sale usually realises capital gain or loss. That is a question for your own tax adviser, not for a calculator.
How it overrides the ladder
Double Lehman on a $1,500,000 deal produces $140,000. A $150,000 minimum produces $150,000, so the scale never applies at all and the effective rate is 10.00% rather than the 9.33% the ladder implies.
Drop the deal to $1,000,000 and the ladder gives $100,000 while the same minimum still gives $150,000, an effective rate of 15.00%. The smaller the transaction, the more completely the minimum governs, and the further the headline scale drifts from what you pay.
Why minimums exist
A sell-side process has a fixed cost floor. The information memorandum, buyer research, diligence support and negotiation take similar senior time on a $1.5M deal as on a $4M one. No ladder based on deal value can cover that at the bottom.
So a minimum is honest rather than sharp practice. What is sharp is publishing a gentle-looking scale and mentioning the minimum on page nine.
Compare on the effective rate, always
Run every quote you hold through the calculator on this page at your own expected deal value, with that firm's minimum and retainer entered. Compare the effective rate output, not the scale.
Two firms quoting 'Double Lehman' with minimums of $100,000 and $200,000 are quoting prices that differ by a factor of two on a $1.5M transaction. Nothing about the phrase Double Lehman tells you that.
When a minimum should make you walk
When it is large relative to your deal and the firm cannot say what it buys. A minimum funding a real process is defensible. A minimum that simply floors revenue on a mandate the firm is not excited about signals how it will be staffed.
Ask directly who will run the process day to day, and how many deals of your size that person closed last year. A firm charging a meaningful minimum on a small deal should have a confident answer.