The income of business acquisition advisors depends upon their skill at signing up clients, their workmanship and the scope and kind of work they do for clients.
Don’t be fooled!
You can easily see what fees and terms are prevalent in the marketplace. One way to do so is to Google: Business Acquisition Advisory Fee. The last time we did that about 311,000,000 results were found. There was informative insight available by simply clicking some of the results. If you want to know about how business brokers, who are paid by buyers instead of or in addition to earning commissions from sellers, Google: Business Acquisition Advisory Fee + business broker.
And then conduct further research to see the specific tasks that service providers perform and their fees and other terms of service.
This method puts you in control. You don’t have to ask us about it. The marketplace represents reality, which is the basis for astute business decisions.
One of the ways to improve the probability of success, in a business advisory (or brokerage) practice, is to avoid being a one-product/service shop. Diversify! (Use the search box at the bottom of this website’s webpages to see more about this: diversify.)
We price our services to be competitive.
Business Buyer Advocates price their advisory fees on the basis of the value they and their clients believe will be derived from their engagement. They also consider the scope of the assignment, the complexity and financial size of the client’s potential business merger or acquisition.
The predominant way Business Buyer Advocates get paid for their service is with the client paying an upfront nonrefundable fee (which repels the less-than-serious potential buyers) plus progress (milestones) and/or completion fees (done deal).
Example of fees proposed by Business Buyer Advocates
We don’t know the amount of revenue earned by Business Buyer Advocates. They don’t share that kind of information with “Partner” On-Call Network, LLC. But some of them tell us how they set their fees.
As of February, 2017, here is how some Business Buyer Advocates, targeting a certain category of potential clients, propose fees:
The total amount of the professional fee is commonly based upon the Lehman Scale, which is 5%-4%-3%-2%-1% of each million dollars comprising the price of the acquisition transaction. On transaction values below one million dollars, the total fee can be up to 6% of the price of the acquisition transaction. Another way they price their total fee is an upfront commitment fee plus a completion (done deal) fee of 2% to 3% of the price of the acquisition transaction.
Here’s a common way clients pay fees: An upfront commitment fee of $10,000 to $20,000. And then, sometimes, monthly progress payments of $3,000 to $5,000, which are credited against the total fee. And then upon achievement of a done deal, clients pay the remaining portion of the completion fee.
Business Buyer Advocates, during the startup phase of their advisory practice may price their fees lower than the more experienced advisors, or they may agree to work on relatively smaller-value transactions.
The Bottom Line
It is the personal capability and performance of professional advisors that determines their income and their success. You, like us, have seen many well-educated and experienced people failing when they tried to operate an advisory practice. This occurs, usually, because these practitioners do not adhere to industry best practices and/or they do not effectively market themselves to attract prospective clients.