The brokerage gap is the structural exclusion; the broker tax is what it costs the sellers who do get in the door. This playbook runs the seller's math on traditional fees, the retainer barrier, and the floor that turns most owners away before the conversation starts.
§ 01 · The fee6–12%, and a formula that hides it.
Traditional advisors charge success fees of 6–12% of final sale price, occasionally up to 15%. Two structural reasons drive the rate: the minimum-effort problem — the legal and administrative work to sell a $1M agency is roughly the same as a $5M one, so brokers load higher percentages onto smaller deals — and the Double Lehman tiered formula (for example 10% on the first million, 8% on the second) that obscures the blended cost and frequently inflates it versus a flat rate. The opacity is the point: a seller who can't easily compute the all-in number can't comparison-shop it.
§ 02 · The retainerPay-to-play.
On top of the fee sits a non-refundable retainer — $5,000 to $50,000 just to sign an engagement. It transfers deal-failure risk to the seller: if the agency doesn't sell or the owner withdraws, the money is gone. It also creates a misalignment — the retainer is a safety net guaranteeing the broker some compensation regardless of outcome, which softens the urgency to close.
§ 03 · The math$165,000 on a $2M sale.
The combined cost is concrete and verifiable.
| Cost on a $2M sale | Traditional broker | Flat 3%, on close |
|---|---|---|
| Success fee | 10% (typical) | 3% |
| Upfront retainer | $25,000 | $0 |
| Total transaction cost | ~$225,000 | ~$60,000 |
| Equity preserved | — | ~$165,000 |
$165,000 on a $2M sale is not a discount — it is equity the seller created, returned to the seller. For an owner whose agency is their retirement, the fee structure is a line item that belongs in the retirement math.
§ 04 · The floorAnd the DIY trap below it.
The fee only matters if a broker will take the deal — and most won't. To justify their overhead, reputable firms enforce a hard floor, declining agencies under roughly $5M of enterprise value. Combined with the punishing small-deal percentages, that floor excludes about 84% of independent agencies — the $250K–$1.5M squeezed middle. Priced out of professional help, many owners sell alone, and the do-it-yourself route typically produces severe undervaluation, weak legal terms, and no competitive tension — frequently costing more in lost value than the fee would have. The structural answer is a model with no floor and no retainer: a flat 3% success fee paid only on close, the commercial term the squeezed middle was built around. (The 3% is the commercial reality; third-party legal, escrow, and closing costs still apply.) The structural backdrop is in the brokerage-gap analysis.
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Terminology on this shelf
- Broker tax
- The combination of 6–12% success fees and $5K–$50K retainers that erodes seller equity in traditional M&A.
- Double Lehman
- A tiered commission formula (e.g. 10% / 8% / 6%) that obscures the blended rate and often inflates it.
- Pay-to-play
- Requiring a non-refundable retainer to engage, transferring deal-failure risk to the seller.
- Enterprise-value minimum
- The ~$5M floor below which most brokers decline — excluding ~84% of agencies.
- Net proceeds
- The cash the seller actually keeps after every transaction cost, fee, and tax.
- Success fee
- A fee paid only when the deal closes — Milly's is a flat 3%, with no retainer.