If you have never sold a business before, the way a broker gets paid can feel opaque. I hear some version of this every month from London owners who call after quietly testing the waters: I do not mind paying a fair fee if you get it done, I just want to know what fair looks like. The short answer is that commission structures vary with deal size, complexity, and the level of service. The longer answer is worth your time, because a few lines in a listing agreement decide tens of thousands of dollars at closing.
This guide unpacks how commissions and success fees work with business brokers in London, Ontario, why certain models exist, and how to read the fine print so you know what you will net, not just what you will gross. Along the way I will show math with real numbers, flag common pitfalls, and share a couple of London specific quirks.
How business brokers in London actually earn their fee
The work spans months, sometimes a year from first valuation discussion to closing. A diligent broker will price the business, prepare a confidential information memorandum, design a buyer list, run outreach, screen and educate buyers, stage management meetings, coordinate due diligence, and keep lawyers and accountants rowing in the same direction. Most of that work happens before a buyer wires a dollar. The commission is designed to cover two things, the cost of that uphill push and the incentive to get the deal across the line.
In this market, brokers earn most of their compensation when the deal closes. Retainers and expense reimbursements help offset upfront work, but the lion’s share is a success fee paid out of proceeds. Sellers often pay it, though buy-side mandates are increasingly common when an entrepreneur wants help to buy a business in London or elsewhere in Southwestern Ontario.
Typical who pays what in Ontario
For sell-side mandates, the seller pays the commission at closing. It is usually deducted from the purchase price by the lawyer in trust and remitted to the brokerage, with HST added. If there is a buyer’s agent, the listing brokerage often shares a portion, but that split is invisible to the seller. The seller still pays the full agreed commission.
For buy-side engagements, the buyer signs a retainer and success fee agreement. The fee might be a percentage of enterprise value, or a flat amount with a minimum. Sometimes the buyer asks the seller to contribute to fees in the purchase agreement. It happens, but it is not standard and depends on how competitive the situation is.
The five most common commission models you will see
- Straight percentage on total transaction value, often 8 to 12 percent for small businesses under roughly 1 million dollars, with minimum fees that can range from 15,000 to 50,000 dollars depending on the brokerage. Tiered or scaled percentage, such as a Double Lehman or modified Lehman formula that steps down as price increases, more common once values cross 2 to 3 million dollars. Percentage plus retainer, where a modest, nonrefundable retainer is credited against the success fee at closing. Flat minimum plus a smaller percentage, useful for very small transactions or asset-only deals with limited upside. Buy-side retainer plus success fee, paid by the acquirer, typically 2 to 5 percent with a floor, tied to enterprise value including assumed debt.
A few London firms offer hourly consulting for discrete tasks, such as valuation or sale-prep coaching, but when it comes to running a process, the market expects a performance-based fee.
Why ranges exist, and when 10 percent is not really 10 percent
I can hear the internal wince on first read: Ten percent on a 900,000 dollar sale is 90,000 dollars, that is steep. The gut reaction is fair. But fee levels reflect deal friction, not just deal size. Below about 1 million dollars, it is unusual to have audited financials, dedicated finance staff, or a mature management team. Buyers need more handholding, lenders ask for more explanation, diligence takes more broker time. One of the better known small business agencies in town told me they close roughly one in three sell-side engagements they take, and they are selective. That failure rate is not laziness, it is market reality for owner-operated companies. The price has to cover the time and risk across wins and losses.
On the other hand, once you get into the lower mid-market, say 3 to 10 million dollars in enterprise value, buyers are more sophisticated, diligence is cleaner, and a tiered structure lines up incentives on bigger dollars without overpaying for the top slice. That is where a Double Lehman or a negotiated ladder makes sense.
A look inside common structures, with London-flavoured examples
Straight percentage with a minimum. Picture a successful HVAC contractor in east London with 1.1 million dollars in EBITDA and 4.2 million dollars in revenue. The owner wants to retire, but there is customer concentration and weak second-tier management. A broker sets expectations at 4.25 to 4.75 times EBITDA given risk factors and the current appetite of local and GTA buyers. They agree to a 9 percent success fee with a 40,000 dollar minimum and a 10,000 dollar retainer credited at close. If the deal closes at 4.7 million dollars, the fee is 423,000 dollars plus HST, less the retainer already paid.
Tiered or Double Lehman. London has a steady stream of manufacturing and distribution deals in the 2 to 6 million dollar range. Here a tier often looks like 5 percent on the first 1 million dollars, 4 percent on the second, 3 percent on the third, 2 percent on the fourth, and 1 percent beyond that. On a 5 million dollar sale, that math yields 150,000 plus 120,000 plus 90,000 plus 40,000 plus 10,000, or 410,000 dollars. Some firms use a Double Lehman early in the tiers, which would be 10, 8, 6, 4, 2 percent, then negotiate a cap or step-down above a threshold. Double Lehman sounds rich until you do the math; at 5 million dollars it totals 1 million dollars under a pure Double Lehman, which is rarely used in full here. Most London brokers apply a modified version that tops out far earlier or switches to a flat low single-digit rate above 3 million dollars.
Hybrid minimum plus percentage. For a small retail shop on Richmond Row selling for 220,000 dollars as an asset sale, a broker might quote 12 percent with a 20,000 dollar minimum. If the business goes for 180,000, the minimum applies. On a sale at 260,000, the fee would be 31,200 dollars.
Buy-side example. An entrepreneur relocating from the GTA wants to buy a business in London, Ontario, ideally in B2B services with 500,000 to 1 million dollars in EBITDA. A buy-side engagement might run with a 5,000 dollar per month retainer for up to six months, fully creditable, plus a 3 percent success fee on enterprise value with a 75,000 dollar floor. That fee gives the broker cover to pound the phones on off market business for sale leads, talk to quiet owners, and get beyond the usual businesses for sale London Ontario postings you see on marketplaces.
The nuts and bolts that move numbers more than the headline rate
The headline percentage is not the only number that matters. Three clauses shift real money at closing: the definition of Transaction Value, the treatment of working capital, and the tail period.
Transaction Value. Good agreements define it to include all forms of consideration. Cash at close, assumption or payoff of debt, earnouts, notes, consulting or employment agreements tied to the sale, non-compete payments, and even equity rolled into a buyer’s holding company can be included. If a 2 million dollar price is split into 1.5 million at close and a 500,000 dollar three-year earnout, most brokers expect the fee on the entire 2 million, with the earnout portion paid when it is received. Ask for examples of how the firm has handled earnouts and vendor take-back notes in past deals.
Working capital. In London we often see asset deals where inventory is extra at landed cost. Some brokers treat inventory as part of Transaction Value, others carve it out. Same with excess cash or normalized net working capital pegs. These choices swing fees by five figures. Press for clarity in writing.
Tail period. Nearly every listing agreement includes a tail, usually 12 to 24 months after the agreement ends. If the buyer who closes during that time was first introduced during the mandate, the fee is still owed. This protects the broker from having a seller wait out the term then deal with a buyer that the broker found. Tail clauses should cover only named or registered buyers, not the entire world. Ask the brokerage to keep and share a running register.
What London sellers actually sign, based on deal size
Micro deals under 300,000 dollars. Expect 10 to 12 percent with a 15,000 to 25,000 dollar minimum, retainer optional, often credited. Marketing expenses are sometimes extra 1,500 to 3,500 dollars for photography, listing placement, and CIM design.
Owner-operated businesses 300,000 to 1.5 million dollars. The most common quote is 8 to 10 percent plus HST, minimums 25,000 to 50,000 dollars. Retainers between 3,000 and 10,000 dollars are normal with better prepared firms. If you see 6 percent in this bracket, ask what is omitted, because the broker may not be funding outreach beyond their buyer list.
Lower mid-market 1.5 to 10 million dollars. Tiered structures are standard. You might see 5, 4, 3, 2, 1 percent by million-dollar tranche, or a custom ladder. Minimums matter less at this size, and retainers rise to 10,000 to 20,000 dollars a month for heavier research or when courting strategic buyers. Larger mandates often attract boutique M&A advisors rather than classic small business brokers.
HST, deductions, and what actually hits your bank account
In Ontario, HST applies to brokerage fees. If your success fee is 200,000 dollars, your lawyer will wire 200,000 plus 26,000 dollars HST to the brokerage. Build this into your net proceeds math. Remember, the sale of shares in a Canadian controlled private corporation can be structured to reduce or eliminate tax via the Lifetime Capital Gains Exemption if you qualify, but that is a tax conversation for your accountant. The HST on fees is separate and unavoidable.
Also expect adjustments for working capital targets, prorated expenses, and holdbacks. It is common to see 5 to 10 percent of the price held in escrow for a year to cover representations and warranties. Your broker’s fee is usually paid on the gross price, not the net after holdback, with the earnout portion carved out and paid later as earned.
Co-brokerage, dual representation, and conflicts you should ask about
London is a collaborative town. I have co-brokered with firms from Kitchener, Windsor, and Toronto when they have a buyer with a strong thesis. When a co-broker brings the buyer, the selling brokerage typically shares its commission, often splitting 50, 50 with the cooperating agent. The seller pays the same total. Co-brokerage can speed a process.
Dual representation is trickier. It happens when the listing broker also works directly with the buyer. The law allows it with informed, written consent, and many smaller deals proceed that way. Be clear about what that means in practice. The broker cannot advocate for one side against the other. In my files, the most contentious points in dual deals were earnout definitions and working capital pegs, exactly where a strong advocate helps most. If your listing agent hints that a faster close requires working with their buyer and limiting outside exposure, press for a shorter exclusive marketing window so you can still test market interest.
Off market searches and why those fees look different
Owners often say, I do not want my staff spooked, can we sell quietly. You can. An off market business for sale process relies on targeted calls to a curated list, quiet outreach to strategics, and one-to-one introductions. It is time intensive, and response rates are low. That is why a retainer shows up more often for quiet processes. If you engage a firm for a buy-side search to find a small business for sale London Ontario wide, expect meaningful retainers. Those retainers pay for research tools, data subscriptions, and a steady drumbeat of personalized calls, the kind where a principal says I run a company, I am not selling, but I will buy you a coffee to talk. That coffee sometimes turns into a deal no marketplace ever saw.
Real math with Ontario specific wrinkles
Example A, selling a bakery-cafe in Old East Village. Asset sale at 375,000 dollars, plus inventory at cost of 28,000 dollars, no debt assumed, close in 90 days. Commission at 10 percent with a 25,000 dollar minimum, marketing expense of 2,000 dollars agreed. If the agreement defines Transaction Value as purchase price excluding inventory, the fee is 37,500 dollars plus HST. If it includes inventory, the fee is 40,300 dollars plus HST. At closing, the trust ledger will show deductions for the brokerage fee plus HST, legal fees, and adjustments for prepaid rent and utilities.
Example B, selling a light manufacturing company near the 401. Share sale at 4.6 million dollars, with a normalized net working capital peg and a 10 percent holdback for 12 months. Modified Lehman fee structure, 5 percent on the first 1 million dollars, 4 percent on the second, 3 percent on the third, 2 percent on the fourth, and 1 percent on the remainder. Commission is 50,000 plus 40,000 plus 30,000 plus 20,000 plus 6,000, totalling 146,000 dollars plus HST. The 460,000 dollar holdback does not reduce the fee at close. The seller receives the remainder net of legal fees, adjustments, and tax planning outcomes.
Example C, buying a business London area roll-up. A local investor wants to acquire three HVAC service firms over two years. He signs a buy-side agreement at 2.5 percent of enterprise value with a 60,000 dollar minimum per closed deal and a 7,500 dollar monthly retainer credited at close. On a 2.2 million dollar deal where the buyer assumes a 300,000 dollar equipment loan and pays 1.9 million dollars in cash, the fee is calculated on 2.2 million dollars, 55,000 dollars per percent times 2.5, or 137,500 dollars, less the retainer paid to date.
Negotiating fee terms without poisoning the well
You do not need to grind a broker to get a fair structure. The better approach is to match the fee to the work and the risk. When a seller shows organized financials, a clean ownership structure, and a realistic range on value, many London brokers sharpen the pencil. When the plan hinges on reaching private equity buyers or out-of-province strategics, a retainer can be the difference between a half-hearted email blast and a real search.
These negotiation points often land well:
- A success fee that steps down above a defined break point, tailored to your valuation range. A retainer that is fully creditable and ceases after a certain milestone, such as the signed LOI. An explicit exclusion of inventory from Transaction Value for asset deals, or a cap on what counts if inventory fluctuates seasonally. A shorter exclusive period, say 90 to 120 days, with an automatic 60-day extension if you are under LOI with a qualified buyer. A named-buyer carveout if you have already been approached by a specific company, with a reduced fee for that buyer only.
The goal is not to underpay, it is to pay for performance, with both sides confident they will be treated fairly as the deal structure evolves.
The role of brand and market coverage
You Get started will see names around town. A few boutique firms focus on restaurants and retail. Others carry a broader portfolio of companies for sale London and across Southwestern Ontario, from service contractors to small manufacturers. I have interacted with teams from Liquid Sunset Business Brokers and Sunset Business Brokers on cross-border buyer inquiries, and with independent advisors who keep a tight local book. Brand can matter for inbound inquiries, but the individual broker matters more. Ask who does the calling, who writes the CIM, and who is on the phone when the buyer’s accountant pushes back on add-backs. If the senior person is only at the first meeting, you are buying a logo, not an advisor.
What a strong broker is actually doing for that fee
Some owners assume the broker will post a business for sale in London, Ontario on a marketplace and wait. A few do. The better ones push. They build a researched buyer list, run targeted outreach, call decade-old contacts, and keep a disciplined cadence. They coach you on what to say in management meetings and when to let silence work. They hold the line when a buyer tries to widen the definition of normalized working capital the night before closing. That judgment is what you are buying. In healthy mandates I have watched good brokers pay for their fee twice, once by finding more buyers, and again by defending value during diligence.
A note on regulation and professional standards
In Ontario, selling the shares or assets of a business that do not include an interest in real estate is not regulated by the Real Estate Council of Ontario. If the sale includes the transfer of a commercial property or a lease assignment can be considered the provision of services related to real estate, RECO rules can come into play. Many business brokers partner with a licensed real estate salesperson or broker for the property component. Ask who will handle the lease assignment or property sale, and make sure the scope and fees are clear. Whether or not RECO applies, you still want an engagement letter that sets out duties, confidentiality, and fees in plain language.
How buyers see the fee, and why your preparation lowers it indirectly
Serious buyers in London and from the GTA do not flinch at a brokered deal. They prefer it. They know there will be a data room, a timeline, and a counterpart who returns calls. What does make buyers grind is chaos, poorly prepared financials, and sudden surprises. The more disciplined your prep, the stronger your negotiating position and the less likely a painful retrade that leaves everyone grumpy about fees that felt fine on day one.
A short checklist before you sign
- Ask for a one-page fee summary with defined Transaction Value, earnout treatment, and inventory treatment. Confirm the tail period applies only to named buyers, and get a running buyer register. Request two references for deals closed in the last 18 months in your revenue bracket, not just any deal. Clarify marketing expenses, what is included, what is extra, and who owns deliverables like the CIM. Align on an indicative valuation range and how a tiered fee would apply within it, with a quick example in writing.
Where to start if you are unsure
If you are not ready to engage, spend a month getting your numbers into shape. Clean trailing twelve-month financials, customer concentration by revenue, add-back schedules, and a list of equipment with approximate fair market value. With that in hand, have informal conversations with two or three business brokers London Ontario offers. Include at least one boutique and one firm that handles lower mid-market mandates. If you are leaning toward buying a business in London, call a broker with buy-side experience and ask them to walk you through a sample outreach plan to owners, not just a plan to comb public listings for a business for sale in London.
When you hear a quote that sounds high or low, do the math with your likely sale price and ask how the fee changes if you land 10 percent below or above the target. Then decide based on fit, not just the cheapest number. A fair fee for a broker who brings the right buyers and defends value is money well spent. A cheap fee that buys a thin process and a weak close costs more than it seems.
London is a city of practical operators. The best brokers here reflect that. They avoid fluff, return calls, and keep steady pressure from first teaser to final wire. Get the structure right up front, and both sides can focus on the work that actually closes deals.