By Andreas Pettersson, Founder, Leaders ADAPT
Most owners know the headline number they want. Very few can tell me what they will keep from it. The gap between the price on the letter of intent and the money that lands in your account is made of fees, taxes, holdbacks and adjustments, and nobody hands you that list in one place.
I sold Arcules to Canon. The price was the part everyone asked about. The part I learned the most from was the list of things that came off it, and the things that were still technically mine but would arrive later, or never.
The cost to sell a business is the sell side agent's fee, the professional fees for legal, accounting, quality of earnings and valuation, the money held back in escrow or deferred, the taxes, and the costs that never appear on an invoice, such as your own time and the bonuses that keep key people through closing.
Quick answer: The cost to sell a business starts with the agent, around 10 percent for a broker on sales under $1 million and a sliding scale for an M&A advisor above that. Add legal fees, a quality of earnings report from about $25,000, accounting, tax advice and a valuation. Then escrow, often 10 percent of the price held back, and taxes, usually the largest line. Plan from net proceeds, not the headline.
Leaders ADAPT does not sell businesses. We are not a broker, an M&A advisor, a law firm or an accounting firm, and no firm named on this page pays us. Our exit readiness read is a fixed fee quoted after a first call. Every cost figure here is a third party's published number, linked with the month I read it. If their number has changed, their page wins. This page is not tax or legal advice.
What it costs to sell a business, in one table
The table is market figures only. Where I could not find a published number I trust, I say so rather than invent one.
| Cost line | Published market figure | Source, read October 2026 |
|---|---|---|
| Business broker commission | 8 to 15 percent on sales of $1 million or less, most often 10 percent, lower rate from $1 million to $5 million | BizQuest |
| Broker minimum fee | $10,000 to $25,000 for very small businesses | BizQuest |
| M&A advisor retainer and success fee | Retainer $5,000 to $50,000, often credited at closing, minimum success fee $35,000 to $50,000 | BizQuest |
| Business valuation by an appraiser | $1,000 to $20,000 | BizQuest |
| Commercial real estate broker, if property is in the deal | 4 to 6 percent of the property price | BizQuest |
| Quality of earnings report | $25,000 to $35,000 under $10 million in revenue, from $60,000 for larger companies | Eton Venture Services |
| Legal fees, sell side | No published benchmark I would stand behind. Get a written estimate by phase with a cap | Quoted by firm |
| Accounting and tax advice | No published benchmark I would stand behind. Ask for a fixed fee for the allocation and tax model | Quoted by firm |
| Escrow held back at closing | Median 10 percent of deal value across all deals in 2025, 2.8 percent on deals with R&W insurance | SRS Acquiom study via Fasken |
| R&W insurance premium | Around or slightly above 3 percent of the policy limit | Gallagher |
| Federal long term capital gains | 0, 15 or 20 percent by taxable income, for taxable years beginning in 2025 | IRS Topic 409 |
| Net investment income tax | 3.8 percent above $200,000 single or $250,000 married filing jointly, where it applies | IRS Topic 559 |
| Depreciation recapture | Gain up to prior depreciation on equipment taxed as ordinary income | 26 U.S. Code 1245 |
| State income tax | Varies by state, some charge none | Your tax advisor |
The lines do not add up the same way for every deal. An asset sale and a stock sale produce different tax bills on the same price, and the biggest costs in most sales are not on any invoice at all.
The sell side agent: broker commission or advisor fee
For most owners the agent is the largest professional fee. Which kind of agent you hire depends mostly on deal size, and I have written that comparison in full on business broker vs M&A advisor, including the Lehman scales. Here is only what matters for the cost picture.
A broker on a small sale charges a percentage at closing. BizQuest notes that a straight 10 percent on a $5 million sale would be $500,000, which is why brokers step the rate down as the price rises.
An M&A advisor charges a retainer up front and a success fee at closing, usually on a sliding scale. The retainer is the part you pay even if the deal never happens. The success fee is a percentage of the price, so it moves with the number the buyer pays, not with the hours the advisor spends.
Three things to check in any engagement letter before you sign. The tail, meaning how long after the engagement ends the agent still earns a fee if a buyer they introduced comes back. Exclusivity, and how you leave if the process stalls. And what the fee is calculated on. If the fee is calculated on total consideration, it can include money you have not yet received, such as an earnout that may never pay out.
Legal, accounting, quality of earnings and valuation
Owners underestimate these because each one looks reasonable alone.
Legal. Your deal lawyer drafts or reviews the letter of intent, runs the disclosure schedules and negotiates the purchase agreement, including the indemnity terms that decide how much of the escrow you keep. I could not find a published benchmark I trust, so I will not print one. Hire a lawyer who closes deals of your size every year, not your general counsel who wrote your leases, and ask for an estimate by phase with a cap on each.
Quality of earnings. A quality of earnings report rebuilds your profit from source records and tells a buyer what your adjusted EBITDA really is. Eton Venture Services puts a typical report for a business under $10 million in revenue at $25,000 to $35,000, with larger companies often starting at $60,000 and reaching six figures. The buyer pays for their own report. If you order a sell side report a year early, you pay for that one, and in my view it is the best money in this whole table. Our quality of earnings page explains what the report checks and why its number gets multiplied.
Accounting and tax advice. Separate from the QoE. Your accountant prepares the financials a buyer will rely on, and your tax advisor models the allocation of the price across assets and the after tax result under different structures. Ask for a fixed fee for the model. It will tell you which deal terms are worth fighting for.
Valuation. BizQuest lists appraiser valuations from $1,000 to $20,000. A broker may bundle a valuation into an upfront fee. Our page on EBITDA multiples by industry shows how the market prices companies of your size. It is not the price. The price is what a buyer pays after diligence.
Taxes: usually the largest line
Taxes are the biggest single cost for most owners, and the one they model last. A few federal facts, with the usual warning that your structure decides how they apply.
Long term capital gains are taxed at 0, 15 or 20 percent depending on taxable income. For taxable years beginning in 2025, IRS Topic 409 puts the 20 percent rate on income above $533,400 for a single filer and $600,050 for married couples filing jointly. The same page lists a 25 percent maximum rate on unrecaptured section 1250 gain from real property.
Depreciation recapture surprises many owners. Under 26 U.S. Code 1245, when you sell depreciable equipment for more than its adjusted basis, the gain up to the depreciation you took is treated as ordinary income, not capital gain. If you wrote off equipment fast, part of your gain comes back at ordinary rates.
The net investment income tax adds 3.8 percent for individuals above $200,000 of modified adjusted gross income for single filers and $250,000 for married couples filing jointly, according to IRS Topic 559. Whether it applies to your sale depends on whether you were active in the business and how the sale is structured. That is a question for your tax advisor, not for a blog.
In an asset sale, buyer and seller each report how the price was split across the assets on IRS Form 8594. The allocation is negotiated. The buyer wants more value on assets they can depreciate quickly. You usually want more on goodwill, taxed as capital gain. Same headline price, different after tax result. Then add your state, which can range from nothing to a meaningful share.
Not tax or legal advice. Take this section to someone qualified, a year before you sign a letter of intent.
The line items owners forget
This is the section I wish someone had shown me earlier. None of these show up on a professional's invoice.
Escrow and holdbacks. Part of the price is held back to cover claims after closing. In the SRS Acquiom study summarized by Fasken, the median escrow across all deals was 10 percent of deal value in 2025, and the median indemnity escrow alone was also 10 percent. On deals with representations and warranties insurance the median total escrow fell to 2.8 percent. Escrow is your money on paper. It arrives months after closing, if no claims are made, and it is not cash you can plan around on the day.
Representations and warranties insurance. The insurance shifts some of that risk to an insurer, which is why escrows shrink when it is used. Gallagher puts premiums around or slightly above 3 percent of the policy limit in 2026. On a $1 million limit that would be roughly $30,000 in premium, and who pays it is a negotiated term. The same study found insurance on about 46 percent of deals.
The working capital peg. Almost every deal adjusts the price at closing for working capital. Fasken reports purchase price adjustments in well over 90 percent of deals in recent years. The buyer and seller agree a normal level of working capital, the peg, and if you deliver less at closing, the price drops dollar for dollar. Owners who pull cash or delay payables in the last months often hand that money straight back.
Earnouts and deferred payments. Fasken reports earnouts in 24 percent of 2025 deals, with median earnout potential at 34 percent of the closing payment. That is a third of the money depending on results after you have handed over control. Our earnout page covers how to write one you can actually collect.
Retention bonuses. A buyer who depends on two or three of your people will want them locked in. Often the seller funds stay bonuses from the proceeds. If those people are only staying because you are, the bonus has to be larger. The key person risk page explains why.
Book cleanup. If your books close late, mix personal and business costs, or run on cash basis, someone has to fix them before diligence. You pay for that work either way, as a cleanup fee a year early or as a price cut at the end.
Your own time. A sale process takes months, and the owner is usually the person answering diligence questions at night. While you are doing that, nobody is running sales or pricing the way you do. A dip in results during the process can reopen the price. This is the most expensive line on the page for owner led companies, and it never appears in a fee quote.
Where AI fits in keeping the cost down
AI will not cut the agent's percentage. It can cut the hours that drive the other costs.
First, the data room. Most diligence delays come from documents scattered across inboxes and drives. An AI assistant pointed at your own files can pull customer revenue by year, list every contract with a change of control clause, and flag mismatches before a buyer's team does.
Second, the close. A finance team using AI tools can draft variance commentary and reconcile transactions faster, which makes a clean monthly close realistic a year before the sale. For companies running on EOS, our guide to AI for EOS companies shows where this fits the quarterly rhythm.
Where it does not belong is the decisions. Which offer, which structure, how much escrow to accept, when to walk away. Our page on what not to delegate to AI is the longer argument. AI can tell you what the purchase agreement says. You still decide whether to sign it.
What cutting the fees does not fix
Owners who read a page like this often try to save in the wrong place. A cheaper lawyer, no quality of earnings, a broker with a low rate. Usually the larger cost is somewhere else.
Cutting fees does not fix a company that depends on the owner. A buyer prices that dependence through a lower multiple, a bigger escrow, a longer earnout or a two year employment term for you. Each of those costs more than every invoice in the table above. The fix is a team that runs without you, which is leadership work, and it is what our leadership team development guide is about.
Cutting fees does not fix numbers a stranger cannot verify. Skipping the sell side quality of earnings saves $25,000 and can cost a multiple of that when the buyer's accountants find the problem during exclusivity.
And cutting fees does not fix timing. The cheapest sale is the one you prepare for 12 to 24 months ahead, when you can still change the answers. Our exit readiness checklist lists the 40 items a buyer will test, and prepare business for sale turns them into a plan.
Who is on the bench for this
Steve Shaw is the fractional CFO on the Leaders ADAPT bench. Steve has twenty years in finance leadership and works with owners on clean books, cash discipline, financial positioning before a sale, and the numbers conversation with buyers and lenders. The cleanup, the working capital history and the add back file are his ground, and they decide how much of this page you pay.
Thor Legvold is the leadership psychologist on the bench. He works on assessments, executive fit, team dynamics and the people decisions behind a sale. When the retention bonus question comes up, Thor is the one who tells you whether the person you are counting on can carry the company, or whether you are paying to keep someone who will leave anyway.
Sergey Dmitriev is the fractional CTO and AI systems partner on the bench. He builds and runs the AI and data work we deliver, including company knowledge systems, and trains leadership teams on AI tools with me. Technology diligence and the data room are where he starts.
Every engagement runs through Leaders ADAPT. I take the first call, match the partner, and stay in the room.
Cost to sell a business FAQ
What does it cost to sell a business?
Expect the sell side agent to take the largest fee, around 10 percent for a broker on a sale under $1 million and a sliding scale for an M&A advisor on larger deals. Add legal fees, a quality of earnings report at roughly $25,000 to $35,000 for smaller companies, accounting and tax advice, and a valuation. Then taxes, which are often the biggest line of all.
How much is a business broker commission?
BizQuest reports a typical broker commission of 10 percent on sales of $1 million or less, within a range of 8 to 15 percent, with a lower rate between $1 million and $5 million. Very small businesses often face a minimum fee of $10,000 to $25,000. Some brokers also charge upfront for a valuation. Read the engagement letter for the tail period and exclusivity terms.
Who pays for the quality of earnings report?
The buyer usually pays for the report they commission during diligence. A seller who orders a sell side report a year early pays for that one. Eton Venture Services puts a typical report for a business under $10 million in revenue at $25,000 to $35,000, with larger companies starting around $60,000. The sell side report is often the cheapest insurance on the price.
How much of the sale price is held back in escrow?
In the SRS Acquiom study summarized by Fasken, the median escrow across all deals was 10 percent of deal value in 2025. Deals with representations and warranties insurance had a median of 2.8 percent. That money is yours on paper and arrives later, if no claims are made. Treat it as a separate number when you plan what you will actually receive.
What taxes do you pay when you sell a business?
Federal long term capital gains rates are 0, 15 or 20 percent depending on taxable income, per IRS Topic 409 for 2025 tax years. Depreciation you took on equipment can come back as ordinary income under section 1245. A 3.8 percent net investment income tax may apply above set income thresholds, and most states add their own tax. Ask a tax advisor before you sign anything.
Are seller costs on a business sale tax deductible?
Selling expenses such as commissions and legal fees generally reduce the amount realized on the sale rather than being deducted like ordinary business expenses, which lowers the taxable gain. The treatment depends on the deal structure, the asset allocation and your entity type. This page is not tax advice, so take the full list of costs to your tax advisor before closing.
What costs do owners forget when selling a business?
Five come up most. The owner's own time away from running the company during a process that can last most of a year. The cost of cleaning up books before diligence. Retention bonuses for key staff the buyer wants to keep. Working capital adjustments at closing. And money held in escrow or paid later through an earnout, which is part of the price but not cash on the day.
How can I lower the cost of selling my business?
The fees are mostly percentages, so the cheapest move is to make the company worth more and easier to verify before you hire anyone. Clean monthly closes, documented add backs and a team that runs without you shorten diligence and reduce the escrow and price arguments. Negotiate the agent's fee scale and ask every professional for a written estimate with a cap.
Plan from the number you keep
Here is a step for tomorrow morning. Take the price you have in your head and write it at the top of a page. Below it, subtract the agent's fee at the rates above, a figure for legal and accounting, 10 percent for escrow, and a rough federal and state tax estimate from your accountant. Circle what is left. That is the number to plan your life around, and it is usually a surprise.
Then ask the harder question. How much of the gap is fees you cannot avoid, and how much is risk a buyer will charge you for because the company still runs through you. The second part is the one you can change, and it takes time.
What the first conversation looks like
It is a 30 minute call with me, not a sales rep. Bring the price you want and the page from this morning with the costs subtracted. I will tell you where I think a buyer will push the number, which costs on your list are risk you can still reduce, and whether an exit readiness read is the right next step. If the honest answer is that you are ready and need a broker or an advisor now, I say so.
If we go ahead, the read is a fixed fee quoted after that call. Steve, Thor and Sergey take the finance, people and technology parts, I take the whole, and you get a written view of what a buyer will find and what to fix first.
Your step for tomorrow morning: take the free assessments so I can see how much of the company runs through you, then read the exit readiness page and book the call. Find out whether you are ready for the exit you are now excited about, before you pay anyone a percentage.
