Lehman vs. Double Lehman: How Business Broker Commissions Are Actually Structured

I still remember the first time a seller asked me to explain “Lehman vs. double-Lehman” on a business sale. I nodded like I knew exactly what he meant.

Then I went home and spent two hours with a legal pad trying to remember why anyone would name a commission structure after an investment bank that no longer exists. 😅

That was years ago. Since then I’ve sat through hundreds of these conversations, and I can tell you the confusion hasn’t gone away.

So let’s clear it up. No jargon walls. No fluff. Just the straight story on how business broker commissions actually work.

The Quick Definition (Read This First)

  • Lehman structure: One flat commission rate applied to the entire sale price.

  • Double-Lehman structure: A tiered rate where the commission percentage changes as the sale price climbs.

That’s the whole ballgame. Everything else is detail. But the details matter, so keep reading.

Where the Names Come From

Here’s the honest answer: nobody agrees. Some old-timers swear the terms came out of deal memos on Wall Street transactions. Others say it’s just shorthand that stuck. I’ve asked a dozen veteran brokers and gotten a dozen shrugs.

What I do know is this. The labels describe the math, not the bank. Don’t let anyone overcomplicate it.

How the Lehman Structure Works

Picture a simple listing agreement. Say the commission is 10 percent. The business sells for $500,000. The broker earns $50,000. Business sells for $800,000? The broker earns $80,000.

One rate. One calculation. Done.

This setup is clean, and sellers tend to like it because they can do the math in their head. Buyers like it too, or at least they stop asking questions. The catch? On larger deals, a flat rate can feel steep. Paying 10 percent on a seven-figure sale stings, and sellers know it.

How the Double-Lehman Structure Works

Now the tiered version. Here’s a typical example:

  1. First $1 million of sale price: 10 percent commission

  2. Portion above $1 million: 5 percent commission

Run the numbers on a $1.5 million sale:

  • Commission on the first million: $100,000

  • Commission on the remaining $500,000: $25,000

  • Total commission: $125,000

Compare that to a flat 10 percent Lehman on the same deal, which would run $150,000. The seller saves $25,000. The broker still does well. That’s why the double-Lehman is common on mid-market transactions.

Why Tiered Rates Exist

  • They align incentives. The broker still gets paid more as the price rises, just at a gentler rate.

  • They get big deals across the finish line. A buyer who balks at a flat fee will often accept a tiered one.

  • They look professional. A tiered structure signals the broker has done this before.

The Part Nobody Warns You About

Here’s my self-deprecating confession for the day. Early in my career, I quoted a seller a flat rate on a deal that ended up closing way above expectations. He paid a commission that made his eyes water, and honestly, he had a point. I learned two things from that episode:

  • Structure the deal for the outcome, not just the listing.

  • Put the fee schedule in writing and walk the seller through every tier. Surprises kill trust.

A quick checklist before you sign anything:

  1. Confirm whether the rate is flat or tiered

  2. Identify exactly where each tier breakpoint sits

  3. Ask what happens if the sale price lands just above a breakpoint

  4. Clarify who pays the commission and when

  5. Get the fee schedule in writing, every tier spelled out

Which One Should You Choose?

No universal answer here. It depends on deal size, industry norms, and how motivated you are to move the listing. My rule of thumb for sellers:

  • Smaller deals: a flat Lehman rate is usually simplest.

  • Mid-market deals: the double-Lehman structure often saves real money.

  • Larger deals: ask about tiered schedules, because a flat rate can get expensive fast.

For brokers, the reverse logic applies. A flat rate rewards you on smaller transactions. A tiered rate keeps you competitive on bigger ones.

The Bottom Line

Lehman vs. double-Lehman sounds like Wall Street trivia. It’s really just a question of whether you pay one rate or a staircase of rates. Know the difference, run the math on your own numbers, and get everything in writing. Your future self will thank you. 🙌

And if a broker tosses out the term and can’t explain it in plain English? That’s your cue to ask harder questions.