What Success Fees Should Actually Look Like in 2026

The success fee is the single largest single payment most founders make in their lives. On a 60 million dollar transaction at a 2 percent fee, the banker collects 1.2 million dollars when the wire hits. On a 30 million transaction with a 250K minimum, the banker collects close to the same percentage with a lot less revenue cap. The math matters, and most founders sign engagement letters without ever benchmarking the numbers against what other firms would charge for the same work.

This guide walks through what 2026 fee structures actually look like in the lower middle market, where they bend, what minimums and tails to expect, and how to evaluate a quote against the market.

The base success fee

Success fees in the lower middle market fall into a tight range once you control for deal size. As of 2026, here is what is normal:

• Deals below 10 million enterprise value: 5 to 8 percent of total transaction value, often with a minimum fee in the 200K to 400K range.
• Deals from 10 to 25 million: 4 to 6 percent.
• Deals from 25 to 75 million: 2.5 to 4 percent.
• Deals from 75 to 200 million: 1.5 to 2.5 percent.
• Deals from 200 to 500 million: 1 to 1.5 percent.
• Deals above 500 million: typically under 1 percent, often with a tiered Lehman variant.

These are the percentage of total transaction value, including cash, stock, assumed debt, earnouts, and rollover equity. Bankers will often try to base the fee on "enterprise value" rather than "transaction value," and the difference between the two is where most fee disputes start.

The classic Lehman scale

The original Lehman formula, dating back to the 1960s and still occasionally used in smaller transactions, is 5 percent of the first million, 4 percent of the second million, 3 percent of the third, 2 percent of the fourth, and 1 percent of everything above. On a 10 million deal, that produces a fee of 140K, or 1.4 percent of the total.

Almost nobody uses the classic Lehman in pure form anymore. It produces fees that are too low for advisors to take seriously in modern processes. But variants of it still appear in engagement letters, and you should know what you are reading when they do.

Modern Lehman variants

What you will see in 2026 is usually a modified Lehman, often called "double Lehman" or "triple Lehman." Double Lehman doubles each tier: 10 percent of the first million, 8 percent of the second, 6 percent of the third, 4 percent of the fourth, and 2 percent of everything above. On a 25 million deal, that produces a fee of 700K, or 2.8 percent of the total. Triple Lehman triples each tier and shows up on smaller deals where bankers want a higher floor.

An equally common structure is the "step-up" or "reverse Lehman," where the rate increases above a target enterprise value. For example, 2 percent on the first 80 million, 3 percent on value from 80 to 100 million, and 4 percent on value above 100 million. This aligns the banker's incentives with maximizing price above an expectation level, which sounds good in theory and works only when the expectation level is set honestly. If the banker sets the threshold at a number they already know is reachable, the step-up is just a hidden rate increase. Run the math against your realistic outcome range, not just the headline rate.

The minimum fee

Almost every engagement letter for deals under 50 million includes a minimum fee. This is the banker's way of saying: regardless of where the deal lands, we are not getting out of bed for less than X. Minimums in 2026 typically range from 250K to 750K depending on firm size and deal complexity.

Minimums are reasonable. The work in a sell-side process is the same whether the deal closes at 20 million or 35 million. What you need to watch for is the gap between your expected outcome and the minimum: if a 5 percent fee on a 12 million deal is 600K but the minimum is 500K, you are essentially at the minimum. The percentage on the deck is decorative. Always solve for the dollar number on your downside case.

The retainer

Boutique advisors typically charge an upfront retainer, often in the 50K to 250K range, payable in installments over the first few months of the engagement. The retainer is sometimes credited against the success fee at closing, sometimes not. Read this clause carefully. "Creditable against the success fee" is the founder-friendly version. "Non-refundable monthly retainer" with no credit is the banker-friendly version.

A small retainer (under 50K) is reasonable across the market. A large non-creditable retainer is a sign that the banker wants to be paid regardless of outcome, which usually means they suspect the outcome is uncertain.

Treatment of non-cash consideration

Most deals are not all-cash. The fee on cash is easy. The fee on stock, earnouts, rollover, escrow, and assumed debt is where the negotiation lives.

Stock: should be valued at the closing-date market value if public, or at the same value the parties used in the purchase agreement if private. Founders sometimes get away with a haircut on the fee for restricted stock with long lock-ups, on the theory that the value is uncertain. Bankers resist this. Reasonable middle ground: full fee on the stock value at closing, with the founder bearing the risk of any decline.

Earnouts: this is where most fee fights happen. The banker wants to be paid on the total potential earnout. The founder wants to pay only on the earnout that actually gets paid. Standard 2026 practice is some version of: a portion of the fee is paid at closing on the cash portion, and the earnout fee is paid on amounts as they are earned. Bankers will sometimes push to be paid on the present value of the maximum earnout at closing, which is aggressive. Push back.

Rollover equity: typically counted at face value into the transaction value, with the fee paid in cash at closing. This is sometimes painful because the founder is being asked to pay banker fees in cash on equity they have not monetized. Pre-negotiate this if rollover is likely.

Tail clauses

Tail clauses survive the engagement. After the engagement letter terminates, the banker still gets a fee if you close a deal within the tail period with anyone the banker introduced or contacted during the engagement. Standard tail in 2026 is 12 months. Aggressive bankers will push for 18 to 24 months.

The tail itself is fair in principle. The problem is when the tail is paired with a loose definition of "introduced." An aggressive engagement letter says the tail covers any party the banker emailed during the engagement. A more reasonable one limits it to parties on a pre-agreed buyer list, or parties who actually signed an NDA and received information.

Our tail clause guide covers the worst-case scenarios in detail. The single most important sentence in the engagement letter is the one that defines who the tail applies to. Read it twice. Then read it again.

Expense pass-throughs

Bankers typically pass through out-of-pocket expenses (travel, third-party fees, data room costs, printing) at cost. This is reasonable. What you want to avoid is an open-ended expense bucket with no cap. A 50K to 75K total cap on expenses for a 9-month process is normal. Anything materially above that should require your written consent.

Some firms try to bill for "in-house" services like graphic design, financial modeling templates, or industry research. Push back on these; they are part of the success fee. The advisor is being paid 2 percent of a 100 million deal to bring their judgment, their relationships, and their team. They are not entitled to charge separately for the team.

Benchmarking the quote you have

If you have an engagement letter in front of you and you want to know whether the fees are market, do this exercise. Take the headline success fee percentage. Multiply it by your realistic outcome range (low, base, high case). Add the retainer. Add an assumption about expenses. Compare the all-in dollar fee to the ranges above. If you are within 10 percent of normal, you are in the market. If you are 25 percent above, you have leverage to push back. If you are 50 percent above, the firm is taking advantage of the fact that you have not benchmarked.

And before you sign anything, read founder-verified reviews of the firm at BankerNotes. The fee structure is one input. The actual outcomes founders got from this firm are a much better predictor of value than the headline rate.