Why We Changed Our Commission Structure
Updated on September 8, 2021
The only constant in both business and life is change (well, and taxes).
In the beginning, when we were AdsenseFlippers, we were known as the “20x Guys.” Now, that has changed significantly.
We rebranded to Empire Flippers and started giving higher and more accurate valuations of businesses using our automated valuation tool that goes off actual past sales data.
Fast forward to 2021, we’ve now sold 8 figure businesses and sold over $80 million worth of online businesses in 2020 alone. 2021 has got off to a similar start, in the second quarter we saw our highest ever seller submissions.
It’s truly great to see that our marketplace continues to grow, and we plan to change our commission structure to reflect that.
We’ve always been the best value for the money compared to other brokerages for both buyers and sellers.
Do other brokers charge less? Some do, but few can match the value that we bring to the table. We have entire teams in place for every step of the sales process, unlike our competitors.
Our audience is the biggest and we have one of the most well-read blogs in the industry. We’ve also been able to hit the Inc. 5000 list four years in a row. All of this means we have one of the largest groups of buyers and sellers in the industry, which tends to lead to faster sales and acquisitions for our customers.
Because of this, we felt that our tiered commission structure was more than justified and the majority of our customers have agreed with us.
However, with the online business mergers and acquisitions (M&A) world growing at such a rate, we felt that we needed to change to keep up.
By making this change, we can still be the best-valued M&A brokerage in the online business space that is as attractive as possible to entrepreneurs of all sizes.
How Does Our New Commission Structure Work?
The new commission is blended, meaning the commission rates are stacked on one another based on the value of the business.
Here’s how it breaks down:
Under $700,000 – Commission will be a flat 15% on the sale price.
The value of the business between $700,000 and $5M – Commission will be reduced to 8% on the amount above $700,000 and below $5,000,000.
The value of a business above $5 million – Commission will further be reduced to 2.5% on the amount above $5,000,000.
For example, if a business is listed for $1 million:
$700,000 of the value will have a commission of 15% = $105,000
Plus 8% commission on the remaining $300,000 value = $24,000
Total = $105,000 + $24,000 = $129,000 commission
If a business is listed at $5 million:
$700,000 of the value will have a commission of 15% = $105,000
Plus 8% commission on the remaining $4,300,000 value = $344,000
Total = $105,000 + $344,000 = $449,000 commission
Remember, the same rule applies as you move above $5M, the remaining value would have a low commission rate of 2.5%.
To view the commission you would pay on the listing price of your business, you can use our commission calculator here.
Why Did We Change Our Commission Structure?
We wanted to smooth out the jumps in our initial pricing tiers, in particular for the growing number of multi-million dollar businesses listed with us.
Sellers listing their businesses with a value on the cusp of our current tiers could see a sizable difference in the amount of commission that they would have to pay.
For example, if a business was listed for $4.9 million effectively, the commission would be close to $400,000, but if the business was to get over the $5 million price point, that commission amount comes down to around $250,000.
Understandably, sellers would want to find a way to narrow the gap between those two values on a multi-million dollar sale.
Our initial tiered commission was always a stop-gap to meet the needs of a growing marketplace. Additionally, our very low commission rates for high-value businesses, particularly for eight-figure businesses, were put in place to help us put our money where our mouth is and were only meant to be implemented for a finite amount of time.
Now that we have successfully sold multiple eight-figure businesses, we feel confident in our ability to adjust the commission to better reflect the value that we’re delivering and to scale with the size of the business.
We reviewed all of our past sales data and analyzed the competitive landscape of other M&A brokerages in the space to help us make this decision.
The new blended commission structure not only makes for more logical commission rates but also still makes us the clear choice for value and service. Our sellers are still walking away with their best possible exit with the most money in their pockets.
Remember—when you do decide to sell your business, we will be there throughout the entire process, taking the friction out of achieving a profitable exit.
Are you ready to sell your business? Click here.
Photo Credit: Maxisports
