By Brett Kaufman. 8 years using relationships to build sales pipelines, from political fundraising to a 7 figure business to running matchmaking for two communities. Over 1,000 introductions facilitated.

A finder’s fee for a business introduction is a payment you receive for connecting two parties who go on to do a deal, usually a flat amount or a percentage of what closes. It is legal in many situations, but not all: introducing investors to a company raising capital, brokering the sale of a business, and real estate each have their own rules, and the fee needs to be agreed in writing before you make the intro.

You know the scene. A founder you trust tells you she is selling her company. Two weeks later, at a dinner, an operator mentions he is looking for exactly that kind of business. You know both of them. You could put them together tonight with one text.

Before you send it, decide one thing. Is this a favor, or is this a fee?

I have facilitated over 1,000 introductions, and I run matchmaking for two communities. Make intros at any volume and that question finds you. What I tell people is simple: decide before the intro, never after.

I am not a lawyer. This article is general information, not legal advice. The rules depend on your state, the deal and what you actually do. Talk to your own lawyer before you agree to any fee.

How finder’s fees usually work

A finder introduces. That is the core of the role. You know who needs what, and you connect the two sides. You are not negotiating the terms, valuing the business, holding the money or running diligence.

The fee usually takes one of three shapes:

• Flat fee. A fixed amount paid when the deal closes, or sometimes when a first meeting happens. Simple, easy to agree to, and the least tied to deal size.
• Percentage of the deal. A share of the purchase price, the capital raised or the first year of revenue from a client you sent.
• A tiered scale. The best known is the Lehman formula: 5% of the first $1 million, 4% of the second, 3% of the third, 2% of the fourth and 1% of everything above $4 million. It is still used in some finder arrangements.

Illustrative math on that scale: a $3 million deal would pay $50,000 plus $40,000 plus $30,000, or $120,000. That is why people fight about these fees, and why you settle it on paper first.

Other terms that show up: a tail (you get paid if the two parties do a deal within, say, 12 or 24 months after your intro), a cap, and whether the fee covers only that deal or every deal between those two parties.

Put it in writing before the intro

The intro is your leverage. Once you send it, the two sides have each other’s numbers and you are optional.

So the agreement comes first. One page is fine. Here is what I would want on it:

1. Who is paying you. One side, not both, unless both know and agree.
2. Who you are introducing. By name. Not “potential buyers.”
3. What counts as an introduction. The first email? The first meeting?
4. The fee and when it is due. At close, from closing proceeds, in what form.
5. The tail. How long after the intro a deal still counts.
6. What you are not doing. You are not advising on price, negotiating, or handling funds. This line matters for the legal sections below.

Then make the intro, and log the date you sent it. That date is your proof. If you do not already keep an intro ledger, start with how to track introductions and referrals. The fee is just one more column on it.

The securities line: capital raising

This is the one that catches people. Again, I am not a lawyer. Read the sources and call one.

If you introduce investors to a company raising money, you are near a securities transaction. Under Section 15(a) of the Securities Exchange Act, people in the business of effecting securities transactions for others generally must register as brokers. The SEC’s guide to broker dealer registration lists “finders” among the people who may need to register, and asks a pointed question: does your compensation depend on the outcome or size of the deal? A yes is a warning sign.

That is exactly what a percentage finder’s fee is.

In October 2020, the SEC proposed a conditional exemption for finders who help small businesses raise capital from accredited investors. Then Chairman Jay Clayton said there had been “significant uncertainty for years” about finders’ regulatory status. The proposal had two tiers. A Tier I finder could only pass along contact information for one raise in 12 months. A Tier II finder could do more, short of advising on valuation. Both required a written agreement.

It was a proposal, not a final rule, so check sec.gov for its current status. Until a final rule says otherwise, the uncertainty Clayton described is the uncertainty you face. If someone offers you a percentage of a raise for introducing investors, that is the moment to call a securities lawyer, before you say yes.

The M&A line: introducing buyers and sellers

Introducing a buyer to a business owner can also involve securities, for example when the deal is a stock sale.

Congress created a specific path here. The Consolidated Appropriations Act of 2023 added an M&A broker exemption, Section 15(b)(13), for brokers working on the sale of privately held companies with EBITDA under $25 million or gross revenues under $250 million in the prior fiscal year. The SEC staff then withdrew its earlier 2014 M&A broker no action letter, saying the statute now covers that ground.

The exemption has conditions. Among them: the broker cannot hold the funds, cannot provide the financing, cannot bind a party to the deal, and the buyer has to be someone who will actively operate the company, not a passive investor. Read it with counsel. Do not read it as a blanket pass.

The state line: business brokerage and real estate

Federal law is not the only layer.

Some states treat brokering the sale of a business as real estate brokerage. Florida is a clear example. Its statute defines a broker to include anyone who, for compensation, takes part in procuring buyers or sellers of “business enterprises or business opportunities”. If that describes your intro and you are paid for it, you may need a license there.

Real estate referrals are tighter still. Florida, for example, disciplines licensees who pay a fee to an unlicensed person for referring real estate business. Many states have similar rules. If the deal includes the building, ask before you assume you can be paid.

None of this means you cannot make the intro. It means the fee, its size and its trigger may need to change, or be paid to a licensed party.

What this looks like day to day

Here is my view. The fee conversation is rare. The intros are constant. The money is not only in fees. It is in the referral partners who send things back, the operators who call you first, and the deals you hear about early. That is relationship capital, and it is why people who reciprocate become advocates.

What hurts is the intro you promised at dinner and never sent, or the one you sent with no record of when. Either one leaves you with nothing to point to if a fee was ever on the table.

The system behind the intro

I built FRONT OF MIND to keep the intro side of a network in one place. Say a name and a sentence out loud after the dinner, “she is selling, he is buying, talk fee first,” and it is filed under the event.

Every morning your 10 minutes for today shows intros to make this week, with dated proof on both sides so you know the reason is current. Each comes with a drafted text style message, 40 words max, and nothing sends without your tap. Ask Liala “who do I know that is an M&A advisor” and get the right people with why.

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Start free with your first 25 contacts and 1 intro, and see who comes up first.

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