So, let’s address the elephant in the room first: the Lehman Scale takes its name from the infamous Lehman Brothers that developed this method in the late 1960s to bring under control and standardise the market of private bankers’ finders fee.
Instead of having a wide variety of percentages that would drastically change according to transaction sizes, the bank came up with a fix method to define the compensation for this kind of activity.
The traditional Lehman Formula works as follows:
- 5% of the first 1 million raised from investors
- 4% of the second 1 million raised from investors
- 3% of the third 1 million raised from investors
- 2% of the fourth 1 million raised from investors
- 1% of everything above 4 million raised from investors.
After the ‘70s the formula was changed and adjusted in order to compensate for the rocketing inflation and in some cases a ‘Double Lehman’ (10% – 8% – 6%…) or similar variations were introduced to keep the fees relevant. Read Wikipedia’s or Investopedia’s articles.