How are Brokers Different from Investment Bankers
In today's episode of the podcast, Robert Hirsch from Freedom Factory speaks about the difference between financial investment bankers and business brokers.
Hi, it's Robert Hirsch from Freedom Factory again. And I wished to talk with you today about a question that we get a lot, and it's, what's the distinction between a broker and an investment lender? And you understand, as a business owner, I didn't know the difference. The first time I offered a company, I used a financial investment banker.
And, you know, and long story short, I ended up being a broker because the entire situation might have gone better. And so what I found out was that business brokers, all they do is sell services and mostly entrepreneurial businesses. And often they offer it to other business owners, in some cases they offer it to personal equity firms, smaller personal equity firms, often venture capital's, often little roll-ups.
However they're actually focused on helping business owners get the maximum value for their business. Now, investment bankers and I do not understand, they're just really different. And part of our group here at Freedom Factory are people that came from a financial investment banking background and they did truly large deals, you know, mostly, you know, offers over 100 million and lots of offers that are 5, 10, 15, 20 million are method too little for them.
Or they just, you know, essentially the charges aren't high enough to make them take note. So it's estimated that roughly 80% of all M&An offers are done by brokers, however roughly 10% of all M&An earnings is done by business brokers. And again, you understand, our typical asking price are companies that do EBIDTA of approximately two to 20 million.
And what that implies when you do revenues of 2 to 20 million is our prices are considerably smaller sized than business like Google or eBay. And so it's actually a, a big difference. So lenders are truly concentrated on big deals, big groups, you know, big deals. If you have a smaller sized service or a business that does revenue of.
50 or 60 million or less, you're going to be very small for a lender, but you're going to be really immaterial to a broker. Therefore when it boiled down to what do I want to do with the rest of my efficient life, I have actually been running entrepreneurial services for thirty years, and I've gone from spectacular successes to smoldering holes in the ground and, and whatever in between.
You know, it truly boiled down to who's your people? And I love business owners and I enjoy helping business owners with the biggest deal of their life.
And we actually had a chance to reinvent the business brokerage space here at Freedom Factory and done some, some quite innovative things. To me, the big question ends up being, If you have actually existed done that $100 million business, you know, in some cases bankers can do an actually good job and there's only a few institutional buyers and they understand the majority of them. And it can be very easy if you're an entrepreneur that's built a high development way of life business, and again, your incomes are someplace in between two and 20 approximately 25 million, you know, your sales are 50 million or less.
Then discovering the ideal broker that focuses on deals that size can actually make a huge distinction. Due to the fact that if you're, if you're a small fry to somebody, no one likes feeling like they're little french fries, specifically if it's a, the biggest offer of their life. But maybe, perhaps your charges on your dealership are just a few hundred thousand and on another deal.
You understand, bankers can make 10 15 20 million from an offer. So they're really going to focus on that. Ultimately, when you look at what the size of your service is and attempting to decide what's right for you, a financial investment lender or a broker, you understand, and I would recommend talking to both, but determine who makes you feel fantastic.
Make the right decision based upon the size of your business. If you have concerns on this or anything else like this, simply give us a call at Freedom factory and we 'd be happy to assist. Thank you a lot for enjoying. Please like and subscribe and we'll see you quickly.
Contact Freedom Factory
5500 Greenwood Plaza Blvd., Ste 230 Greenwood Village, CO 80111 Phone: 844-MAX-VALUE (844-629-8258)
https://www.freedomfactory.com/
https://g.page/freedom-factory-denver
Also Follow Freedom Factory here
https://www.freedomfactory.com/
https://g.page/freedom-factory-denver
Also Follow Freedom Factory here
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