In today's episode of the podcast, Robert Hirsch from Freedom Factory talks about the difference between business brokers and investment bankers.

Hi, it's Robert Hirsch from Freedom Factory again. And I wanted to talk to you today about a question that we get a lot, and it's, what's the difference between a broker and an investment banker? And you know, as an entrepreneur, I didn't know the difference. The first time I sold a business, I used an investment banker.

And, you know, and long story short, I became a broker because the whole situation could have gone better. And so what I learned was that that brokers, all they do is sell businesses and primarily entrepreneurial businesses. And sometimes they sell it to other entrepreneurs, sometimes they sell it to private equity firms, smaller private equity firms, sometimes venture capital's, sometimes small roll-ups.

But they're really focused on helping entrepreneurs get the maximum value for their business. Now, investment bankers and I don't know, they're just very different. And part of our team here at Freedom Factory are people that came from an investment banking background and they did really large deals, you know, primarily, you know, deals over 100 million and many deals that are five, 10, 15, 20 million are way too small for them.

Or they just, you know, essentially the fees aren't high enough to make them pay attention. So it's estimated that roughly 80% of all M&A deals are done by brokers, but roughly 10% of all M&A revenue is done by brokers. And again, you know, our average selling price are companies that do EBIDTA of roughly two to 20 million.

And what that means when you do earnings of two to 20 million is our sales price are significantly smaller than companies like Google or eBay. And so it's really a, a big difference. So bankers are really focused on large deals, large teams, you know, big deals. If you have a smaller business or a company that does revenue of.

50 or 60 million or less, you're going to be very small for a banker, but you're going to be really immaterial to a broker. And so when it came down to what do I want to do with the rest of my productive life, I've been running entrepreneurial businesses for 30 years, and I've gone from spectacular successes to smoldering holes in the ground and, and everything in between.

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What Type of Contract do I Need to Sell My Business?

Freedom Factory's PodcastBy Robert HirschFeb 07, 2020