For founders with smaller, local, and owner-operated tech firms, business brokers can help them find buyers. However, there’s more you should understand about these experts and how they help you complete straightforward M&A transactions.
Our blog covers what technology business brokers do, how they differ from M&A advisors, and what you should look for when evaluating one.
A technology business broker is a professional who serves as an intermediary between you and the buyer. They earn a commission after the transaction is completed.
They understand the SaaS metrics, software licensing structures, recurring revenue models, and contracts.
Tech brokers advise and close transactions across the full spectrum of the technology sector.
Some of the types of businesses that fit into the technology sector are:
A broker uses the key value drivers in each business type and helps you target the distinct buyer profiles in each category.
For example, if you own a cybersecurity firm, they can help improve your government contracts, certifications, and recurring revenue. They can also help you get connected to buyers such as CISOs, CIOs, and IT managers.
An M&A advisor helps you maximize deal value, structure complex M&A transactions, and manage the entire acquisition process from start to finish.
Whether you should work with a business broker or an M&A advisor to sell your business depends on your business type, size, and the complexity of the deal.
The simplest way to look at the difference between the two experts is through a breakdown of a couple of factors:
If you're evaluating a technology business broker or an M&A advisor, it’s worth asking: Do you want someone to list your company or a team to help you prepare for a successful exit?
In our experience, the best exit outcomes often come from working with a team that supports you long before your business goes to market. At Exitwise, we help founders improve their exit, understand their value drivers, and navigate the sale process with confidence.
If you're considering an exit in the next one to three years, book a call with our team to discuss the next steps.
If your business is less than 2M ARR and you’re looking for a broker, you should evaluate your options based on these factors:
When choosing a broker, you should factor in their compensation structure.
Here’s a highlight of the common fees:
It’s common to ask what the exit valuation of your technology business looks like.
Here’s a breakdown of the different methods and the scope and skillset you should look for in a broker for each:
The method helps perform a discounted cash flow (DCF) analysis based on your business's future projections. It’s ideal for established tech businesses that have predictable revenue streams.
You should choose a broker that understands traditional valuation methods for estimating future cash flows, income, and expenses over a given period, reflecting current market expectations for those amounts.
The earnings before interest, taxes, depreciation, and amortization (EBITDA) determine your SaaS company’s economic value based on its financial stability.
The methods use EBITDA multiples ranging from 9.3x to 17.1x, depending on the business type and ARR. It’s great if you’re an established SaaS company with $5M in ARR or more, have a more complex management structure, more employees, and are operating in a fast-growing market.
In this case, you need to select a professional who understands the quality of recurring subscription revenue and your operational efficiency.
Although this often undervalues technology companies, they are often undervalued due to their intangible assets.
They include proprietary systems, intellectual property, technical documentation, product differentiation, customer relationships, and brand recognition, which are rarely reflected at fair market value.
Here, you should go with a broker who is skilled enough to leverage your hidden value drivers to make your business attractive to potential buyers.
With this approach, you can benchmark comparable public companies and precedent transactions to understand the industry multiples and competitive positioning.
For example, you can use a SaaS valuation calculator to get an estimate of your valuation.
If you want to use this approach, you should look for a broker who understands the current sales in your location and is familiar with the profit numbers.
Yes. Here's what to expect from a tech business broker:
Below, we address the common inquiries we get on the selection criteria and the process involved in selling your technology business:
Business brokers handle small deals from $500K to $2 million. They provide varying support and often work on a success-based fee, earning a commission when the deal closes.
In contrast, investment bankers focus on larger deals of $100 million or more and provide comprehensive financial advisory services. They have access to institutional capital and structure complex deals and work on a retainer plus success fee structure.
A broker will need financial documents and operational insights into your technology business. These files include:
Depending on your company’s size, financial structure, and buyer interest, you can take months to sell your company.
Yes, technology business brokers work with SaaS companies.
Before hiring one, check whether they understand the SaaS metrics that matter to buyers, such as ARR, churn rate, and net revenue retention. That way, you’ll know they will use their expertise to ensure your business is fairly priced.
Yes, some brokers act as dual agents, representing the buyer and the seller. However, that might create a conflict of interest.
You should ask whether an expert exclusively represents the sellers.
If you’re considering selling your small to medium-sized tech company, you can consider a technology business broker. You can get help in valuing your business, finding potential buyers, and negotiating the sale.
However, if your transaction involves a complex business merger with a deal size over $ 2 million, you should go with an M&A advisor.
The right guidance can make a difference to your exit outcome and the experience.
At Exitwise, we work with technology business owners to strengthen their position before going to market and navigate the complexities of the sale process. We have helped achieve 28% average increase in sales price.
Book an exit strategy session and start planning for a successful transition.
Let Exitwise introduce, hire and manage the best, industry specialized, investment bankers, M&A attorneys, tax accountants and other M&A advisors to help you maximize the sale of your business.
