Providing Startup Financing Solutions Since 2001

How accurate are the numbers the broker gives you on the business?

It all depends. In some cases, they may not represent an accurate picture of the present condition of the company. There are two reasons for this. First, the broker relies on the seller for all the information that he passes onto prospective buyers.The point I am making here is that a broker doesn’t verify any of the claims of the seller. He simply packages the information into a standardized format and releases it to qualified buyers. In other words, he is trusting that the seller is being honest about the business. It’s totally up to the buyer then to conduct a proper due diligence on the company and unearth any discrepancies in the information, outright lies, as well as potential threats the owner may not even be aware of.

Second, the seller may be supplying accurate information to the broker but dragging his heels about doing so. With some sellers it’s very difficult to get the last month’s numbers in a timely fashion in order to update the 12 month trailing average results. This can be because they’re simply too busy or because they are resisting disclosing numbers that show their business to be declining.

The only way to get accurate numbers is with access to the tax returns.

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