Hire an investment banker when your business is sale-ready, and not before. A banker's job is to package and sell the business as it exists on the day you sign the engagement letter. If you hire one while your business still has fixable problems (owner dependence, numbers that don't match your story, no documented evidence of what makes you different), you'll pay a success fee on a discounted price. The right sequence is: fix first, then hire the banker. Here's why the order matters more than most owners realize.
Bankers package. They don't fix.
A Confidential Information Memorandum is marketing for the business you already have. No banker spends twelve months removing owner dependence, reconciling your financials with your growth story, or building the evidence buyers pay premiums for. Their process starts when yours should already be finished. Ask any banker what they do with a weak add-back: they footnote it. A buyer's analyst torches it.
The success fee runs on a clock.
Bankers and brokers are paid at close. Main Street brokers typically charge a commission around 8% to 12%, and lower-middle-market banks typically charge a retainer plus a success fee on a sliding scale. From the day you engage, every incentive points one direction: go to market now, at today's readiness, and get to a close. Waiting a year while you fix deal-killers costs the banker money. It makes you money.
Your price isn't set at the LOI. It's set in diligence.
Unprepared sellers sign flattering letters of intent and then get retraded when diligence finds the problems they didn't know existed. The banker still gets paid on whatever closes. The seller eats the retrade, or worse, the structure: a longer earnout, a bigger seller note, more risk shifted onto them because the evidence was weak. This is also why the highest valuation in a banker's pitch deck should be read carefully: brokers compete for listings by quoting the biggest number, and that number is bait, not a bid. Their fee gets paid at whatever price actually closes.
A broken process is the most expensive outcome.
If you go to market unprepared, fail diligence, and relist a year later, the buyer pool reads your business as damaged goods. Second processes attract lower bids. Going to market once, prepared, is the cheapest path to a premium. Good bankers know this; it's why the best ones decline unprepared mandates or park them in "pipeline." If you're interviewing bankers, ask what percentage of their dead deals died in diligence, and what the seller could have done a year earlier. Their answer is the case for preparation.
So what's the right sequence?
Hiring a banker first is like hiring a realtor before fixing the roof: they'll happily list the house as-is, and their commission just shrinks with your price. Spend 6 to 12 months making the business diligence-proof, then run a competitive process through a banker who fights for prepared mandates. That's exactly how Pre-Sale Prep is built: we prepare the business, then introduce you to one to three vetted sell-side advisors we've personally worked with. We earn nothing from your transaction, which is why we can tell you the truth about when you're ready.