Every Owner Thinks Their Business Is Unique, and Every One of Them Is Right

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Most owners already have a number in their head before we ever sit down, and where that number came from usually tells me how close it is to what the business will really bring.

When an owner tells me what they think their business is worth, that number came from somewhere, and I always want to know where, because the source usually tells me how much to rely on it. Sometimes it is a multiple they heard at a trade show. Sometimes it is what a competitor supposedly sold for, which is almost always secondhand and almost always wrong. I hear “my friends sold their businesses and retired, and I want what they got.” I hear “I am in an industry that is booming, so my business should be worth a lot more.” And more than almost any of the others, I hear “my business has so much potential, I just never had the appetite to expand it the way I know I could.”

That last one deserves an honest answer, because owners hold onto it harder than any of the others. The potential may be very real. But a buyer is not going to pay you today for the work they are going to have to do, with their own money and their own effort, after they own the business, to turn that potential into actual earnings. Those expansion opportunities can bring more buyers to the table and create more interest in the business, and that is a good thing. What they will not do is get you paid up front for a plan you never carried out yourself.

Here is something I share with every owner, and it changes the whole conversation. Every business owner believes their business is unique, and every one of them is 100% correct. Even two pizza shops on the same block are different businesses. They have different customers, different suppliers, a different community around them, a different management team and crew, a different culture, machinery and equipment of a different type and age, different ongoing capital needs, even a different IT setup. All of that is real, and all of it is part of what makes a business worth what it is worth. But it works the opposite way from how owners usually mean it. If your business is truly one of a kind, and it is, then your friend’s sale price, the industry multiple, and the rule of thumb from the trade show are describing someone else’s business, not yours. The very thing that makes your company unique is the reason you cannot use anybody else’s number to price it.

So what does set the number? A big part of it is what a buyer can actually finance against your specific numbers. For smaller businesses, often called Main Street, a lot of the buyers are individuals who will need SBA financing, and SBA limits how much debt the business’s cash flow is allowed to support. That limit becomes a ceiling on what those buyers can reasonably offer, and the new SBA rules that took effect this fall made it even more concrete. As businesses get larger and move up into the lower middle market, more of the buyers are private equity groups, strategic acquirers, and family offices who are less dependent on SBA, but they are running their own financing math, and it produces a ceiling of its own. And more and more, I am also working through with owners how AI is likely to affect their particular industry and their particular business, because for some companies it is going to add value and for others it is a real threat to what they earn. Buyers are already thinking about that, even when the owner has not started to.

When the number in an owner’s head is well above what I am seeing in the market, the most useful thing I do is put them in the buyer’s seat. We go through the actual debt service coverage calculations on their own business, and I advise them exactly the way I would advise a buyer who was looking at their company as an acquisition. It flips the script. All of a sudden they are looking at their own business the way a buyer will, seeing what adds to the value and what takes away from it, and understanding that the buyer across the table has other businesses to consider and theirs is only one of them. That does more to bring an unrealistic number back to earth than anything I could tell them directly.

A few other things help. Our process aims to bring multiple interested parties to the table at the same time so that our seller is rarely dealing one-on-one with a single buyer who holds all the leverage. At times we will take a business to market without a stated price, so that we are not negotiating against ourselves, and so the market itself can tell the seller and our team how the business is being received right now. Timing matters more than most owners expect, too. What is the lending environment? What is happening in the overall economy? What does the geopolitical picture look like? Where does the industry stand at the moment? All of that affects what the market will pay, and sometimes the right advice is about when to go to market, not just at what price.

Sometimes the gap between what an owner wants and what the market will pay is simply too wide to close right now. When that is the case, I would rather tell them so than take a business to market that is not going to get there. In those situations we talk about bringing in the professionals who help owners actually build value, the people who help a business grow organically, improve its processes, and add the right talent, so that a year or two down the road the number the owner wants is a number the business can actually support. We also talk about whether it makes sense for them to make an acquisition of their own first, to grow the business before they sell it, which is something we can help with on the buy side.

None of this is about talking an owner down. The goal is simply to get to a number that is real, because a real number is what actually gets a business sold. What an owner hopes to get and what a buyer can actually finance are not always the same, and most of the useful work is in understanding the distance between the two and deciding together what to do about it. If you are an owner trying to figure out what your business is really worth, a good first step is to be honest with yourself about where your current number came from.

A note for the CPAs who refer clients to me

A lot of the unrealistic numbers I run into could have been softened earlier by the client’s CPA, because you are often the one person who knows both what the business actually earns and where the owner’s expectations are starting to drift. When a client begins talking about what they think the business is worth, you are well placed to gently test that number against the financials before it hardens into an expectation that a sale process later has to unwind. When you bring me in early, we can get the owner to a realistic and defensible view of value together, which makes the eventual decision about whether and when to sell a much calmer one for everybody.

A note for the financial advisors who refer clients to me

For a financial advisor, the number an owner expects to get for their business is often already baked into the retirement plan you are building with them, sometimes years ahead of any actual sale. If that number came from a friend’s deal or an industry rule of thumb rather than from what the business will really bring, the plan is resting on a figure the market may never pay. That is something you would much rather catch early than discover when the offers come in. When a client starts thinking about an eventual sale, getting them to a realistic and defensible value is as much about protecting the financial plan you have built together as it is about the transaction itself, and it is a good reason to bring me into the conversation while there is still time either to adjust the plan or to build more value into the business.