About Valuation, Preparation & Monitoring
There’s an old tale of a small boy in a village searching for his mother. When asked to describe her, he said she was the most beautiful woman alive. The villagers pointed to the local beauties, but none were her. Finally, a simple-looking woman appeared, and the boy ran into her arms—his mother. To him, she was the most beautiful, regardless of appearances.
This story captures exactly how most business owners view their companies. For them, the business is personal, filled with emotional investment. But when it comes time to sell, it’s not the owner’s view that matters—it’s the buyer’s.
Any serious attempt to sell a business must begin with a professional third-party valuation. The owner needs a realistic understanding of what the business is worth, and the M&A advisor must assess its true value and contributing factors before deciding on price expectations or feasibility. If a broker is willing to take a business to market without a proper valuation, they’re likely just playing a numbers game (see: “Do You Feel Lucky Today?”).
A good starting point is to ask:
“Do I know exactly what my business is worth today, if a buyer asked?”
Many owners believe they have a solid grasp—but often this is based on emotion or outdated performance. Sometimes, they go so far as to question a buyer’s seriousness if their valuation doesn’t match the owner’s expectations.
Let’s break down that question in detail:
-
Do I… — The owner. Not your accountant or your friend. You.
-
Know exactly… — No estimates. Real numbers, backed by documentation.
-
What the value… — Meaning net worth, cash flow, profit potential, tangible and intangible assets.
-
Of my… — Ownership structure. Are you the sole owner? Any silent partners? Legal entanglements?
-
Business… — Are we talking shares, assets, liabilities, goodwill, client contracts, or intellectual property?
-
Is today… — As in current. Not last year, or your peak. Right now.
-
When asked by a serious buyer… — Not just anyone, but a qualified, strategic, or financial buyer. What’s their intent: acquisition, expansion, competition elimination?
This breakdown reveals how complex valuation really is—and that “value” is not the same as “price.” Value is what your business is worth; price is what you’re asking. The final sale price will also be influenced by terms, buyer expectations, risk mitigation, and due diligence. And what the buyer is willing to pay may not be what you end up receiving after taxes, fees, and deal structuring.
A properly valued company with clean, accurate financials is a completely different proposition than a business with outdated or vague records and a casual, undocumented way of working.
If your business has poorly classified revenue, missing documentation, or unclear operations, serious buyers won’t engage for long. Worse, you may find yourself stuck in endless meetings explaining figures, defending guesswork, and correcting misunderstandings—wasting your time and weakening your negotiating position.
In short: Failing to plan is planning to fail. If you want to attract serious buyers and achieve a favorable exit, start with a professional valuation and well-prepared, transparent records. That’s the foundation of a successful business sale.