Why Your Business Might Be Worth Less Than You Think (And What to Do About It)
Key Takeaways
- Businesses sell based on earnings, not revenue — and not what you think they could earn someday
- Most deals fall through because the seller's price doesn't match what buyers will actually pay
- Qualified buyers walk past overpriced listings without saying a word
- Getting a realistic number before you go to market saves you months of wasted time
Here's a scenario that plays out constantly in the middle market.
A business owner decides to sell. He's put in 18 years. The business does $3 million in revenue. He does some math, talks to a few people, and decides it should be worth around $2.5 million.
He goes to market. A few people inquire. Nobody makes an offer. Six months later, nothing. He wonders what went wrong.
Usually the answer is simple: the price wasn't connected to reality.
How buyers actually decide what to pay
Buyers don't pay for revenue. They pay for profit — specifically EBITDA. Think of it as what the business actually earns, before accounting and financing decisions get in the way.
Then they apply a multiple to that number.
Simple example: your business earns $400,000 a year in EBITDA. Businesses like yours typically sell for 3 to 4 times earnings. Your value is somewhere between $1.2M and $1.6M.
If your revenue is $3M but your EBITDA is $400K, your business isn't worth $3M. Revenue is what you sell. Profit is what buyers are buying.
The comparisons that get owners in trouble
Two things consistently send sellers in the wrong direction.
Comparing to companies they read about. You saw that a tech company sold for 10 times revenue. Your business is nothing like that company. Public companies and venture-backed startups trade at multiples that have no relationship to a profitable small business.
Valuing future potential. If you've been meaning to expand to a second location or launch a new service line — a buyer isn't going to pay for that. They pay for what's already happening, not what might happen.
What stale listings actually cost you
The first 60 days are when you get the most attention. Buyers are watching for new listings. If your price is off, they pass — quietly, without feedback.
By month six, buyers start wondering why it hasn't sold. Your own energy drops. Sometimes employees notice something is going on.
Starting at a realistic price — even if it's lower than you hoped — means a faster, cleaner process with real buyers at the table.
The bottom line
Get a real valuation before you list. Not a number from an online calculator. A proper look at your actual earnings, what businesses like yours are selling for right now, and an honest assessment of what a buyer will pay.
That's the conversation we start with at Taka Partners — and it's free.
Ready to find out what your business is actually worth? Contact us for a free confidential consultation.
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