Every seller wants to know what their business is worth. It's the first question of every initial conversation, and it should be — knowing the realistic range is the foundation of every decision that follows.
But the way most owners arrive at their number is wrong. They benchmark against the wrong comparables. They anchor on industry rules of thumb that don't apply to their specific situation. They confuse asking price with sale price. And they listen to brokers who inflate valuations to win the listing — knowing the business will languish on the market and ultimately sell for less.
After ten years brokering business sales in Indiana and the broader Midwest, here are the four valuation mistakes I see most consistently — and how to avoid them.
1. Confusing asking price with sale price.
The most common mistake is also the most dangerous: assuming that a business that listed for $5 million is comparable to your business that you think is worth $5 million.
Listing prices are aspirational. Sale prices are real. The difference is often 15-30%, and it's the only number that matters when you're trying to understand your own business's market position. Public business-for-sale listing platforms are full of stale listings at unrealistic prices — using them as comparables will systematically inflate your expectations.
2. Applying industry rules of thumb that don't fit.
"HVAC businesses sell for 3x EBITDA." "Construction firms sell for 4x SDE." "Services businesses go for 0.8x revenue."
These rules of thumb exist because they're directionally correct in aggregate. They're directionally wrong for your specific business — because every business has characteristics that move it above or below the industry average. Customer concentration. Owner dependency. Recurring revenue percentage. Geographic concentration. Margin profile. Growth trajectory.
A construction firm with 60% recurring service revenue and a working management team isn't worth 4x SDE. It's worth more. A construction firm with 80% concentration on one general contractor isn't worth 4x SDE either. It's worth less. The rule of thumb is a starting point — never the answer.
3. Ignoring the buyer pool that will actually pay.
Different buyer pools value different things. A strategic acquirer might pay a premium for your customer relationships and operational infrastructure. A private equity platform might pay for your management team and growth potential. An individual buyer using SBA financing is constrained by what the bank will lend.
Your business's "value" is meaningfully different depending on which buyer pool is most likely to acquire it. Understanding this isn't optional — it's the difference between marketing to the wrong audience and getting the right buyers competing for your business.
4. Falling for inflated valuations from brokers who want the listing.
This is the most damaging mistake of all, because it's not even the seller's fault. It's the broker's.
It's tempting to choose the broker who tells you your business is worth the most. They sound confident. They share the optimistic comparables. They make you feel good about what you've built. And then your business sits on the market for 18 months at a price that no qualified buyer will pay, the listing goes stale, and you eventually sell for less than you would have at a realistic asking price from day one.
The brokers who inflate valuations to win the listing are the same ones who fail to close it. The number that closes deals is the number that attracts serious, qualified buyers — not the number that makes you feel good in the initial meeting.
What honest valuation looks like.
A real Opinion of Value starts with your trailing twelve months of recasted Seller's Discretionary Earnings — every owner perk, one-time expense, and discretionary cost properly normalized. It then applies multiples drawn from completed transactions in your industry, geography, and size range. It adjusts for your business's specific value drivers and detractors. And it produces a range, not a point estimate, because every transaction is different.
That number is what serious buyers will pay. Anything higher is fantasy. Anything lower is leaving money on the table.
The good news: an honest valuation is the foundation of every good outcome. It tells you whether to go to market now or invest twelve months in preparation. It tells you which buyer pool to target. It tells you what to negotiate hard for and what to concede. And it tells you whether the offer in front of you is fair.
If you're considering a sale in the next three to twenty-four months, an Opinion of Value is the right place to start.