Welcome back to the Mid Market Insider!
Today, I’m tackling a topic that makes a lot of owners uncomfortable: why your business probably isn’t worth what you think it is, and why that’s not an insult.
We’ll break down how buyers really think about valuation, why risk and predictability matter more than effort, and what you can actually do to close the gap between your number and theirs.
Thinking About Selling Your Business?
I’ve spent nearly 20 years buying, growing, and evaluating companies.
If you’re considering a sale or just want to understand more about my role and what we do, feel free to grab 30min on my calendar below:
Your business probably isn’t worth what you think it is.
And that’s not an insult.
It’s just how buyers think.
Most owners anchor on a number based on effort, years invested, sacrifice, or what someone “down the street” sold for.
That’s completely human.
But buyers don’t price effort.
They price risk and predictability.
How Buyers Actually Think
When a buyer evaluates your company, they aren’t asking:
“How hard did this owner work?”
They’re asking:
Can I trust the future cash flow?
How predictable is that cash flow?
What happens if something goes wrong?
How dependent is this business on one person, one customer, or one relationship?
Two companies can have identical revenue and EBITDA… and trade at wildly different valuations.
Why? Because one feels stable and transferable while the other feels fragile.
Same Numbers. Different Risk.
One business has:
Clean, consistent financial reporting
Diversified customers
Documented processes
A leadership team that can operate without the owner
The other relies on:
A few key relationships
Institutional knowledge in one person’s head
Hope that customers won’t leave
A “we’ll figure it out” culture
Same numbers. Very different risk profiles.
Buyers discount risk aggressively.
Where Deals Start to Break
Problems usually don’t start with valuation.
They start when an owner becomes emotionally attached to a number that doesn’t reflect the underlying risk.
Feedback from buyers feels like criticism.
Negotiations turn defensive.
Structure gets more complicated.
Earnouts and contingencies appear.
Buyers aren’t trying to be difficult.
They’re protecting themselves.
Valuation isn’t a judgment on you or what you’ve built.
It’s a reflection of how easy your business is to step into, understand, and run without you.
The Good News
Risk and predictability are not fixed traits… they can be improved.
Customer concentration can be reduced, processes can be documented, financial reporting can be cleaned up, and leadership can be strengthened.
When perceived risk goes down, multiples tend to move up because the business actually becomes easier to underwrite.
That’s the part most people miss.
Valuation typically follows preparation.
That’s all for today’s newsletter! Thanks for reading!
📅 Next Week:
In next week’s edition, I’ll break down why the most dangerous part of a business sale often begins after the LOI is signed.
We’ll talk about how small performance dips during diligence can quietly reopen negotiations, and what disciplined owners do to protect value all the way to closing.
Keep building,
Nick
P.S. What to Watch This Week
Watch one of our recent videos on YouTube…
How to Know If Your Business Is Truly Ready to Sell
Click the link below and check it out:
