What Your Business is Really Worth (And Why Most Owners Get It Wrong)
What Your Business is Really Worth (And Why Most Owners Get It Wrong)
One of the most common conversations we have with business owners before a sale begins with a number they have been carrying around in their head for years. Sometimes it is based on a rough rule of thumb from a colleague in the same industry. Sometimes it is a figure their accountant mentioned casually at the end of a tax year review. Occasionally it is simply what they feel they deserve after two decades of seven-day weeks.
The market, unfortunately, does not share that number.
The gap between what owners believe their business is worth and what buyers are willing to pay for it is one of the most persistent and damaging problems in the SME sale market.
Research from Bstar whose valuation methodology we use in our advisory practice, suggests that 88% of SME owners have a value gap risk. That is not a small number. It means that the vast majority of business owners approaching exit are working from an inflated baseline.
“A valuation is not just a number. It is a diagnostic, a map of where value lives and where risk erodes it.”
The issue is not dishonesty. It is the natural human tendency to value the time and sacrifice we have invested in something, rather than what a willing buyer, with full information, would pay for it today.
Buyers price risk. They price transferability, how much of the business’s value walks out the door if the owner does. They price concentration: one customer representing 40 percent of revenue is a problem, regardless of how long that relationship has been in place.
A formal business valuation changes the conversation entirely. It replaces the owner’s internal number with an evidence-based one, grounded in comparable market data, normalised financials, and an honest assessment of the risk and value drivers that determine what buyers will pay. It also identifies, often for the first time, the specific things that need to change to close the gap.
At Wood Associates, we conduct valuations to recognised professional standards, not as a one-page estimate, but as a structured analysis that gives owners a clear picture of their position and a practical pathway to improve it. For owners with 18 months to three years before a planned exit, this work can meaningfully shift the outcome.
If you have not had a formal valuation in the past two years, or have never had one at all, that is the right starting point. Not because a sale is necessarily imminent, but because you cannot manage value you cannot measure.
Tags: business broker tips business owners
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