For most business owners, their company isn’t just a paycheck. It’s something they’ve spent years building, often with plenty of sweat and sacrifice. For many, it’s also their single biggest financial asset. That’s why it’s so important to know what it’s really worth.
The problem is, a lot of owners get tripped up when trying to put a number on their business. Ask too much, and you risk turning away serious buyers or investors. Ask too little, and you could walk away with far less than you deserve.
Here are five of the most common mistakes owners make when estimating the value of their business—and what you can do to avoid them.
1. Focusing on Revenue vs Profit
Just because a company brings in $1 million in revenue doesn’t mean it’s worth $1 million. Buyers are a lot more interested in profit than revenue.
Take two businesses as an example. One sells $1 million worth of goods but only clears $200,000 after expenses. Another sells $600,000 but clears $300,000 in profit. Even though the first business looks bigger, the second one is more attractive to buyers.
How to avoid this: Keep your focus on profitability. A business with steady, healthy profits will usually sell for more than a business that just looks big on paper.
2. Not Knowing What’s Normal in Your Industry
Different types of businesses sell for different multiples. A software company with steady subscription income might sell for four to six times annual profit. A small retail shop might be closer to two or three times.
If you don’t know what’s common in your line of business, it’s easy to set your expectations too high—or too low.
How to avoid this: Look into recent sales or use a valuation calculator to get a ballpark figure for your type of business. Having a realistic starting point makes the process smoother.
3. Depending Too Much on the Owner
A lot of small businesses rely heavily on the owner for sales, customer relationships, and daily operations. That can be fine while you’re running it, but it creates a problem for buyers.
From their perspective, if the business can’t run without you, what happens the day you step away? That risk lowers the value.
How to avoid this: Build systems, train your team, and make sure customers deal with more than just you. The less the business depends on the owner, the more appealing it is to buyers.
4. Ignoring Timing and the Market
Even if your business is doing well, the market around you has an impact. The overall economy, interest rates, and trends in your industry can all affect what buyers are willing to pay.
For example, a restaurant might have a lower valuation during a downturn, while a trucking company could see more demand during that same period. Timing plays a bigger role than most owners realize.
How to avoid this: Keep an eye on both the local economy and your specific industry. If you’re flexible about when to sell, try to pick a time when demand is strong.
5. Forgetting About Intangibles
When owners think about value, they often focus on physical things like equipment, buildings, or inventory. But intangible assets—like your brand, customer loyalty, contracts, or unique processes—can also add real value.
On the other hand, some owners overvalue these items without showing how they actually boost revenue or profit.
How to avoid this: Make a list of your intangible strengths, but also tie them back to results. A strong reputation is great, but it’s even more powerful when you can show how it keeps customers coming back.
Why This Matters
Getting your business valuation wrong doesn’t just matter when it’s time to sell. It can affect retirement planning, passing the business on to family, or even applying for financing. Knowing the real number helps you make better decisions and gives you options.
Take the First Step
If you’re wondering what your business might be worth, try our Business Valuation Calculator. In just a few minutes, you’ll get a clear, data-based estimate built around your numbers and your industry.