First Things First: I Thought I Knew the Number
So there I was—feet up on the desk, sipping a lukewarm cup of coffee that tasted like burnt ambition—convinced my business was worth at least seven figures. I mean, c’mon… I built the thing from scratch. Blood, sweat, spreadsheets, and way too many awkward Zoom calls. Surely that counted for something, right?
Spoiler alert: it didn’t count for nearly as much as I thought. 🫠
What I thought was value—the grind, the emotional rollercoaster, the all-nighters—wasn’t what buyers actually cared about. They wanted numbers. Predictability. Transferable systems. I was pitching passion, and they were buying profits.
That disconnect? Cost me months.
So I hit the brakes, got humble, and started asking the right questions. Here’s what I found out—without the fluff.
Understanding What “Value” Even Means
Let’s clear something up: your business isn’t worth what you think it should be worth. It’s worth what someone is willing to pay for it. That’s it. That’s the post.
(Just kidding—don’t click away yet 😅)
Valuation isn’t an art, and it isn’t a science. It’s a bizarre little cocktail of both—with a twist of market timing, industry trends, and a buyer’s mood that day.
You want to know the real deal? You have to break it down:
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Cash Flow is King. Not revenue. Not even profit. We’re talking discretionary earnings or EBITDA (yeah, I had to Google it too). If your business prints predictable cash every month, you’re already halfway there.
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Systems Sell. If your business runs because you run, congrats—you’re the business. And that makes it really hard to sell. A buyer wants a machine that runs without the original operator. Harsh? Maybe. True? Absolutely.
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Documentation = Dollar Signs. Clean books, clear SOPs, and no “funny stuff” in the tax returns. Buyers don’t want mysteries—they want math.
Multiples: The Myth, The Legend
When I first heard people talking about “multiples,” I thought I was back in high school algebra. Turns out, it’s simpler than that—but also sneakily deceptive.
Let’s say your business pulls in $250,000 in seller’s discretionary earnings (SDE). If you’re in a stable industry, with clean books and minimal risk, maybe someone pays a 3x multiple. That’s $750,000.
Boom. That’s your number, right?
Eh… not so fast.
Multiples aren’t fixed. They shift like beach sand in a hurricane depending on:
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Your industry (tech? ecommerce? local plumbing biz?)
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Market trends (up, down, sideways?)
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Owner involvement (are you working 80 hours a week?)
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Growth potential (is the rocket ship fueled and ready?)
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Customer concentration (do you rely on one huge client?)
My multiple started at 2.2, then dropped to 1.8 when a buyer saw I was doing all the sales myself. Brutal wake-up call.
I Got Schooled by a Valuation Specialist
Eventually, I hired someone to do a real, honest-to-goodness valuation. Not some online calculator that spits out a number based on how many employees you have. A human. A professional. A guy who asked questions that made me sweat.
Like:
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“How much recurring revenue do you have?”
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“What happens if you take a month off?”
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“Why are your margins sliding year-over-year?”
I hated those questions. But I needed them.
He looked through my financials like a forensic accountant solving a crime. And in the end, his valuation came in lower than I hoped—but higher than I feared.
It gave me leverage. Because when you know your number, you don’t get pushed around in negotiations. You sit at the table with facts, not feelings.
Stuff You Can Do Right Now to Ballpark Your Value
You don’t need a Harvard MBA to get a rough idea of what your business is worth. Here’s a quick checklist to get you started:
✅ Tally up your Seller’s Discretionary Earnings (SDE)
✅ Apply a reasonable industry multiple (2–4x is typical for small businesses)
✅ Ask yourself: Would I buy this business for that price?
And if your gut says “nah”—then yeah, that’s your cue to fix some things.
Bonus tip: check out businesses similar to yours that have sold recently. Think of it like comps in real estate. If the bakery down the street sold for 3x earnings, and your bakery is twice as busy and better branded, well… you’ve got a leg to stand on.
My Personal Wake-Up Call (AKA: The Inventory Meltdown)
Quick story. I had $40k in unsold inventory sitting in a warehouse. I proudly included that in my “assets.” But when the buyer dug in, they realized half of it was old stock we couldn’t move. It had literally expired (don’t ask—long story involving coconut oil and summer heat).
I thought it added value. The buyer saw it as a liability.
The lesson? Everything on paper needs to survive the flashlight test. Shine a light on it. If it’s dusty, questionable, or starts melting when exposed to heat—it’s probably not helping your valuation.
What I’d Do Differently If I Had a Time Machine
If I could hop in a DeLorean and whisper something to 2018 me, it’d be this:
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Start building the business like you’re going to sell it—even if you aren’t.
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Keep the books clean. Like, accountant-smiles-when-they-see-them clean.
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Document everything—how you onboard a client, how you pay vendors, how you order paperclips. Okay, maybe not paperclips. But you get the idea.
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Diversify revenue streams. One leg of a stool ain’t stable.
Most importantly?
Detach your identity from the business.
Because when you finally do get a number, and it’s not what you dreamed… you’ll take it personally. And you shouldn’t. The value isn’t a reflection of your worth—it’s a reflection of the business’s readiness for someone else to run it.
Final Thought: It’s Not About What You Deserve, It’s About What You Can Prove
Look, I get it. You’ve worked your butt off. You’ve sacrificed weekends, friendships, probably a few hair follicles. But buyers aren’t buying your journey—they’re buying your outcome.
So if you’re serious about knowing what your business is worth, do the work.
Clean the books. Cut the fat. Build the systems.
And when the day comes that someone asks “So, what’s your asking price?” — you’ll answer with confidence. Not hope.
Now excuse me—I’ve got some coconut oil inventory to clear out. 😅