What Is My Business Worth? Understanding How Buyers See Your Company’s Value

In This Article: Understanding what your business is worth involves more than reviewing financial statements or estimating a sale price. This article examines how potential buyers assess value, what makes a company more attractive to buyers, and why knowing where your business stands can help you plan for growth, succession, or an eventual exit.

If someone offered to buy your business tomorrow, would you know whether the price was fair?

It’s a question I ask business owners, and I’ve found that the answers can vary quite a bit! Some have a number in mind based on a competitor’s sale, a conversation with another CEO, or an earnings multiple they’ve heard mentioned. Others haven’t really given it much thought.

I understand why, of course. When you’ve spent years building a company, it’s difficult to put a dollar figure on everything you’ve invested in it. But understanding what your business may be worth to someone else is an important part of planning for its future.

In my work with CEOs, I’ve seen how much can change when an owner begins looking at the company from a potential buyer’s perspective. That shift can reveal strengths worth building on, along with issues that could affect a future sale.

And the earlier you understand those issues, the more time you have to address them.

Three different ways to think about your business’s value

When we talk about what a company is worth, we’re often talking about three different numbers.

The number you have in mind. This reflects your personal experience as an owner. You’ve invested years of work, taken financial risks, made difficult decisions and built something you’re proud of. All of that matters deeply to you, even though a buyer will evaluate the business differently.

The estimated financial value. This comes from the company’s earnings, assets, financial history and other measures of performance. Depending on the business, a valuation may also consider industry comparisons and expected future cash flow. It’s a useful starting point, although the final estimate depends on the assumptions and methods used.

The price a buyer is willing to pay. This is where things become interesting. A buyer considers the financial picture, but also looks at what they’re taking on, what the company could become and how well it would operate under new ownership. Different buyers may arrive at different prices based on what they see.

I know something about this from personal experience. I built my own company, grew it fivefold in four years and eventually sold it. That experience gave me a lasting appreciation for the difference between building a successful business and preparing that business for someone else to own.

What buyers consider when determining value

When someone considers buying your company, they’re thinking about what the business can accomplish after the sale. They want to understand its financial performance, how it operates and what risks they would be taking on.

Some of the questions they’ll be asking include:

• Owner dependence: How much of the company’s success relies on your personal involvement, relationships or decision-making?
• Financial performance: Are the financial records accurate, consistent and easy to understand? Can the business demonstrate dependable earnings and cash flow?
• Customer relationships: Is revenue spread across a healthy customer base, or does too much depend on a handful of accounts?
• Leadership: Can your management team make decisions and keep the company running successfully without you?
• Growth potential: Is there a credible plan for continued growth, supported by the people, resources and systems needed to carry it out?
• Business stability: Are there recurring sources of revenue, established processes and other strengths that make future performance more predictable?

Each of these factors can influence how a buyer views the company and, potentially, what they’re willing to pay.

The Exit Planning Institute reports that only 20% to 30% of businesses brought to market actually sell. There are many reasons a transaction might not happen, but the statistic is a useful reminder that finding a buyer and reaching an agreement aren’t guaranteed.

If you’re considering a sale in the next few years, understanding how your business would hold up under a buyer’s scrutiny can help you prepare.

How can you determine what your business is worth?

There are several ways to begin getting an answer, depending on what you want to know.

A professional business valuation can provide an estimate based on the company’s financial performance, assets and other relevant factors. A business broker or investment banker can offer perspective on current market conditions, comparable transactions and what potential buyers might be willing to pay.

In my coaching work, I also encourage owners to look closely at something called transferable value.

Think about what would happen if you stepped away from the business tomorrow. Would the company continue operating successfully? Would your customers remain loyal? Could your leadership team make important decisions without calling you?

The answers tell us a great deal about how prepared the business is for a change in ownership.

They also help identify where there’s room to strengthen the company, whether that means developing leaders, improving financial reporting, reducing customer concentration or making daily operations less dependent on you.

These are changes you can begin making long before a buyer enters the picture.

Why your business’s value matters even if you’re not ready to sell

One question I hear from owners is, “If I’m not planning to sell anytime soon, why should I be thinking about valuation?”

My answer is that understanding your company’s value can help you make better decisions while you still own it.

If you’re planning to keep growing, knowing where the business is strong and where it needs attention can help guide future investments.

If you’re considering succession, understanding the company’s financial position and ability to operate without you can help you prepare the next generation of leadership and work toward a fair transition.

And if selling is somewhere on the horizon, having a clearer picture of the company’s worth gives you more time to prepare and make decisions on your own terms.

As I discussed in my recent article, What Happens Next?, business owners have different paths available to them. Whether you want to keep building, protect what you’ve created or prepare for an exit, knowing where your company stands financially is a useful place to begin.

Find out where your business stands

I created the free Business Exit Value Questionnaire to help owners begin thinking about their company’s readiness for a future transition.

It gives you a starting point for looking at the strengths of your business, areas that may need attention and factors that could influence its attractiveness to a buyer.

It’s a useful first step, whether a sale is something you’re considering soon or several years from now.

Take the Free Business Exit Value Questionnaire

If the results raise questions, I’d be happy to talk through them with you. Sometimes a short conversation is all it takes to identify where you should focus your attention first.

After all, you’ve spent years building your business. You deserve to understand what it’s worth and what you can do to make it stronger.

Start Here

I’ve created a free assessment at Coach4Execs to help you answer two critical questions:

• How prepared is my business for an exit?
• How much value am I potentially leaving on the table?

You can take it here: Business Exit Value Questionnaire

You’ll also get access to a free downloadable guide outlining the key steps to prepare and sell your business the right way.

📘 Download your free Exit Timeline & Resource Guide, a roadmap to prepare your company and yourself.

🧭 Take the free Transferable Value Assessment to see where you stand today.

💬 Let’s talk. As your Exit Coach, I’ll help you design the plan that turns your business into a legacy and your exit into a launchpad.

Georganne Goldblum,
CEO of Coach4Execs
Exit & Executive Coach, Vistage Florida Chair

About Georganne

Georganne Goldblum is a seasoned executive coach with over 20 years of experience, specializing in coaching senior executives to outperform their goals and competition. Drawing from her impressive background as a Fortune 500 executive, management consultant, entrepreneur, and private investor with over 25 years of management experience, Georganne brings a wealth of knowledge and expertise to her coaching. She helped 8 companies optimize their business exits in the last 5 years, netting over $1.1 billion. Over the last 9 years, assisted 14 companies in achieving exits totaling over $2.5 billion.

An MBA graduate from the renowned NYU Stern School of Business, her impact and influence in the industry are evident through the numerous accolades and awards she has received, including the prestigious Charles “Red” Scott Award. She has been recognized as one of the Most Influential Businesswomen in South Florida. Connect with her on LinkedIn.