Common Assumptions: Most owners base their estimates of their businesses’ value on prices they’ve heard quoted for similar businesses. Additionally, many owners tend to overvalue their businesses, which prevents them from growing value and often leads to a rocky exit at best. Building business value often takes years, so it’s important for owners to understand what their businesses are worth currently to avoid any surprises when they are ready to exit.
All We Want Are the Facts: Owners must base their estimates of business value on the estimate of a well-experienced valuation expert. While estimates don’t quite rise to the level of fact, they are far more reliable than owners’ guesses, which are often based on what they have heard about valuation multiples in their industries.
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