Most meetings with business owners follow a similar pattern. Some small talk in the boardroom. A tour of the warehouse or factory. Back to the boardroom.

The owner then leans back and asks: “So, what do you think my business is worth?”

It’s a perfectly reasonable question. But it’s also the wrong place to start.

My office bookshelf is filled with books on business valuation. I’ve read most of them more than once.

I understand why the owner wants to know what their business may be worth. They have spent decades building it. They have endured sleepless nights, near-death experiences. They want to know what they’re eventually going to get out of it.

The problem is that a business doesn’t have just one value. It has three:

The financial value — what the numbers suggest after analysing earnings, assets, risk and cash flow.

The market value — what an actual buyer is prepared to pay in today’s market.

The personal value — what the business is worth to the person who spent decades building it.

That’s why when I discuss valuations with a potential client, I always ask them the same thing: what is the business worth to you? They are the ones who have built the business. Understanding what it is worth to them is critical.

I have had many clients who decide on that number based on what they estimate they will need to live out a comfortable retirement. They will say that they have spoken to their accountant or financial planner and they need to pull ‘$X’ from the transaction.

That figure often includes debts, family commitments and other considerations that I know nothing about. I never ask them to justify it. It’s their number. Not mine.

Whether that number is achievable is another question entirely. But what they are telling me is crucial information. It allows me to gauge whether they are being remotely realistic. It also helps me protect their red lines during negotiations.

Then there are owners who have already made their money. They are not directly relying on the proceeds they pull from the specific transaction for their comfortable retirement. For them, the value of the business is more psychologically significant.

That’s where valuations become interesting. Some owners are solving a financial problem. Others are trying to solve a psychological one.

After twenty or thirty years of building a business, the sale price often comes to represent something much larger than money. It becomes a verdict on decades of effort, sacrifice and risk.
I have worked with some owners who draw a clear line in the sand; there is a minimum below which they simply won’t go. Anything less would be a slap in the face.

There are other owners who say that they want to achieve a price above a certain threshold. That would make their efforts seem worthwhile.

The spreadsheets matter.

The multiples matter.

The market matters.

But none of them explain why one owner happily accepts an offer while another rejects a higher one. That’s why I never start with the valuation. I start with the owner.

Because every valuation ultimately belongs to someone.

For business owners looking to reap the rewards of their hard work and enter the next phase of life with financial security and finality, the senior team at CFSG provides private, no-obligation consultations. If you would like to have a confidential discussion, we invite you to contact us.