Business Valuation of a Company: Methods & Real Numbers

I've sold five SaaS companies. Every time, the valuation conversation went differently than I expected.

The business valuation of a company isn't some magical formula an accountant pulls out of thin air. It's what someone will actually pay you, and that depends on your business model, growth rate, profitability, and how desperate the buyer is.

Here's what actually matters when you're trying to figure out what your company is worth.

The Three Main Valuation Methods You'll Actually Encounter

Most business valuations use one of three approaches: asset-based, income-based, or market-based. In practice, most buyers focus on market-based valuations because they're shopping around and they know what similar companies sold for.

Asset-Based Valuation

This method adds up everything you own (equipment, inventory, intellectual property, customer lists) and subtracts what you owe. It's the floor value of your business - what you'd get if you liquidated everything tomorrow.

Asset-based valuations work for manufacturing companies or businesses with significant physical assets. They're terrible for service businesses or SaaS companies where the real value is in customer relationships and recurring revenue.

I've never sold a company using asset-based valuation. If someone offers you asset value for a profitable business, walk away.

Income-Based Valuation

Income-based methods look at your future earning potential. The two most common versions are:

• Discounted Cash Flow (DCF): Projects your future cash flows and discounts them back to present value. Sounds sophisticated, but it's basically someone's guess about your future multiplied by another guess about discount rates.
• Capitalization of Earnings: Takes your current earnings and divides by a capitalization rate. If you make $200K annually and the cap rate is 20%, your business is worth $1M.

Income-based valuations work well when you have predictable revenue and reasonable growth. They fall apart when your business is growing fast or highly seasonal.

Market-Based Valuation (Revenue Multiples)

This is what actually happens in most deals. Buyers look at what similar companies sold for and apply those multiples to your revenue or profit.

The most common metrics are:

• Revenue Multiple: Your annual revenue times some number (typically 0.5x to 5x for most businesses, higher for SaaS)
• EBITDA Multiple: Your earnings before interest, taxes, depreciation, and amortization times 3x to 8x
• SDE Multiple: Seller's Discretionary Earnings (profit plus owner salary and personal expenses) times 2x to 4x for small businesses

SaaS companies typically trade at 3x to 10x annual recurring revenue depending on growth rate and churn. Service businesses trade at 0.5x to 2x revenue or 2x to 4x SDE. Ecommerce is usually 1x to 3x revenue.

These multiples change constantly based on market conditions, interest rates, and how much private equity money is sloshing around looking for deals.

Understanding Discounted Cash Flow Analysis

DCF gets thrown around in boardrooms like everyone knows what it means. Most don't.

The concept is simple: your business is worth the total of all future cash it will generate, adjusted for the time value of money. A dollar today is worth more than a dollar next year because you could invest that dollar today and earn returns.

How DCF Actually Works

You project your free cash flow for the next 5-10 years. Then you calculate a terminal value representing everything after that period. Finally, you discount all those future cash flows back to present value using a discount rate.

The discount rate is usually your Weighted Average Cost of Capital (WACC), which factors in both your cost of equity and cost of debt. Higher risk means higher discount rate, which means lower valuation.

Here's why DCF often fails in real deals: it's extremely sensitive to assumptions. Change your growth rate by 2% or your discount rate by half a point, and your valuation shifts by millions. I've watched buyers justify any number they want by tweaking DCF assumptions.

DCF works best for mature, predictable businesses. If you're a stable utility company printing money consistently, DCF makes sense. If you're a high-growth startup with unpredictable revenue, DCF becomes a creative writing exercise.

When Buyers Actually Use DCF

Sophisticated buyers use DCF as one input among many. Private equity firms run DCF models to justify valuations they've already decided on through market comps. Strategic buyers use it to model synergies and cost savings.

No one buys a company purely based on a DCF model. They use it to support a price they arrived at through other methods, usually market-based multiples.

Current Market Multiples: What Buyers Are Actually Paying

Valuation multiples change with market conditions. Here's what's happening right now based on recent transactions.

SaaS Multiples in the Current Market

The SaaS market has normalized after the pandemic boom. Public SaaS companies are trading around 6x to 7x revenue. Private SaaS companies get lower multiples - typically 3x to 5x ARR for smaller companies, 7x to 12x for mid-market companies with proven growth.

Growth rate drives everything. A SaaS company growing under 20% might get 3x to 5x ARR. Growing 20-40% pushes you to 5x to 7x. Above 40% growth can command 7x to 10x or higher.

The Rule of 40 matters now more than ever. Add your growth rate plus your profit margin. If that number exceeds 40%, you're in premium valuation territory. A company growing 30% with 10% EBITDA margin hits the Rule of 40 and gets valued 2x to 3x higher than peers with weaker metrics.

Customer concentration kills SaaS valuations. If one customer represents more than 10-15% of ARR, expect buyers to discount heavily. I've seen 30% valuation cuts because of concentration risk.

EBITDA Multiples Across Industries

Most private companies with $1M to $10M in EBITDA trade at 4x to 8x EBITDA. That's the middle of the range for established businesses in stable industries.

Software and technology companies command higher multiples - often 6x to 12x EBITDA. Manufacturing and distribution businesses trade lower - typically 3x to 6x EBITDA due to capital requirements and cyclical risk.

Service businesses sit in the middle at 4x to 7x EBITDA, depending on customer concentration and whether the business can operate without the owner.

Size matters significantly. A company with $1M EBITDA might get 4x. The same company at $5M EBITDA could get 6x. At $10M EBITDA, you're looking at 7x to 8x. Larger companies get premium multiples because they're more stable, have proven their model at scale, and attract more buyers.

Small Business SDE Multiples

Businesses under $1M in Seller's Discretionary Earnings typically sell for 2x to 4x SDE. These are often owner-operator businesses where the buyer is essentially buying themselves a job plus some profit.

Local service businesses - landscaping, HVAC, plumbing - usually trade at 2x to 3x SDE. Professional services might get 2.5x to 3.5x SDE if there's a strong customer base and recurring revenue.

The multiple depends heavily on how much the business depends on the owner. If you're the only person who can do the work or maintain customer relationships, you're selling at the low end. If the business runs with documented systems and a capable team, you're at the high end or potentially transitioning to EBITDA multiples.

What Actually Drives Your Valuation Higher

The textbooks give you formulas. Here's what actually makes buyers pay more in real negotiations.

Recurring Revenue

A dollar of recurring revenue is worth 3-5x more than a dollar of project revenue. Monthly subscriptions are gold. Annual contracts are platinum. Multi-year contracts with auto-renewal will make buyers fight each other.

When I sold my first SaaS company, we had 80% recurring revenue. The multiple was 2.5x higher than a similar-sized agency I sold the same year.

Growth Rate

A company growing 100% year-over-year gets valued at double or triple what a flat company gets, even with the same current revenue. Buyers pay for future earnings, and growth proves you'll have them.

This is why you should spend 6-12 months aggressively growing before you start talking to buyers. Every percentage point of monthly growth adds tens of thousands to your exit.

Customer Concentration

If your top three customers represent 60% of revenue, your valuation just dropped 30%. Buyers don't want to inherit that risk.

Spread your revenue across at least 20 customers, ideally 50+. No single customer should be more than 10% of revenue. I learned this the hard way when a buyer cut their offer in half after due diligence revealed our concentration risk.

Systems and Documentation

Can the business run without you? If not, you're selling a job, not a company.

Document everything. Standard operating procedures for sales, fulfillment, customer support, everything. Use a tool like Trainual to build your playbooks. Buyers will pay more when they see the business won't collapse the day you leave.

I cover the complete exit preparation process inside my 7-Figure Agency Blueprint, including the exact documentation buyers want to see.

Clean Customer Data and Lead Systems

Your customer list needs to be organized, current, and valuable. If you're running an agency or service business, having a well-maintained database of prospects and customers shows operational maturity.

For companies that rely on outbound sales, being able to demonstrate a systematic approach to lead generation adds value. Having documented processes for finding and qualifying prospects makes the business more transferable. Tools like this B2B email database can help you build and maintain clean prospect lists that become part of your company's assets.

Profit Margins and Operational Efficiency

Buyers care about how much cash the business actually generates. Two companies with the same revenue but different profit margins get wildly different valuations.

A SaaS company with 70% gross margins and 20% EBITDA margins commands premium multiples. The same revenue with 50% gross margins and 10% EBITDA margins gets valued 30-40% lower.

Operational efficiency signals that the business is well-run and has room to scale. If your business is already optimized, buyers see less risk. If it's inefficient, they discount for the uncertainty of whether improvements are actually possible.

The Valuation Process: What Actually Happens

Here's how a real valuation unfolds when you're talking to a buyer.

Initial Offer (Based on Revenue Multiple)

The buyer asks for your revenue and profit numbers. They multiply by whatever multiple they use for companies like yours. That's your initial offer.

This number is always negotiable. It's their opening position, not their final offer. But it tells you if you're in the right ballpark.

Due Diligence

The buyer's team digs through everything. Financial statements, customer contracts, employee agreements, tax returns, legal docs, everything.

They're looking for reasons to lower the price. Customer concentration, revenue irregularities, legal issues, key person dependencies, messy books - anything that adds risk.

This is where deals die or valuations drop 20-40%. Have your financials clean before you start conversations. Use proper accounting software. Reconcile everything. No surprises.

Adjusted Offer

After due diligence, the buyer comes back with an adjusted offer. Sometimes higher if they found hidden value. Usually lower because they found risks.

This is where your preparation pays off. If your books are clean, your customers are diversified, and your operations are documented, the adjusted offer stays close to the initial number.

Deal Structure

The final valuation isn't just a number - it's how that number gets paid. Cash at closing, seller financing, earnouts, equity in the acquiring company.

A $2M offer with $1.5M cash at closing is worth more than a $2.5M offer with $1M cash and $1.5M in earnouts over three years. Run the numbers on what you'll actually receive.

Critical Red Flags That Tank Valuations

Buyers know what to look for. These issues consistently destroy value in due diligence.

Financial Red Flags

Inconsistent or unreliable financial records kill deals instantly. If you can't produce accurate financial statements, buyers walk. Small business owners often run sloppy books because updating accounting systems takes time. But buyers can't make informed decisions without accurate numbers.

Declining revenue trends signal problems. A steady drop in revenue, shrinking margins, or increasing expenses without explanation makes buyers nervous. They'll either walk or discount heavily for perceived risk.

Cash flow problems are deal-breakers. If you're relying heavily on short-term borrowing, have delays in accounts receivable collection, or show unexplained cash withdrawals, buyers see danger.

Operational Red Flags

High employee turnover signals organizational problems. Companies with turnover over 40% see 32% lower revenue growth than stable businesses. Buyers discount for the cost and risk of replacing key people.

Over-dependence on the owner is the most common valuation killer for small businesses. If you're the only person who can maintain customer relationships, close deals, or handle key operations, buyers see a job for sale, not a business.

Poor systems and documentation make the business untransferable. If processes live in your head instead of in documented procedures, buyers can't operate the business without you. That's worth 30-50% less than a business with proper systems.

Customer and Revenue Red Flags

Customer concentration is a massive red flag. If your top three customers represent more than 30% of revenue, expect significant discounts. Buyers fear losing those customers and destroying the business value.

Lack of recurring revenue in businesses that should have it signals problems. If you're in an industry where competitors have subscriptions or retainers and you're still doing one-off projects, you're leaving money on the table and getting a lower multiple.

Revenue recognition issues destroy trust. If you're booking revenue before actually earning it, counting non-recurring revenue as recurring, or manipulating numbers to look better, buyers will find out and walk.

Legal and Compliance Red Flags

Unresolved legal disputes create uncertainty. Pending lawsuits, regulatory violations, or compliance issues can reduce valuations by 20-30% or kill deals entirely.

Tax problems are serious. Some companies delay paying payroll taxes when they have cash flow problems. This exposes buyers to expensive penalties. Have a tax expert review your filings before you go to market.

Missing or incomplete contracts create risk. Customer contracts, vendor agreements, employee agreements, and intellectual property assignments all need to be clean and documented. Gaps here give buyers leverage to renegotiate.

Professional Valuations vs. Market-Based Estimates

Professional valuations cost $5,000 to $50,000 depending on complexity and business size. You need one in specific situations.

When You Need a Professional Valuation

Talking to serious buyers requires third-party validation. They'll want an independent assessment of your numbers, especially for deals over $5M.

Partner buyouts need professional valuations to prevent disputes. If you're buying out a partner or being bought out, an independent valuation protects everyone.

Tax and legal requirements demand professional valuations. Estate planning, divorce proceedings, and litigation all require valuations from certified appraisers who follow standards like USPAP (Uniform Standards of Professional Appraisal Practice).

Professional business valuators typically hold credentials like ASA (Accredited Senior Appraiser), ABV (Accredited in Business Valuation), or CVA (Certified Valuation Analyst). These credentials require extensive training, experience, and adherence to professional standards.

Standards and Methodologies

Professional appraisers follow established standards. In the US, most follow USPAP Standards 9 and 10, which cover business valuation development and reporting. The American Society of Appraisers publishes additional Business Valuation Standards that members must follow.

These standards require appraisers to identify the purpose of the valuation, the standard of value being used (fair market value, investment value, etc.), and the premise of value (going concern vs. liquidation).

Professional valuations include comprehensive analysis: detailed financial review, industry analysis, economic outlook, selection of appropriate valuation methods, application of discounts or premiums, and detailed documentation of all assumptions.

When Market Estimates Are Enough

For everything else, learn to value your own company using market comparables. Track similar businesses on marketplaces like Flippa and talk to brokers about recent sales in your space.

Market-based estimates work well when you're exploring options, making internal decisions, or having preliminary conversations with buyers. You don't need a $30K valuation to decide whether you should focus on growth or profitability.

I use market comps constantly to advise the companies I work with. Look at what similar businesses actually sold for, adjust for differences in size and quality, and you'll get within 15-20% of what buyers will actually pay.

Common Valuation Mistakes That Cost You Money

I've watched dozens of founders leave money on the table. Here are the biggest mistakes.

Valuing Too Early

Getting a valuation when you're not ready to sell is pointless. Valuations change monthly based on your performance and market conditions. Focus on building a more valuable company instead of getting a number today.

Using One Method

Different buyers use different methods. Know your valuation under revenue multiples, EBITDA multiples, and SDE multiples. Emphasize whichever makes your company look best.

If you're profitable with low growth, push EBITDA multiples. If you're high-growth with thin margins, push revenue multiples. Frame the conversation around your strengths.

Ignoring Market Comparables

Your opinion of your company's value doesn't matter. Market comparables do. Look up recent sales of similar companies on marketplaces or ask brokers what similar businesses sold for.

If SaaS companies in your space are trading at 4x ARR and you want 8x, you need to explain why you're different. Without data to back it up, you're just negotiating poorly.

Forgetting Add-Backs

Add-backs are personal expenses you ran through the business that a buyer won't have. Your car lease, family phone plans, that conference in Hawaii, your spouse's salary for minimal work.

Properly documented add-backs increase your SDE, which increases your valuation. Just be ready to prove every add-back with documentation. Buyers will challenge anything questionable.

Not Considering Deal Structure

Founders focus on headline valuation numbers and ignore deal structure. A $3M offer with $2.5M cash at closing is better than a $3.5M offer with $1.5M cash, $1M earnout, and $1M seller note.

Earnouts tie your payout to future performance you don't control. Seller notes mean you're financing the buyer's purchase. Equity in the acquiring company is a bet on their success. Calculate the actual value of different structures.

Overestimating Growth Potential

Buyers discount your growth projections by 30-50% automatically. Everyone claims their business will double next year. Buyers have seen those projections fail hundreds of times.

Base your valuation on actual results, not hypothetical futures. If you haven't done it yet, buyers won't pay for it.

Building a Data Room Before You Need It

The companies that get the best valuations prepare years in advance. They build what's called a data room - a organized collection of every document a buyer might want to see.

Financial Documents

Three to five years of financial statements including income statements, balance sheets, and cash flow statements. If you're using cash accounting, transition to accrual accounting at least a year before you sell.

Tax returns for the same period. Buyers will verify your financials against your tax returns, and any discrepancies create immediate distrust.

Detailed revenue breakdown by customer, product, and time period. Buyers want to see where money comes from and how stable it is.

Customer acquisition cost (CAC) and lifetime value (LTV) analysis if you're in subscription or recurring revenue business. These metrics are fundamental to SaaS and subscription business valuations.

Operational Documents

Organization charts showing who does what. Buyers need to understand your team structure and identify key person dependencies.

Standard operating procedures for all major functions. Sales processes, fulfillment workflows, customer support protocols, everything documented so a new owner can run the business.

Key metrics dashboards showing the numbers you track. What KPIs matter to your business? How do you measure success? Buyers want to see you run a data-driven operation.

Technology stack documentation. What software and tools do you use? What are the costs? What would it take to migrate to different systems?

Legal and Compliance Documents

All customer contracts, organized and searchable. Buyers will sample these to verify your revenue claims and check for unusual terms or cancellation clauses.

Vendor and supplier agreements. What commitments have you made? Are there any unfavorable terms that affect profitability?

Employee agreements and contractor contracts. Who works for you and under what terms? Are there any non-compete or retention issues?

Intellectual property documentation. Do you actually own everything you claim to own? Are all trademark, copyright, and patent filings current? Have all developers and contractors assigned their IP to the company?

Compliance records showing you meet all applicable regulations. Industry licenses, data privacy compliance, employment law adherence, everything that keeps you legal.

Increasing Your Valuation Before You Sell

If you're 6-12 months away from wanting to exit, here's what to focus on.

Accelerate Growth

Growth rate impacts valuation more than almost anything else. Sacrifice some profit for growth in the year before you sell. Hire salespeople, increase marketing spend, launch new products.

A company growing 50% year-over-year at $900K revenue gets valued higher than one growing 10% at $1M revenue.

Lock in Long-Term Contracts

Convert monthly customers to annual contracts. Offer discounts if needed - the lower churn and longer commitment increases valuation more than the discount costs you.

Pre-selling 6-12 months of revenue before closing also increases your valuation since that future revenue is locked in.

Clean Up Your Customer Base

Fire problem customers. Even if they're profitable, buyers see high-maintenance customers as risks. Replace them with better customers before you sell.

Your customer list should look like a greatest hits album, not a collection of charity cases you're managing.

Document Your Sales Process

Buyers want to see repeatable systems. If you can show them exactly how you generate leads, qualify prospects, run sales calls, and close deals, the business looks less risky.

This is where having documented processes for prospecting becomes valuable. Whether you're using a Maps scraping tool for local business leads or an email lookup service for B2B contacts, documenting your lead generation shows buyers they can replicate your success.

My discovery call framework is part of this documentation - showing buyers exactly how your sales process works increases confidence in future revenue.

Build Strategic Value

Strategic buyers pay more than financial buyers. A strategic buyer wants your customer list, your technology, your team, or your market position.

Figure out who would benefit most from owning your company and position yourself accordingly. Sometimes that means focusing on a specific niche or vertical that makes you attractive to larger players in that space.

The Psychology of Valuation Negotiations

Valuation isn't just numbers. It's psychology and negotiation. Understanding buyer motivations gives you leverage.

Why Buyers Discount

Buyers are trained to find problems. Their entire due diligence process is designed to discover risks and use them to negotiate lower prices.

Every issue they find becomes ammunition for renegotiation. This is why preparation matters so much. The fewer problems they find, the less leverage they have.

Buyers also have FOMO (fear of missing out). If you're talking to multiple buyers simultaneously, they compete. If you're only talking to one buyer, they have all the leverage.

Running a Competitive Process

The best way to maximize valuation is to have multiple buyers bidding. This requires patience and preparation.

You need to approach 20-30 potential buyers to get 5-8 interested. Of those, maybe 2-4 make it through initial diligence to submit offers. Having 2-4 offers to choose from increases your final price by 20-30% on average.

This is where brokers and M&A advisors earn their fees. They run competitive processes professionally, managing multiple buyers simultaneously and creating urgency.

Timing the Market

Valuation multiples fluctuate with market conditions. When interest rates are low and capital is abundant, multiples increase. When rates rise and capital tightens, multiples compress.

You can't perfectly time the market, but you can avoid obviously bad times. Don't try to sell during economic downturns or industry-specific crises.

The best time to sell is when your business is growing, the market is strong, and you're not desperate. Buyers smell desperation and use it to negotiate lower prices.

Special Considerations for Different Business Types

Different types of businesses have unique valuation considerations.

SaaS and Software Companies

SaaS valuations focus almost exclusively on ARR (Annual Recurring Revenue), growth rate, and churn. EBITDA matters less than for traditional businesses because SaaS companies often invest heavily in growth.

Net Revenue Retention (NRR) is critical. If your existing customers are expanding their usage and paying more over time (NRR over 100%), you get premium valuations. If customers are downgrading or canceling (NRR under 90%), expect significant discounts.

Logo retention and dollar retention are different metrics. You can lose customers (logo churn) but still grow revenue if remaining customers expand enough. Buyers care more about dollar retention.

Gross margin matters. SaaS businesses should have 70-80% gross margins. Lower margins signal structural problems with your unit economics.

Agencies and Service Businesses

Service businesses get valued on a mix of revenue multiples and SDE multiples, depending on size and sophistication.

Client concentration is the biggest valuation killer. If you lose your top client tomorrow, does the business survive? If not, you're getting heavily discounted.

Retainer vs. project revenue matters enormously. Monthly retainers are worth 2-3x more than project work because they're predictable and recurring.

Team structure determines transferability. If you're the only person doing client work, you're selling yourself a job. If you have account managers who own client relationships, the business is transferable and worth more.

Ecommerce and Physical Product Businesses

Ecommerce valuations focus on revenue multiples, typically 1x to 3x annual revenue for smaller businesses, higher for fast-growing brands.

Gross margin is critical because it shows true profitability after COGS. A $2M revenue ecommerce business with 25% gross margin is worth less than a $1.5M business with 50% gross margin.

Customer acquisition cost relative to lifetime value determines sustainability. If you're spending $150 to acquire customers who only buy once for $100, you have a problem. Buyers need to see positive unit economics.

Platform concentration creates risk. If 80% of sales come from Amazon, buyers worry about Amazon changing policies or competition intensifying. Diversification across channels increases value.

Brand ownership and differentiation matter. Private label products competing on price get low multiples. Branded products with loyal customers command premiums.

Local Service Businesses

Local businesses like HVAC, plumbing, landscaping, and home services typically sell for 2x to 4x SDE.

The owner's role is everything. If you work in the business doing the actual service work, you're getting 2x SDE. If you have crews doing the work and you just manage, you might get 3x to 4x SDE.

Recurring maintenance contracts are gold. One-time service calls are worth less than monthly or annual maintenance agreements that create predictable revenue.

Geographic concentration matters. If all your customers are in one small area, you're vulnerable to local economic conditions. Broader geographic coverage reduces risk.

For these businesses, having systematic lead generation helps demonstrate transferability. Whether that's SEO, paid ads, or a consistent process for finding new customers, buyers want to see how the pipeline stays full.

The Emotional Side of Valuation

Founders get emotionally attached to their companies. This clouds valuation judgment.

The Founder Premium Fallacy

You've poured years of your life into building this business. You've sacrificed, struggled, and overcome challenges. To you, the business represents all that effort and emotion.

Buyers don't care about any of that. They care about future cash flows and return on investment. Your emotional attachment adds zero dollars to their valuation.

I've watched founders turn down fair offers because they thought their business was worth more based on how hard they'd worked. Those companies often sold later for less or never sold at all.

Walking Away From Bad Deals

Sometimes the best decision is not to sell. If buyers aren't offering fair value, if the market is down, or if you haven't prepared adequately, walking away is better than accepting a bad deal.

You only sell a business once. There are no do-overs. Taking a 30% discount because you're impatient or unprepared costs you real money you'll never recover.

Build the business to a point where you're getting premium valuations, or don't sell. It's that simple.

The Right Time to Sell

The right time to sell is when the business is performing well, you're not desperate, and the market is strong. That usually means selling when you don't have to, not when you need to.

Selling out of desperation - because you're burned out, the business is declining, or you need the money - puts you in a weak negotiating position. Buyers sense this and use it against you.

The best exits happen when you're still excited about the business and it's growing. That's when buyers pay premium multiples.

After the Valuation: Making the Deal Work

Getting a high valuation doesn't mean anything if the deal falls apart or the payment structure screws you.

Understanding Earnouts

Earnouts tie part of your payout to future performance. Buyers use them to bridge valuation gaps and reduce their risk.

If a buyer offers $3M with $2M at closing and $1M earnout based on revenue targets, you're betting on hitting those targets under new ownership. Most earnouts fail because you no longer control the business but you're responsible for the results.

Negotiate earnouts carefully. Make the targets achievable, the measurement period short (12-18 months maximum), and the metrics simple and verifiable. Complex earnout formulas always favor the buyer.

Seller Financing

Seller financing means you're lending money to the buyer. You receive part of the purchase price as a promissory note payable over time.

This reduces the buyer's upfront cash requirement and shares risk with you. If the business fails under new ownership, you might not get paid.

Only accept seller financing if the buyer is strong, the terms are reasonable (3-5 years maximum, market interest rate), and you're comfortable with the risk. Many sellers get stuck with worthless notes when businesses fail post-acquisition.

Transition Periods

Most deals include a transition period where you help the new owner take over. This might be 30 days, 90 days, or even a year depending on complexity.

Negotiate your transition role carefully. What exactly are you expected to do? How much time is required? What happens if you don't fulfill expectations?

Some buyers want you involved heavily. Others want you gone quickly. Be clear about expectations before you close.

The Real Number That Matters

Here's the truth about valuations: your company is worth what someone will pay for it.

All the formulas and methods are just ways to start the conversation. The final number comes down to negotiation, market conditions, how badly the buyer wants your company, and how many buyers you're talking to.

The best way to increase your valuation isn't to argue about multiples. It's to build a company that multiple buyers want to own. Recurring revenue, strong growth, diversified customers, documented systems, and a business that doesn't depend on you personally.

Do that, and the valuation takes care of itself.

If you need help positioning your company for maximum value, the strategies I teach inside Galadon Gold cover everything from fixing operational issues to running a competitive sales process. The companies that execute these strategies consistently get premium multiples.