Wild, Wacky, and Totally Wrong Ways to Value Your Business

If there’s one thing that unites business owners—besides caffeine and a deep distrust of Mondays—it’s the tendency to wildly miscalculate the value of their businesses. Some do it with absolute confidence. Others do it out of sheer desperation. But make no mistake—there are some truly creative ways people come up with their business valuation, none of which have anything to do with reality.

Let’s take a tour through the most, um, innovative methods business owners use to figure out what their company is worth. The examples are kept short and confidential, but each represents a real scenario, the likes of which we have heard numerous times.

1. The “Million-Dollar Partner” Formula

The classic. Count your partners and multiply by a million. Three partners? Clearly your business must be worth $3 million.

Example: A landscaping company with four partners insisted their firm was worth $4 million. In truth, their total value came in around $1,350,000. The number of owners does not influence market prices—buyers,  and the business performance, does.

2. The Retirement Fantasy Valuation

This is where you mix wishful thinking with financial planning. Step one: calculate what you want for retirement. Step two: subtract what you already have. Step three: Voilà—the gap becomes your asking price.

Example: A manufacturer decided his business must sell for $3.5 million because he needed that number to retire. Market reality? Buyers valued it closer to $1.8 million. Retirement dreams don’t dictate buyer offers.

3. The “My Golf Buddy Said” Method

We’ve all heard it. A buddy brags, “I sold my business for 10x earnings!” Suddenly everyone believes they should, too.

Example: A bakery owner expected 10x earnings because her golf buddy got it. Turns out, he sold a scalable software company. Her owner-dependent bakery? Valued closer to 2.5x. Another true story but actually made up by one Seller admitting later he loved making his ‘friend/competitor’ crazy and a little envious.

4. The Rearview Mirror Accountant

Some accountants are great valuation specialists like CVAs, but many are not. Accountants are great with numbers—past numbers. Some take last year’s tax return, apply a multiple, and call it a day.

Example: A specialty retailer’s accountant valued the store at $2,750,000 based on last year’s strong tax return. On paper, it looked solid. But here’s what they missed: the company’s primary supplier had just gone bankrupt, a new competitor moved in down the street, and online sales in the sector were falling fast. When those risks were factored in, the true market value came in closer to $1,400,000—almost half the “rearview mirror” number.

5. The Generous Vanishing Buyer

This is when a “buyer” sweeps in with wild promises. They offer the moon, you start yacht shopping, and then they vanish.

Example: A gym owner entertained a $5 million “offer” from a foreign investor who never returned to the US. The deal evaporated, but that number stuck like glue in the owner’s mind years later, making a more likely market value of $2 million feel insulting.

6. The “Tech Unicorn Comparison”

Some owners read about Silicon Valley startups selling for 11x earnings and think, “Why not me?”

Example: After a visit with his sister’s family, the plumbing company owner came back convinced his business should be valued like a tech unicorn. Why? His nephew is a private equity guy in Chicago who specializes in SaaS deals. Reality check: service businesses aren’t scalable software platforms. The plumbing company sold for 3.5x earnings—not 11x.

7. The “Wrong Multiple on the Wrong Earnings”

Here’s a big one: applying the wrong multiple to the wrong number. We’re talking NOI, SDE, DE, EBITDA, EBIT, ROI—you name it. Sometimes it makes you want to say W-T-F (which, as my kids were taught, means “wow, that’s funny”).

Example: Not long ago, a gentleman with a modest-sized business was applying a 3x multiple—but to his gross revenues. At best, the multiple should have been applied to discretionary earnings. In his late 60s, he had a painful awakening: he wasn’t going to retire with nearly as much as he hoped. Getting the right multiple and the right multiplier is absolutely essential. Too often, people get one or both wrong. This is also one more reason to get a valuation early, and often.

The Reality Check

The truth is that none of these wild and wacky methods actually work. Valuing a business isn’t about retirement fantasies, golf stories, phantom buyers, or unicorn envy. And it’s certainly not about applying the wrong multiple to the wrong number.

Business valuation is about:

• Financial performance (earnings, cash flow, and revenue quality).
• Transferability (can it run without you?).
• Risk factors (customer concentration, employee retention, industry shifts).
• Market trends (what’s happening in your industry).
• Comparable sales (what businesses like yours are really selling for).

Your business is likely your largest asset. Guessing wrong could cost you your retirement, your family’s security, and your legacy.

Final Thought

It’s fun to laugh at these myths, but there’s nothing funny about leaving money—or your future—on the table. If you want clarity, protect your wealth, and prepare for what comes next, don’t rely on fantasy formulas. Get a professional evaluation, based on real data, and plan with confidence.

Request a full evaluation assessment today. Call us at (813) 571-7700, text us at the same number, or email us at biz@buybizusa.com.