What Is My Business Worth? What Buyers Test Before They Believe the Number

The short answer. Only a qualified appraiser, business broker, or CPA can tell you what your business is worth — and Mahoney Road doesn't estimate values. What we can tell you is how buyers decide what they'll pay: they look at what the business earns, how confident they are it will keep earning without you, and what they'd have to fix or risk after closing. The number matters. Whether a buyer believes it matters just as much.

Who Can Tell You What Your Business Is Worth

Different professionals answer the question in different ways:

• A business appraiser prepares a formal, independent valuation. Lenders financing a purchase often require one.
• A business broker gives an opinion of value when pricing a business for market, drawing on recent sales of comparable businesses.
• Your CPA knows your financial picture — how your earnings are presented and what a sale would mean for your taxes.

A business broker's focus is finding the right buyer and getting a deal to closing — and a good broker conversation is worth having early, to understand your market. Preparation is the work on the business itself, before it's listed. The two fit together: the better prepared a business is, the more a broker has to work with.

What Drives What a Business Is Worth

In plain terms, buyers of a Main Street business pay for future earnings they can count on. What moves the number:

• Earnings, and their quality. How much the business earns for an owner — and whether the records support it. (More on what buyers look for in your financials.)
• The trend. Steady or improving results are easier to value than a recent peak or a decline.
• Risk. Heavy owner dependency, a few large customers, or gaps in contracts and licenses all make a buyer less confident the earnings will continue.
• Transferability. Whether a new owner can step in — team, relationships, lease, and accounts carrying over.
• The market. Buyer demand and lending conditions in your industry; your broker can speak to these.

Why the Number Can Change After an Offer

A valuation and a closing price aren't the same number — what happens between them is due diligence. A buyer's offer assumes the business is what it appears to be. Due diligence tests that assumption: the financials, the customers, the contracts, the dependence on you. When an assumption doesn't hold up, the price or the terms tend to move — less paid at closing, part of the price tied to future performance, or a longer transition. (See what a buyer will find.)

That's why the question "what is my business worth?" has a second half: what will a buyer be able to verify?

How to Protect the Number

Preparation doesn't set your price. It tends to reduce the issues buyers use to push the price down.

• Reconcile your books, tax returns, and bank records — with your CPA.
• Move key relationships and decisions from you to your team.
• Put important agreements in writing, and know what they say about a change in ownership.
• Organize the records a buyer will ask for (see what documents you'll need).
• Know your gaps early enough to work on them (see is my business ready to sell? and what to fix first).

Where Mahoney Road Fits

We don't tell you what your business is worth — we make it worth showing to serious buyers. A Mahoney Road review looks at the seven areas buyers examine and shows you where your business is likely to hold up and where it may not, so you can bring your appraiser, broker, and CPA a business that's ready for their work.

• Starting Point Assessment — free, 15 questions, about five minutes. Results by email.
• Compass Brief — a single working session of at least 90 minutes across all seven areas. $695, due when you book, and the full $695 is credited toward your first payment if you move into a full engagement within 90 days.