When owners decide to sell their company, most focus on finding buyers, negotiating hard, and closing quickly. But long before you reach the negotiation table, a critical step determines how much you’ll actually walk away with: valuation.
If you don’t approach valuation properly or if you do it alone without guidance from business valuation advisors you risk leaving a significant amount of money on the table, or worse, scaring away serious buyers with unrealistic expectations.
In this article, we’ll explore 5 common valuation mistakes business owners make before selling, and how to avoid them using professional business company valuation services, solid methods like business valuation using EBITDA, and practical tools such as a business valuation template and small business valuation methods examples.
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Mistake #1: Guessing the Value Instead of Using Structured Methods
The first and most damaging mistake many owners make is guessing what their business is worth.
They might:
- Base the number on what they “need” for retirement or the next venture
- Copy valuations they’ve heard from other owners
- Assume a multiple without understanding how it’s derived
Professional business valuation advisors use structured and accepted methods rather than guesses or wishes. Good business company valuation services typically consider:
- Earnings-based methods (e.g., multiples of EBITDA)
- Cash flow business valuation approaches
- Asset-based and market-comparable methods
When you rely on guesswork, two things happen:
- You overprice and buyers don’t engage seriously.
- Or you underprice and accept less than your business is truly worth.
Both outcomes are expensive. A structured valuation gives you a defensible number that buyers are more likely to trust.
Mistake #2: Ignoring EBITDA and Using the Wrong Profit Figures
A second common error is failing to understand business valuation using EBITDA and using the wrong profit metrics as a base.
Many owners talk about:
- “Net profit after everything, including personal expenses”
- Or they use numbers distorted by one-off costs, personal benefits, or aggressive tax minimization
However, most serious buyers and business valuation advisors prefer EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) because:
- It normalizes earnings and strips out financing and tax effects
- It makes it easier to compare businesses across sectors and markets
- It is commonly used with industry-standard multiples
If you don’t present your numbers in terms of well-prepared EBITDA, buyers may:
- Discount your figures
- Recalculate earnings in their own way (often more conservatively)
- Push your valuation down in negotiations
A strong business company valuation services provider will help you:
- Rebuild your financials into clean, normalized statements
- Calculate EBITDA correctly
- Apply reasonable valuation multiples based on your sector and risk profile
Mistake #3: Not Adjusting for Owner Benefits and One-Off Items
Another major trap is treating your reported net profit as if it equals the business’s true earning potential.
In reality, for many privately owned companies:
- Owners pay themselves below or above market salary
- Personal expenses (cars, travel, family-related costs) are run through the business
- There are one-off legal, setup, renovation, or extraordinary costs
If you don’t adjust for this, buyers looking at your numbers will see a distorted picture.
This is where small business valuation methods examples used by professionals are helpful. A standard approach is to calculate:
- Normalized EBITDA – adjusting for:
- Owner’s compensation to a market-level salary
- Personal expenses removed
- One-off or unusual items added back
Professional business valuation advisors are skilled at identifying and explaining these adjustments in a way that buyers understand and accept.
Ignoring these adjustments leads to one of two problems:
- You undervalue your business because reported profit looks lower than true economic profit.
- Or you overvalue by adding back items the buyer doesn’t agree with, creating mistrust and friction.
Using a clear business valuation template that highlights all adjustments keeps the process transparent and defensible.
