;)
Business valuation misconceptions are one of the biggest reasons owners walk into a sale with unrealistic expectations. Most of these beliefs come from hearsay, industry rumours, or well-meaning advisors who have never sold a business. The market is what determines value—not assumptions, rules of thumb, or past investments. The clearer your understanding, the better prepared you’ll be for a successful exit.
Watch out for these eight thinking traps when preparing your business for a sale.
1. “My business is worth the value of my assets, plus a premium.”
This misconception assumes that fixed assets automatically create business value. In reality, assets only matter if they generate meaningful cash flow. A buyer won’t pay more than the income the business can produce. Asset value determines price only in certain scenarios, such as liquidation or when cash flow is too weak to justify an earnings-based valuation.
2. “Businesses in my industry sell for two-, three-, or four-times sales.”
Industry rules of thumb are broad averages, not valuation formulas. They ignore key factors such as cash flow quality, owner dependence, customer concentration, and risk. Two businesses in the same industry can have dramatically different values. Buyers rely on cash flow and risk assessment, not a simple multiple of revenue.
3. “My direct competitor sold for $X, so mine should be worth the same.”
Again, no two businesses or buyers are alike. Your competitor may have had stronger systems, lower risk, better financials, or undisclosed deal terms that inflated or reduced the price. Without knowing every detail of that transaction, comparisons are unreliable. Market value is based on your business’s performance and risk profile, and definitely not someone else’s sale.
4. “There’s an exact formula for determining business value.”
Business valuation is part art and part science. While financial models help establish a range of values, no formula produces a precise number. Different buyers interpret risk differently, structure deals differently, and weigh opportunities differently. The only true measure of value is what a buyer is willing to pay in real market conditions.
5. “My expert valuation is what a buyer should pay.”
Formal valuations are useful, but they don’t dictate market behaviour. Take it from us. Buyers assess value based on future cash flow and perceived risk as well as their own emotions and opinions. They will rarely blindly follow a third-party report. A valuation without real-world deal experience behind it may be academically sound but irrelevant to an actual buyer’s ultimate judgment.
6. “My business should sell for a premium because of its potential.”
“Potential” rarely increases price. It’s too nebulous. Buyers don’t pay for opportunities you haven’t executed on; they pay for demonstrated, sustainable cash flow. If growth requires investment, new systems, or operational changes, a buyer may view it as risk rather than upside. Past and current performance will always outweigh unproven potential.
7. “Value is based only on the financial numbers.”
While financials are critical, buyers also weigh qualitative factors such as customer diversification, leadership depth, operational stability, and market risks. These intangibles often influence value more than a clean set of statements. Numbers tell part of the story; buyers look for the whole picture.
8. “My accountant knows what my business is worth.”
Most accountants are not trained in business valuation or real-world dealmaking. Unless they have hands-on experience selling businesses, their opinion may not reflect buyer expectations or market behaviour. A reliable valuation requires understanding how actual buyers evaluate risk, cash flow, and deal structure.
Take the Next Step Toward an Accurate Valuation Today
If you want clarity, it starts with understanding how real buyers determine business value in Alberta. Alberta Business Exchange provides market-tested valuations grounded in 20+ years of successful transactions. Book a confidential consultation to understand what your business is truly worth today!