5 Common Myths About Business Valuation (and What to Believe Instead)
- Ernest Bednarz
- Jul 1
- 2 min read
Business owners often hear conflicting advice about what their company is worth. Whether you're planning a sale, raising capital, or creating a succession plan, understanding your business's true value is essential.
Unfortunately, misconceptions about valuation can lead to costly decisions. Here are five of the most common myths about business valuation - and the truth behind them.
1. Myth: My Business Is Worth What a Similar One Sold For
Reality: No two businesses are identical. Even in the same industry or similar business lines, factors like customer concentration, recurring revenue, location, and management structure can significantly impact value. Comparable sales can offer context, but a professional valuation tailors the assessment to your unique situation.
2. Myth: I Just Need to Multiply My Revenue
Reality: While rules of thumb like "2x revenue" or "5x EBITDA" are common, they’re not always reliable for precise valuation. These multiples vary widely depending on risk, growth prospects, and profitability, sometimes they are mere averages of industry multiples which may not apply to your specific business at all. A professional appraisal considers all financial and non-financial aspects of your business.
3. Myth: Valuations Are Only Needed When Selling
Reality: Business valuation is a strategic tool, not just for exit planning. It supports tax planning, insurance coverage, partnership negotiations, and long-term decision-making. Knowing your value helps you manage and grow it. A wise business coach I work with always says "if you don't measure it you can't manage it".
4. Myth: The Higher the Valuation, the Better
Reality: An inflated valuation can backfire, especially when negotiating with investors, lenders, or buyers. A credible, defensible valuation is more valuable than an unrealistic one. It builds trust and helps avoid disappointment or deal breakdowns. How many times did you walk away from buying something in a store because the price was too high without even inquiring about specific features or attributes, it's not different for businesses. Price it too high and many possible buyers will pass on by.
5. Myth: My Accountant Can Just Do It
Reality: While accountants play a critical role in financial reporting, certified business appraisers specialize in determining fair market value using established valuation methodologies. Valuation requires specific expertise that goes beyond preparing financial statements.
Business valuation is more than just a number, it’s a strategic insight into your company’s strengths, risks, and potential.
At Malahat Valuation Group, we provide objective, defensible valuations tailored to your goals.
✅ Ready to find out what your business is really worth?
Contact us or call (250) 929-2929 to schedule your consultation.
Malahat Valuation Group specializes in business valuation and real estate appraisals to owners of privately owned companies and their professional advisors. An now also helping with business succession planning.
When owners need to leverage, sell or reorganize their assets, we answer the age-old question "What is it worth?".
We provide our clients and their advisors peace of mind by preparing professional valuations that stand up to scrutiny from lenders, the Courts, and the Canada Revenue Agency.
Malahat Valuation Group Inc.
(250) 929-2929
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