The Heartbreak Begins

At Liquid Sunset, we have been seeing an increasing number of businesses come to us with business valuations that are deeply disconnected from reality.

Not marginally aggressive. Not optimistic at the edges. We are talking about businesses showing recent decline, margin compression, customer loss, or operational strain being fitted with unprecedented EBITDA or SDE multipliers that simply do not exist in the market.

This is where buisness valuation stops being academic and starts being personal.

For most owners, a valuation is not an abstract exercise. It represents their retirement, their legacy, and years or decades of work. When they pay for a valuation, they trust that the professional preparing it is grounding that number in how businesses actually transact. They plan around that figure. They make emotional and financial decisions based on it.

When those business valuations are not market tested, not supported by comparable transactions, and not reasonable given the company’s current performance, the fallout is severe. Expectations are inflated. Timelines are distorted. Financial plans are built on numbers that cannot be achieved.

The heartbreak comes later, when the business goes to market and reality intervenes. Buyers disengage. Lenders push back. The valuation collapses under scrutiny. What remains is not just disappointment, but confusion, stress, and a sense of betrayal that could have been avoided with a more grounded starting point.

Of Course, We Do Not Let That Happen to Our Clients

What does happen is that we have to address it early.

Before a business is ever brought to market, we sit down with the owner and explain what the market is actually going to support. That conversation is rarely easy. It carries real risk for us. Relationships can be strained. Trust can be tested.

In many cases, it puts us directly up against prior valuation work and the professionals who prepared it. Not because of disagreement for its own sake, but because the numbers have not been market tested in a live transaction environment.

Of course, the truth will meet the light one way or another. Buyers will surface it. Lenders will surface it. The market will expose it. But, we simply hate being the bearer of that news before a process has even begun. But doing it early is far less damaging than allowing an owner to move forward with expectations that reality will inevitably dismantle.

Be Sure to Ask Your CBV What Method They Plan to Use

Not all business valuation methods serve the same purpose, and not all are equally useful when an owner is planning a real transaction. Before contracting a business valuation, business owners should ask a simple but critical question. What method will be used to formulate it.

If the answer does not clearly reference recent market comparables, that should prompt further discussion.

Business Valuations built primarily from theoretical models, long term projections, or heavily adjusted discount rates may be internally consistent, but that does not mean they are externally valid. In the lower and middle market, buyers anchor on what similar businesses have sold for recently, how those deals were structured, and what risks were priced in.

Recent market comparables force discipline. They tie a valuation to observable behavior rather than assumptions. They reflect what buyers are actually paying today, not what they might pay under perfect conditions.

That does not mean other methods have no place. They can be useful for understanding sensitivity, risk, and internal planning. But when a valuation is meant to inform a sale, a transition, or a financing event, it should be grounded first and foremost in recent market comparables.

If that foundation is missing, the valuation may look polished, but it is unlikely to survive first contact with the market.

If You Are Planning to Sell, Start With a Broker Valuation

If an owner is planning to take a business to market, the most practical valuation is one grounded in how buyers actually transact.

At Liquid Sunset, business valuations are included as part of our listing engagement. They are not theoretical exercises. They are built to withstand real buyer scrutiny, lender review, and live negotiations.

In many cases, this approach saves owners a significant amount of money, time, and frustration. It avoids paying for a valuation that looks impressive on paper but needs to be reworked once exposed to the market.

For owners who are still early in their thinking, we also offer a free ballpark value tool on our website. It is designed to provide a realistic starting point, not a promise, so owners can orient themselves before committing to a formal process.

Valuation should create clarity, not confusion. When it starts with the market, it does exactly that.