5 Things That Tank Your Business Value
Most business owners overestimate what their company is worth. Not because the business is bad — but because they're making avoidable mistakes that scare buyers and crush multiples.
Here are the five most common value-killers, and how to fix them.
1. Owner Dependency
If your business can't function without you, it's not really a business — it's a job. And buyers don't pay premium prices for jobs.
Warning signs:
- You handle all the key customer relationships
- You're the only one who knows how things work
- You work 60+ hours a week and can't take a vacation
The fix: Document processes, train employees, and gradually step back from day-to-day operations. A business that runs without you is worth 20-50% more than one that doesn't.
2. Customer Concentration
If one customer represents more than 25% of your revenue, buyers get nervous. What if that customer leaves after the sale?
The fix: Diversify. It's not always easy, but actively work to grow revenue from other customers so no single one dominates.
3. Poor Financial Records
If you can't produce clean financials, buyers assume the worst. They'll either walk away or demand a steep discount for the uncertainty.
The fix: Get your books in order at least 2-3 years before selling. Separate personal and business expenses. Work with a good bookkeeper.
4. Declining Revenue
Buyers pay for the future, not the past. If your revenue has dropped for two years straight, expect to be valued on the lower number — or worse, get hit with a "risk discount."
The fix: Don't sell during a downturn unless you have to. If revenue is declining, address the root cause before going to market.
5. Lease Problems
For businesses tied to a location (restaurants, retail, gyms), the lease can make or break a deal. A lease with only 1 year left — or unfavorable renewal terms — is a dealbreaker for many buyers.
The fix: Before selling, negotiate a new lease or an option to renew on favorable terms. Ideally, get 5+ years locked in.
The Bottom Line
None of these issues are unfixable. But they all take time. The best thing you can do is think about selling 2-3 years before you actually want to — and address these problems early.