Pricing Your Business: What the Experts Say

If you’re a business owner, you’ve probably asked yourself at some point, “What would my business sell for?” It’s a common and important question. At The CBA Group, founder and Managing Director Michael Norman regularly talks with owners who are looking for clarity on their business’s price. While it may be tempting to use a quick rule of thumb like “two times discretionary earnings”, these generalizations rarely tell the full story.

Figuring out what a business is really worth takes more than a simple formula. It involves a detailed review of the company’s financials, operations, assets, and the specific risks and opportunities it faces. In this article, Michael explains how business pricing is done properly and how a realistic price can be determined. The goal is to help owners understand what their business can sell for and why, so they can move forward with confidence when it’s time to sell.

How Business Pricing Works

The methods used vary from one business to another and in many cases, a combination of methods are applied to reach what’s called the Selling Range for Pricing the Business. This is an estimate of the price a business would likely sell for in today’s market, based on objective analysis.

Tools That Support Accurate Valuation

To support these calculations, business brokers and other professionals rely on specialized databases and software. Transaction databases like BizComps, BVR, PeerComps, and BBF MLS provide real-world sales data for comparable businesses. These resources help establish benchmarks for how similar companies are priced.

Software, available from a variety of providers, is also used to organize financial data, apply pricing methods, and produce consistent results. When used together, these tools create a reliable foundation for determining an accurate price.

Adjusting for Key Value Drivers

Every business has unique characteristics that can raise or lower its value in the eyes of a buyer. These adjustments depend on a mix of internal and external factors.

Internal considerations often include how dependent the business is on the owner, whether it relies too heavily on a small number of customers, and how diverse its products, services, or markets are. The accuracy and quality of inventory also play a role.

External influences include industry trends, the strength of the overall economy, and any legal or regulatory risks that might affect future operations. Understanding how these factors apply helps create a more accurate and realistic price for the business. Altogether, there are more than 50 factors that can impact the adjusted selling price. Understanding how these factors apply to a specific business is essential in getting the pricing right.

What Influences Final Pricing

Even with a well-documented pricing structure, the final listing price may depend on market conditions. Supply and demand for businesses in that industry, the availability of buyer financing, and interest from strategic or synergistic buyers can all influence how a business is priced.

Set the price too high and it may sit on the market for months with little or no activity. Set it too low and the owner can risk leaving significant money on the table. At The CBA Group, we work closely with our clients to strike the right balance. Our goal is to position the business competitively, attract qualified buyers, and support a smooth, successful transaction.

Final Thoughts

Putting a selling price on your business is a process that requires careful analysis, the right tools, and experience in the market. Michael Norman and the team at The CBA Group provide owners with a clear, data-backed understanding of what their business is worth and why. With the right pricing in place, business owners can plan their exit with confidence, knowing they’re positioned for a fair price and a successful sale.