Why the Numbers Differ
Two brokers can value the same business differently because valuation involves judgment — on add-backs, the multiple, the method, and comparable data — and because some brokers inflate numbers to win the listing. Valuation isn't a single formula with one right answer; it's a disciplined estimate that reasonable professionals can land differently. But a big gap between two valuations usually points to specific, identifiable causes worth understanding.
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Different Add-Backs
The first source of difference is add-backs. One broker may include add-backs another considers too aggressive, or one may catch legitimate add-backs another misses. Since add-backs change the earnings figure — and that figure is multiplied — different add-back treatment alone can produce meaningfully different values. A careful, defensible add-back analysis is more valuable than a generous one that won't survive diligence.
Different Multiples and Methods
Brokers may apply different multiples based on their read of the business's risk, or weigh the valuation methods differently. One may lean on recent comparable sales the other doesn't have. Access to good comparable-sale data and real transaction experience makes a difference here — a broker who actually sells businesses like yours prices more accurately than one working from generic rules.
The Inflated-Valuation Problem
Here's the one to watch for: some brokers deliberately quote a high valuation to win your listing, knowing the business likely won't sell at that price. It feels great to hear a big number — but an overpriced business sits on the market, goes stale, and ultimately sells for less (or not at all). A broker telling you what you want to hear isn't doing you a favor. Be wary of a valuation far above the others with thin justification.
How to Judge a Valuation
Ask each broker to explain their number: What earnings figure and add-backs did they use? What multiple, and why? What comparable data supports it? A credible valuation is transparent and defensible; an inflated one relies on optimism. Favor the broker who gives you an honest, well-reasoned number over the one who simply quotes the highest. See should I get multiple valuations and choosing a broker.
Frequently Asked Questions
Why do brokers give different business valuations?
Because valuation involves judgment, on add-backs, the multiple applied, the weighting of methods, and available comparable-sale data, so reasonable professionals can land on different numbers. Differences also arise when a broker inflates the valuation to win the listing. A large gap usually traces to specific, identifiable causes.
Why would a broker overvalue my business?
Some brokers deliberately quote a high valuation to win your listing, knowing the business likely won't sell at that price. It's flattering to hear a big number, but an overpriced business sits on the market, goes stale, and often sells for less or not at all. Be wary of a valuation far above others with thin justification.
How do I know which valuation to trust?
Ask each broker to explain their number: the earnings figure and add-backs used, the multiple and why, and the comparable data supporting it. A credible valuation is transparent and defensible; an inflated one relies on optimism. Favor the honest, well-reasoned number over simply the highest one.
Is a higher valuation always better?
No. A realistic valuation that actually sells is far better than a high one that doesn't. An overpriced business accumulates market stigma, sits unsold, and typically closes below what a correctly priced business would have. The goal is an accurate price that attracts qualified buyers, not the biggest number.
Want an Honest Valuation?
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