Business owners love to compare notes.
It usually starts the same way. Someone at a dinner, golf outing, or industry conference leans in and says something like:
“Did you hear what Rick got for his company? Twelve times EBITDA.”
And just like that, a number gets planted in your mind.
By the time our advisors hear the story, it’s usually evolved. Rick didn’t just sell his company. He sold it for a multiple that becomes the new benchmark for everyone in the room. It becomes the number that owners quietly carry around in their heads as they think about their own exit.
The problem is that Rick’s valuation has almost nothing to do with yours.
Caber Hill Advisors have worked with hundreds of business owners on their exits. If there’s one consistent theme, it’s this: as a reference point an owner can use when thinking about selling their company, the “friends and family” valuation is one of the most dangerous.
Because businesses are not simple commodities. They’re complex ecosystems. And the market judges them on a variety of variables that most people outside the deal process never see.
The Part of the Story You Never Hear
The story that circulates in your network usually includes only one detail: the price. Everything else that actually drove the valuation gets left out.
Maybe Rick’s company had recurring revenue that buyers could underwrite with confidence. Maybe he had a management team that could run the business without him. Maybe his industry was in the middle of a consolidation wave and strategic buyers were competing aggressively for assets.
Or maybe there were five bidders in the process and the final price was the result of a structured auction that pushed buyers to their limits.
Those factors matter far more than the headline multiple.
In the middle market, buyers are extremely selective about what they’re willing to pay for. Strong, predictable earnings, recurring revenue, and a management team that can operate independently of the owner all materially increase value.
When those ingredients are present, valuations can climb quickly. When they’re not, the market adjusts.
That’s the part most owners never hear about when they’re comparing outcomes with friends.
When Comparisons Work Against You
We’ve also seen the reverse scenario many times. An owner assumes their business is worth less than it actually is because they’re comparing it to a transaction that happened under very different circumstances. The seller they’re benchmarking against may have rushed to market, negotiated with a single buyer, or sold without a competitive process.
The difference between those outcomes can be millions of dollars.
This is why valuation is always the most contentious part of any transaction. Buyers and sellers often walk into negotiations with very different expectations of what a business is worth.
Owners understandably believe their company deserves a premium. Buyers are evaluating risk, growth potential, and the sustainability of earnings.
The truth usually lies somewhere in the middle.
What Actually Drives Valuation
What determines that number is not what someone in your industry sold for last year. It’s how your business performs when it’s placed under the microscope of professional buyers conducting diligence.
The variables that move valuations?
Revenue quality. Customer concentration. Margin durability. Management depth. Growth runway. Market position.
Why Process Changes the Outcome
The other critical factor is process.
Many owners underestimate how much the sale process itself influences the final outcome. A well-run process exposes your company to the right set of buyers and creates competitive tension between them. When buyers know they’re not the only ones at the table, valuations tend to look very different.
Without that dynamic, the outcome often reflects what one buyer is willing to pay, rather than what the market is willing to pay.
That distinction matters more than any anecdote you hear at a dinner party.
The Only Valuation That Matters
So when someone tells you what their cousin, competitor, or golf partner sold for, take the story for what it is: a single data point from a transaction with details you probably don’t know.
Your business is not their business. Your market position, growth trajectory, and buyer universe are all different.
And your outcome will be determined by how those factors come together when the right buyers evaluate your company in a competitive environment.
That’s the only valuation that actually matters.
