384 owners raised their hand to sell, almost none were ready: is my business ready to sell?
Most companies do not fail to sell because there are no buyers. They fail because the owner believes a number no buyer will pay.
On April 14 Charles and I were on a partnership call with an operator who buys small companies for a fund. He mentioned how many owners had come to him wanting to sell:
384 of them last quarter
Three hundred and eighty-four owners in one quarter, hands up, ready to talk. Then the part that should make every founder thinking about an exit sit up. As the notes from that call record it, only about four of them were actually ready to sell.
A handful, out of 384. The buyers were there. The deals were not.
Problem one: the number in the owner's head
He named the first reason plainly:
the company is not worth what the owner thinks it's worth.
This is not about greed. It is about where the number came from. Owners price their company on what it cost them: the years, the stress, the missed weekends, the money they put in. Buyers price it on what it will produce for them after the owner leaves.
Those are two different numbers, and the gap between them is often huge. An owner who has carried a business for twenty years feels it is worth a life's work. A buyer sees a stream of profit, some risk around it, and a question about how much of it walks out the door with the owner.
Until those numbers meet, there is no deal. And it is almost never the buyer's number that moves.
How a roll-up buyer actually prices you
It helps to see the deal from the buyer's side. He explained his model on the call.
He buys small companies and tucks them under a larger platform company. Over three or four years, the combined business grows to something like four to five million in EBITDA. At that size, the whole thing can sell for around 30 million.
Look at what that means for the small company being bought. It is one piece of a larger plan. The buyer is not paying for the small company's potential. They are paying for its current profit, at a price that leaves room for their own return when the combined company sells. The value created by combining is the buyer's reward for doing the combining.
So when an owner says "but think what this could become", the buyer is thinking the same thing, and that is exactly the part they do not want to pay you for. They will do the work to get there. They expect to keep the upside.
What "ready" looks like before you call a buyer
If almost all of them were not ready, what did the few have that the others did not? He did not walk through a checklist on the call, but the gap he described points to the obvious ones, and they are worth asking yourself honestly.
- Clean numbers. Profit you can show, not profit you have to explain. Personal expenses out of the books.
- A business that runs without you. If every key client relationship lives in your phone, the buyer is buying your phone, and you are leaving.
- Revenue that repeats. Contracts, retainers, customers who buy again, rather than a fresh scramble every month.
- A number grounded in profit. Know what businesses like yours trade for, and start from there, not from what you need to retire.
None of that is fast. Most of it takes a year or two to fix. Which is the real lesson of the 384: the time to get ready to sell is long before you raise your hand.
Readiness is a growth problem too
There is a quieter point under all this. Most of the things that make a company sellable also make it better to own: profit that is clear, customers who come back, a business that does not depend on one person being in every meeting.
And one of the biggest drivers of value is a predictable source of new customers. A company whose pipeline depends on the owner's personal network is worth less, because that network leaves with the owner. A company with a repeatable way to meet new buyers is worth more, because that system stays.
Get your own number before a buyer gives you theirs
The fastest way to close the gap between your number and the buyer's is to find out the buyer's number before you are in a negotiation. Ask an advisor who sells companies like yours what they have seen trade, and on what multiple of profit. Then apply it to your last twelve months, not your best month and not next year's forecast.
If that number is lower than you hoped, you have two honest options. Accept it and sell, or keep the business and spend the next couple of years raising the profit the multiple applies to. Either is fine. The only bad option is the one the 384 mostly picked: raising your hand at a number nobody will pay and waiting for a buyer who does not exist.
Meet the buyers before you need them
Most owners meet their buyer for the first time on the day they want to sell. That is the worst moment to start a relationship. You need the deal more than they do.
Smart founders meet strategic buyers years in advance. Not to pitch. To learn what those buyers value, what they pay for, and who they are. One of the easiest ways to do that is to invite them on your show and ask exactly those questions, on the record, as a peer. Meet strategic buyers as guests on your show.
Frequently asked questions
How do I know if my business is ready to sell?
Check whether your profit is clean and provable, whether the business runs without you, whether revenue repeats, and whether your asking price is grounded in profit rather than personal need. If any of those are weak, fix them before you call buyers.
Why do small business acquisitions fall through?
Often because the owner's valuation does not match the buyer's. In one quarter an acquirer we spoke with had 384 owners raise their hand to sell, and by his account only about four were ready, with valuation expectations the first problem.
How do acquirers value a small company?
On current, provable profit and the risk around it, at a price that leaves room for their own return. Roll-up buyers combine several small companies under a platform and expect to keep the upside from combining them.