Stop relying on media to value businesses

 

 

They aren’t talking about you. 4 reasons Mainstreet business owners need to stop relying on media to value their small businesses.

One of my greatest frustrations as a business intermediary is seeing my clients receive bad information from the internet. We all know we should take online content with a grain of salt, but it’s hard not to trust the written word—especially when it appears authoritative. The problem isn’t just misinformation; it’s the misapplication of correct information due to inexperience or incomplete context.

Data Lacking Explanation

Data feels reliable, but it is often lacking explanation or context online which leads to misinterpretation. I once came across a website listing valuation multiples by SIC (Standard Industrial Classification) code. It provided a data point per industry but failed to specify whether it was based on EBITDA, seller’s discretionary earnings, or revenue. There was no indication of whether the data represented an average, a median, a high, or a low. There was also no indication of sample size or any criteria linked to the businesses. Yet, this incomplete information was presented as reliable by a valuation company and is undoubtedly being absorbed into AI models, further perpetuating its misuse. Without clear explanation, data is meaningless at best and misleading at worst.

Incomplete Information

By nature, internet-sourced business valuation information is incomplete. Because business sales are confidential, online sources rarely explain why a company sells for a high or low value. Without that insight, how can you determine whether your business aligns more with the high end of the scale or the low end? With the incomplete information available online, internet sources are generally unhelpful in valuing your business. 

Non-applicable Advice

Most content on the internet is designed to establish expertise and attract clients. Whether written by accountants, tax professionals, financial advisors, or M&A professionals, this content is often created from the perspective of those working with medium or large businesses. If the author’s credentials come from private equity, a major MBA program, or deals involving eight figure transaction values, their advice likely isn’t applicable to a small Mainstreet business owner. 

Domination by Big Business

Success stories from sales of large companies dominate the internet. This is because those stories are sensational and inspirational. It is like reading the story of Michael Jordan’s rise from his humiliating cut from the varsity team at Laney HS to his superstar status on the Bulls. I agree that these success stories are fun and inspiring to read however, I have encountered more than a few small business owners who gamble with their retirement, believing that they are planning, because they don’t have a firm grasp on reality as it applies to the valuation of their micro or small business asset and their ability to actually sell it to realize the stated value.

Understanding Where Your Business Fits

To put things into perspective, let’s break down U.S. businesses by size (courtesy of the Small Business and Entrepreneurship Council and based on US Census Bureau data):

  • Microbusinesses (1-9 employees): Make up approximately 78.5% of employer firms.
  • Small Businesses (10-99 employees): Account for about 20% of all businesses.
  • Medium-Sized Businesses (100-499 employees): Represent less than 2% of all businesses.
  • Large Businesses (500+ employees): Comprise only 0.3% of businesses.

As of 2023, the SBA reported around 33.2 million businesses in the U.S., including approximately 26.5 million non-employer businesses and 6.1 million employer firms.

The books, the blogs, the major news stories, and most of the advice that is publicly available is largely directed at businesses in the “middle market” (high side of small to medium size businesses).

What Should a Small Business Owner Do?

Instead of relying on internet generalizations, take these concrete steps:

  1. Know where you want to go –  To define your vision you need to understand what you want to achieve personally, financially, and for your business. In that order! Your business is supposed to serve you, you aren’t supposed to be a slave to your business.
  2. Assess Your Business Accurately – Avoid basing your understanding on success stories or incomplete valuation data. Focus on:
    • Calculating the value of your business in its current state.
    • Analyze the intangible assets that not only influence a buyer’s perception of value but make your business more enjoyable and profitable while you own it. In our experience, these are frequently the characteristics that take a small business from “unsaleable” to “saleable”.
    • The role your business needs to play in your financial future.
  3. Seek Personalized Professional Advice – Find guidance tailored to your business, circumstances, and goals.  Business owners should have an Accountant, a Financial Planner, Legal Counsel and if a transaction is contemplated for the future, a Business Intermediary who can accurately value your business and help you understand the intangible assets that will make your business attractive to buyers.
  4. Recognize the Challenges of Growth – Business growth advice is often directed at small-to-medium businesses. If you’re a solopreneur working 50+ hours per week, hearing, “You need to work on your business, not in your business,” can feel unhelpful. Growth requires investment of time, effort and money.

Of the above number 1 “Know where you want to go” is the most important. I’ve owned three small businesses, and for the first time in 27 years, I’m working with an effective coach. She often says, “All business problems are leadership problems. Most leadership problems are communication problems.” I firmly believe this to be true. The blind cannot lead the blind—business owners must have a clear vision for their company’s future. 

Small business owners need to filter internet advice carefully, prioritize tailored insights, and take structured steps toward growth and exit planning. The right information, applied in the right way, makes all the difference.