Why Overvaluation Is So Common When Selling a Business
One of the most common issues we see when business owners decide to sell is overvaluation.
It’s understandable. You’ve put years of hard work into your business. For many owners, it is their retirement plan. But here’s the hard truth:
A business is only worth what a buyer is willing to pay.
- Not what you’ve invested.
- Not how long you’ve worked on it.
- Not how much you still owe the bank.
Where overvaluation comes from
We often hear:
- “I need at least $XXX to clear my loans.”
- “I’ve spent 10 years building this — it must be worth more.”
- “Another business sold for this much, so mine should too.”
But business value is driven by:
- Cash flow
- Risk
- Buyer demand
- Growth potential
Sometimes a business sells above market value – usually because a buyer has a specific reason. But those sales are exceptions, not benchmarks.
The danger
- Overpriced businesses sit on the market.
- Buyers lose interest.
- Eventually, price reductions follow – often below what could have been achieved with the right strategy from the start.
How to get it right
- Get advice from our trusted advisors at NZ Business Brokers
- Ask how they’ve valued similar businesses recently
- Understand what buyers in today’s market are paying
- Be realistic — optimism can cost you money
The goal isn’t the highest price on paper. It’s a price the market will actually pay.
