6 min read · 708 words
At a glance
- Most valuations owners get are either a broker’s optimistic teaser or a formula off unaudited books. The honest version is different: what a buyer would actually pay today, given the numbers as they really are.
- The more useful number is the pair: what it’s worth now, and where it could go once the numbers can be believed. For one $25M owner, that pair was a banker’s $25M to $35M versus a modeled path to roughly $52M.
- You don’t need a live deal to ask. The best time to ask is when there’s no deal at all, so the answer is information you can act on instead of a number someone else holds over you.
“What’s it worth” is the question under every exit, and it’s usually answered badly, either too high to be useful or too formulaic to be true. This piece is about the honest version of the question, why the pair of numbers matters more than the single one, and why now is the right time to ask.
Why are most valuations useless to an owner?
Because they’re built to do something other than tell the truth. A broker’s teaser number is aimed at winning your listing, so it’s optimistic. A formulaic valuation off your current books inherits whatever is wrong with those books, so it’s precise about the wrong inputs. Neither tells you the thing you actually need: what a real buyer, reading your real numbers, would pay, and why.
The honest version starts from the buyer’s seat. It reads your numbers the way his analyst will, finds what he’d re-price and why, and lands on a figure grounded in what he’d believe rather than what you’d hope. It’s less flattering and far more useful.
Why is the answer a pair of numbers?
Because a single number hides the most important part: the gap between what the business is worth today and what it could be worth once the numbers are true and the value is built. That gap is the whole opportunity.
Consider the $25M owner. The single number he had was a banker’s $25M to $35M, resting on books he didn’t trust. The honest pair was different: a clear-eyed read of where he stood, and a modeled path from roughly $21M to $52M once the numbers could be believed and the trapped value was freed. The single number would have sent him to market underprepared. The pair showed him what the work was worth before he committed to it.
That’s what makes the pair actionable:
- The number today tells you whether you’re close to your goal or far from it.
- The number possible tells you whether the gap is worth a year or two of work.
- The distance between them tells you exactly what that work is, in dollars.
Why ask now, with no deal on the table?
Because the answer is only useful as information you control, and it stops being that the moment a buyer is involved. Asked early, “what’s it worth” is a planning tool: it tells you whether to start, what to fix, and how long you’ll need. Asked in the middle of a process, the same question is the buyer’s to answer, and his answer is aimed at paying less.
There’s a cost to waiting, too. The path from today’s number to the possible one runs through a trailing period that takes time to build, so the sooner you know the gap, the sooner the clock on closing it can start. Every month you wait moves the sale date a month.
Where this leads
The honest valuation is the entry point to the rest of the picture: growing what the company is worth, whether your numbers are believable, and when the clock starts.
The Worth X-Ray is built to answer exactly this, fast. Send us three reports, and inside 48 hours we send back a one-page, dollarized read: what a buyer would pay today, what a buyer would re-price, and the first three fixes that move the number.
If that’s the question in front of you, book a fit call. Thirty minutes, no pitch.
Russell Fette · Decisive Finance · Creator of Financial Rhythms™