10 Business Exit Mistakes - 1. Seeking an unrealistic valuation

Value is determined by future maintainable earnings, not potential

If you’re thinking about exiting your business, one of the biggest questions on your mind is likely this What’s it worth? It’s a fair question. After years, maybe decades of effort, it’s natural to hope the value reflects the blood, sweat and tears you’ve put into building something that matters.

But there’s a common misstep many business owners make when they reach this stage they confuse potential with actual value.

Let’s be clear potential is not worthless. It’s what got your business going in the first place. But when it comes time to sell, potential doesn’t pay the bills. Buyers are looking for something more concrete, something they can rely on. That’s why most valuations focus on what’s known as future maintainable earnings.

In simple terms, this means what kind of profits can the business be expected to generate reliably over time?

Why Potential Doesn’t Equal Value

Potential is exciting. It’s the story we tell ourselves about what could be. Maybe your business could expand into new markets. Maybe your new product line might take off. Maybe sales could double with a bit more marketing.

But here’s the issue potential lives in the future and the future is uncertain. Buyers don’t pay for dreams. They pay for results. Specifically, they pay for results they believe will continue once you’re no longer at the helm.

Buyers aren’t just buying your past success; they’re buying their future income. And if your business can’t demonstrate stable, repeatable earnings, its value in the market may be a lot lower than you hoped.

This is where some business owners hit a wall. They feel their business is worth more because they know how hard they’ve worked, how far they’ve come, or how great things could be with just a few more years.

Unfortunately, the market doesn’t price in effort or optimism. It prices in risk and return.

What Buyers Are Really Buying

Think of it this way if someone offered to sell you a rental property, you’d want to know how much rent it brings in each month and how reliable that income is. A property with a solid tenant on a long lease is worth more than one that’s empty but in a “hot” location, because income you can count on is more valuable than income that might show up someday.

Businesses work the same way. Buyers want to see that the earnings are not only strong but also stable and likely to continue. This is especially true if you're stepping away after the sale. Can the business run without you? Is there a solid team in place? Are revenues tied to a few big clients, or is there a broad, dependable base?

These are the questions buyers will ask and they’re all aimed at understanding one thing how much money this business will likely make in the future and how predictable that income is.

Bridging the Gap Realistic Valuation vs. Owner Expectations

The disconnect between what a business is actually worth and what an owner hopes it’s worth is often emotional. That’s understandable. Your business might feel like part of your identity. It’s easy to look at all the possibilities ahead and think, They’ll see how much upside is here.

But unless you’ve already laid the groundwork for that potential to become actual, predictable profit, it won’t factor heavily into the sale price. You might even drive away serious buyers by holding out for a number that isn’t grounded in financial reality.

And here’s something even more important setting an unrealistic price can delay or derail your exit entirely. That’s time, energy and peace of mind you might not get back.

Turning Potential into Real Value

So what can you do if your business does have great potential, but your current earnings don’t reflect it yet?

You’ve got options. If you're not in a hurry to sell, you can focus on turning that potential into results. Strengthen your team, diversify your client base, improve systems and build repeatable revenue streams. Document your processes. Make yourself less essential. All of this adds real, measurable value.

But if you are ready to exit soon, it’s important to accept what the business is truly worth today. That doesn’t mean giving up. It means being strategic. You can still negotiate terms that work for you, especially if you’re open to earn-outs or transitional roles that help the buyer reduce risk. But it starts with seeing the business through their eyes.

Final Thoughts

Valuing a business is not about how much you hope to get, it’s about how much future income the business is likely to produce without you. That might feel like a cold way to look at something you’ve poured your life into, but it’s also a chance to take pride in what you’ve built. If your business has stable earnings, loyal customers and solid systems, that is valuable.

And if it doesn’t yet, but you see the potential? You’re not wrong to be optimistic. Just remember potential becomes value only when it's backed by proof.

The most successful exits come when owners are both ambitious and grounded - able to see their business clearly and plan accordingly.