Thoughts on wild listing prices

January 22, 2025

by a searcher from Columbia University - Columbia Business School in Washington, DC, USA

Here’s a few that stand out

- Broker listed a lumber business for 16x, explaining to me that she wanted full replacement value for all the assets on top of the industry standard 3x cash flow multiple
- Broker for small landscaping business wanted 9x for business and real estate, having valued the real estate 10x higher than comps suggest
- Broker for home goods company listed the business at 3x, but wanted me to purchase $2M of inventory on top of that for an effective multiple of 6x
- Broker and I agreed that comps support 3x for his glass repair business, but he still expected 5x for some reason
- the list goes on...

Is it worth playing ball to eventually get in front of the seller to reset expectations?

Also seems like sellers might benefit from some type of sell side consulting to gut check their own CIMs…

Reply by a searcher
from Duke University in Tulsa, OK, USA

The problem is that a broker has to meet owners and find businesses to try to sell. Business brokerage is an industry with zero barriers to entry and in most states the only thing someone has to do is declare they are a business broker. The result is a market flooded with low quality brokers who take sellers with crazy aspirational goals because it is better than the alternative which is a business broker who doesn't have any businesses to sell.

It is time consuming to find but there are probably good brokers in your region who are well connected and get sellers via referrals from other sellers, local trust companies, local wealth management companies, etc. Those are the ones you need to find and differentiate yourself with from other business buyers in a good way to find the quality businesses if you are going to search with brokers.

Reply by an intermediary
from Wake Forest University in Winston-Salem, NC, USA

Enjoyed your examples! Sometimes brokers come up with some crazy asking prices, and sometimes they just ask the seller what they want to sell it for, and then are stuck trying to justify it. My favorite was when a prospective seller told me how much they wanted for the business, and perplexed by the number I asked how they arrived at that figure -- it was how much they owed on their beach house! I didn't take the listing, but a month later I noticed that someone else did.

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