When an entrepreneur starts thinking about selling their company, the first question is almost always the same: how much is it worth?

Even before starting a structured process, however, an answer often arrives already. An unsolicited company valuation, undocumented, not necessarily well founded, but expressed with great confidence.

“A company like yours is worth at least X.”
“Multiples in your sector are very high.”
“I know someone who sold for much more.”
“If you sell for less, you are giving it away.”

These are common statements. They have the advantage of being simple, immediate and reassuring. However, they also have a significant flaw: they rarely help the entrepreneur understand the real value of the company.

The problem is not listening to them. The problem begins when they become a reference point.

A value discussed over coffee is not a company valuation

In the SME market, many valuations arise this way: from informal conversations, comparisons with transactions seen from a distance, multiples mentioned in passing, experiences of other entrepreneurs or valuations expressed by people who will never actually buy the company.

At first glance, they may seem useful. In reality, they are often numbers without context.

There is almost never an answer to essential questions: which EBITDA was that value calculated on? Is it statutory, management or normalized EBITDA? Is debt included or excluded? Is working capital consistent? Will the entrepreneur stay or exit? Can the company be transferred without the founder?

Without these answers, a valuation may sound convincing in conversation, but weak in a negotiation.

A number stated without method is not necessarily false. It is simply unusable.

Informal valuation and market price: two different levels

One of the most frequent mistakes is treating an informal valuation as if it were the sale price of the company.

A figure expressed during a conversation may have an indicative function, but it does not represent the negotiable value of the business. The price only emerges when there is a process, with real buyers, structured data, a credible industrial rationale and a concrete market discussion.

In M&A, company value is not a number carved in stone. It is the result of many variables: quality of results, growth prospects, perceived risks, transaction structure and the buyer’s strategic interest.

For this reason, two companies with similar revenue and EBITDA can have very different prices. And two buyers can attribute different values to the same company, without either of them necessarily being wrong.

Who is valuing determines the value of the company

Another element often overlooked is the point of view of the person expressing the valuation.

An industrial competitor may recognize value in operational synergies, in the possibility of integrating customers, functions or production capacity. A private equity fund, on the other hand, looks at cash generation, growth potential, management structure and exit horizon. An entrepreneur or manager interested in acquiring the company often thinks in terms of operational sustainability, personal risk and financing capacity.

The same SME can therefore be very attractive to one party and of little relevance to another. Value is not absolute. It depends on who is looking at the company and why they might want to acquire it.

This is why the sentence “your company is worth X” should always be followed by a question: for whom?

Without this clarification, the number remains suspended. It may be flattering, but it is rarely useful.

Company value and transferability after the sale

Many “hearsay” valuations include real elements, but not always transferable ones.

The entrepreneur has built relationships, reputation, expertise and trust with customers and suppliers. All of this has value. The point is understanding how much of this value truly belongs to the company and how much remains tied to the entrepreneur as an individual.

A buyer does not simply ask how much the company has generated so far. They ask what will happen after closing.

Will customers stay? Will management be autonomous? Are processes formalized? Do operating decisions still depend on the founder? Is know-how shared across the organization or concentrated in a few people?

When the company’s functioning depends significantly on the entrepreneur, perceived risk increases. And when risk increases, value is adjusted.

This is not a lack of respect for the person who built the company. It is how the market distinguishes between personal value and transferable value.

Risk as a central variable in SME valuation

Informal valuations often tend to forget one unglamorous but decisive word: risk.

A high multiple always makes an impression. It is much less exciting to ask whether revenues are recurring, whether customers are concentrated, whether margins are sustainable, whether plants require investment, whether management is structured, whether there are solid contracts or only long-standing relationships.

Yet this is precisely where real value is formed.

A buyer does not only buy past results. They buy the possibility that those results will continue, possibly grow, and not disappear as soon as ownership changes.

For this reason, every risk factor can affect the price or the structure of the transaction. Sometimes it does not reduce the stated value, but it changes the conditions: earn-out, vendor loan, mandatory continued involvement of the entrepreneur, broader warranties.

The nominal price may still appear attractive. The value actually collected, however, may be another matter.

Why an unsolicited company valuation creates problems in a sale process

The main risk of an unsolicited company valuation is not that it is wrong. It is that it arrives too early and stays for too long.

A figure heard informally can become a mental anchor. From that moment on, every proposal is compared with that number, even if that number has never been verified.

If the valuation was too high, the entrepreneur may reject serious buyers because they seem ungenerous. If it was too low, the entrepreneur may accept penalizing conditions without exploring better alternatives.

In both cases, the problem is not the market. It is the starting reference point.

In a company sale process, misaligned expectations can block the discussion from the very first stages. A qualified buyer will not invest time in a transaction if they perceive an excessive gap between the requested value and the company’s fundamentals. In the same way, a seller who starts from an indefensible valuation risks weakening their own negotiating position.

How to build a credible company valuation

A useful valuation does not come from a sentence, but from a process.

The first step is the analysis of economic and financial data, with particular attention to the normalization of results. Knowing the EBITDA is not enough: it is necessary to understand whether it is sustainable, recurring and representative of the company’s real profitability.

The second step concerns the qualitative analysis of the business: customers, margins, management, processes, competitive positioning, future investments and dependence on the entrepreneur.

The third step is the market reading: which categories of buyers could be genuinely interested? Which synergies could they recognize? Which risks would they see? Which transaction structure would be most coherent?

Only by integrating these elements is it possible to build a credible, defensible range of value that can be used in a negotiation.

The point is not to reach the highest number. It is to reach a sustainable number, one that can withstand market discussion and due diligence.

Conclusion

“Hearsay” valuations are part of entrepreneurial life. Sometimes they are compliments, sometimes attempts to open a conversation, sometimes simple opinions expressed with great superficiality.

They can be listened to, but they should not guide a decision.

The value of a company does not emerge from an isolated conversation, but from a structured process that brings together data, strategy, risks and market.

The right question, therefore, is not “how much is my company worth according to someone?”

It is: what value can be recognized by a real buyer, in a concrete process, under conditions that can actually be negotiated?

Everything else may be interesting. But it remains, precisely, hearsay.