An increase in listings priced significantly higher than what the market is willing to accept is a trend that many small business brokers are quietly dreading. A recognizable pattern is beginning to emerge in a number of industries. Baby boomers, who make up the majority of aging business owners, are listing their companies for sale with sentiment-driven price tags rather than sustainable ones.
For some, the company is more than just a financial statement; it’s a personal legacy and a second home. Citing 40 years of “sweat and sacrifice,” one Ohio broker described a seller who insisted on pricing their plumbing business at three times its earnings. Buyer interest is not correlated with that emotional currency.
| Factor | Description |
|---|---|
| Aging Ownership | Majority of listings coming from baby boomer owners nearing retirement. |
| Emotional Valuation | Businesses often priced based on emotional value, not financial reality. |
| Retirement Dependency | Owners price based on retirement needs, not market cash flow metrics. |
| Lack of Succession Planning | Many businesses rely heavily on owner, reducing buyer interest. |
| Market Imbalance | More sellers than buyers in many sectors; listings sit unsold. |
| Professional Valuation Often Missing | Owners frequently skip proper appraisals, leading to unrealistic pricing. |
It is easy to see why this is taking place. A large number of these owners failed to accumulate substantial retirement funds outside the business. Rather, they put all of their resources back into the company. When the time comes to sell, they demand a price that is necessary for them to live comfortably in retirement, not what the market will bear.
Although this strategy makes sense, it leaves a big hole. Buyers prioritize transferability, growth potential, and current cash flow, particularly younger buyers or private equity firms. The number of nights the owner spent sleeping in the office has no bearing on them. EBITDA is what they desire. Systems are what they desire. They are looking for something that can function without the founder.
That’s often exactly what’s lacking.
She mentioned a bakery owner in her late sixties who was unable to take a full day off without operations stalling during a recent interview with a Texas business appraiser. The appraiser stated, “She was the manager, the mixer, and the marketer.” “No buyer desires that degree of reliance.”
Furthermore, a large number of these sellers have never looked for an impartial appraisal. Some people who aren’t actively involved in M&A seek advice from friends or their accountant. Frequently, the outcome is a figure that is drawn less from precise statistics and more from optimism.
According to a number of brokers, sellers frequently overestimate the worth of equipment, devoted customers, or unplanned future growth. A Florida restaurant owner recently listed her establishment under the presumption that a 20% increase would result from a nearby new residential development, even though construction had not yet begun.
I once sat across from a retired owner who proudly said, “This is why it’s worth seven figures,” while displaying a thick binder filled with handwritten ledgers. I recall a mixture of silent worry and admiration.
Additionally, timing is a problem. Some owners wait for the “ideal” economic time to sell, only to be sidetracked by an unexpected change in the market or a health crisis. Usually, those compelled, reactive sales bring in much less money. In Colorado, a former customer had intended to sell his HVAC company for $1.2 million. The final deal closed for less than half because of a medical emergency and the lack of a succession plan.
The fact that the demographic wave is only getting started makes things especially difficult. Over the next ten years, millions of businesses are anticipated to enter the market as a result of the so-called “silver tsunami.” If listings continue to be overpriced, the gap between supply and demand will widen.
A few proactive measures should be taken by owners to prevent disappointment. First, a professional valuation can act as a strategic roadmap and provide a reality check, even if it is only conducted every few years. It gives time to address warning signs, boost profitability, or reorganize teams to lessen reliance on owners.
Second, knowing retirement math is essential. Many owners overlook taxes, fees, and the real net amount they will receive in favor of focusing only on the gross sale price. That figure needs to be contrasted with actual retirement requirements.
Third, owners should assemble a leadership group that can manage the company without them. Higher multiples are obtained by companies that function well without the founder. Delegation is long-term planning, not just good management.
Recently, a Minnesota-based M&A advisor worked with a couple who owned a profitable distribution business. It became evident that the business was solely in the husband’s head after he suffered a stroke. Key documents, vendor contracts, and accounts were all inaccessible to the wife. Although the company was valuable, the chaos prevented a buyer from paying top dollar.
On the other hand, owners frequently draw more serious attention when they plan ahead and view their company as an asset rather than an extension of themselves. For three years, an Oregon coffee roaster trained a general manager, standardized procedures, and obtained multi-year contracts. The company closed above asking when it came time to sell.
These tales demonstrate how preparation enhances operations, resilience, and value throughout the process, not just at the finish line.
When brokers point out the increasing number of overpriced listings, they are not being negative. They’re being both pragmatic and subtly optimistic. Because owners can avoid having to sell under duress if they plan ahead. They can exit on their terms, with the financial outcome they envisioned.
And for many, that’s the difference between a legacy quietly fading and one confidently passed on.
