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When we get too attached to something it becomes more valuable in our eyes than in the eyes of others.
  • My house has to be worth more than the others around here.
  • My car is in great shape and hasn’t depreciated as much as others like it.
  • My business is special, it’s not like others, and it’s worth more than conventional wisdom holds.
The last one is my world so it was refreshing when recently I dealt with a dispassionate seller. The investors had very little to do with the day-to-day operations and the decision to sell was purely a business decision with little to no emotion involved.
Compare this to the typical small to mid-sized business sale. Owners love their baby. They’ve given birth to it, nurtured it, received a good to great living from it, and have a lot of pride in it. Of course they expect everybody to see it the same way (and pay more for it).
These feelings run the gauntlet of business type, size, and profitability. From companies making well into seven figures to businesses losing money (years ago an owner told me he’d been losing $200,000 a year for the last few years, all he wanted was someone to pay him to cover his losses, and felt they would because there was so much potential in the business).
Sometimes it happens (people grossly overpaying) but I like to say there are sanity checks in my market. Whereas a private equity firm will just write a check if they really want the deal small business owners and individual buyers don’t have that kind of money, wouldn’t do it anyway, and their bank will add more sanity with their debt coverage ratios.
This is why an outside pair of eyes can let an owner know whether or not they’re realistic.
“The problem with stereotypes is not that they are untrue, but that they are incomplete. They make one story become the only story.” Novelist Chimanada Ngozi Adichie

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