We have a highly subjective view of what our company is worth, but buyers are quoting us much lower multiples. How do we use structured Thinking Time to calculate our true economic value and stop paying a dumb tax on unrealistic expectations?

Question

Tyler Smith · Accepted Answer

Founders often pay a heavy dumb tax by over-valuing their business based on sweat equity, leading to failed negotiations and wasted fees. To avoid this, you must step away from emotional bias and objectively calculate your economic value under the Income Approach.

Commit to a regular thirty-minute Thinking Time session twice a week. Prepare high-value questions before you start, such as: How would an objective, skeptical buyer value our future cash flows if they assumed I vanished tomorrow? Or: What specific operational risks are buyers pricing into their lower multiple offers, and how do we solve them?

Use your Thinking Time to analyze your trailing twelve months of EBITDA. Strip out all lifestyle expenses and one-time adjustments to find your true normalized EBITDA. Then, examine your risk profile. Buyers discount companies with high customer concentration, key-person dependencies, or unstandardized processes.

Convert these identified vulnerabilities into solvable questions, such as: How might we diversify our client base over the next eighteen months so that no single customer represents more than fifteen percent of our revenue?

Once you have framed these challenges as questions, bring them to your leadership team's Level 10 Meeting™ to be solved through the IDS® process. By using disciplined Thinking Time to systematically address the operational flaws that suppress your multiple, you align your expectations with market realities and build a business that actually commands the premium price you want.