Before You Sell: What 2025 Business Owners Need to Know About Valuations

After decades of running the show, a growing number of business owners are preparing to step away. The so-called "great retirement wave" isn't just a demographic shift, it's triggering one of the biggest handovers of private businesses in recent history. However, in today's economy, exiting simply isn't as straightforward as it once was.

Aspects like high interest rates, buyer sentiment doubt, and tighter lending standards are currently changing the market for business sales. For many owners, it's no longer just about finding a buyer, it's about providing value in a more scrutinized and competitive landscape.

At the center of that challenge is valuation. How much is your business truly worth? Not based on gut feeling or what a friend sold for, but grounded in real numbers, risk, and market reality. In 2025, successful exits won't be driven by timing alone, they'll be based on owners understanding and positioning their value the right way.

2025: A Turning Point For Business Owners?

After years of delayed transitions, 2025 is looking to become a critical point for small and mid-sized business ownership. Baby boomers, who own an estimated 41% of businesses in the U.S. are exiting the workforce in large numbers. In their place, Gen X is beginning to inherit or acquire companies, often with a very different set of expectations around risk, growth, and liquidity.

But this generational shift is colliding with economic headwinds. Persistent inflation, higher financing costs, and muted consumer demand are all putting pressure on buyers and sellers alike. Business owners who had hoped for a smooth or high-priced exit are now facing tougher conversations about real market value.

Despite growing urgency, many business owners remain underprepared. According to the Exit Planning Institute's most recent State of Owner Readiness report, 75% of owners say that they are planning to exit within 10 years starting 2023, yet many still lack formal transition teams or documented strategies. While awareness of exit planning has grown, there's still a significant gap between intention and execution. With deal timelines becoming longer and $15 trillion in ownership expected to be handed over or sold over the next ten years, delayed planning can lead to missed opportunities or undervalued exits.

2025 isn't just another year to consider an exit. For many private businesses, it may be the last optimal window before market conditions shift again. The owners who prepare now will be the ones best positioned to make a clean, confident transition.

Business Valuations For a Successful Exit

When it becomes time to sell, many business owners simply ask themselves what their business is worth. However, getting to a real answer requires more than intuition or a matter of opinion. A valuation isn't just a price tag, it's a structured analysis of how your company generates value and how that value would hold up in someone else's ownership.

There are a few main ways to approach it. Earnings-based valuations focus on profitability adjusted for risk and future growth potential, often using EBITDA as a baseline. Asset-based methods are more grounded in physical or financial holdings, typically used for companies with significant tangible assets. Additionally, market comparables look at what similar businesses are selling for, offering a reality check that ties expectations to current trends.

According to reports, the average sale price of small businesses has increased 4% year-over-year that reached $349,000. This data tells us that while demand remains steady, buyers are moving more cautiously and scrutinizing deals more closely. In this kind of environment, a clear and credible valuation can be the difference between a deal moving forward or falling apart.

But valuation isn't just a financial exercise, it's a strategic tool. It gives owners a much better idea of what exactly makes their business valuable and how they can improve it. This insight can impact how they plan for taxes, negotiate sales, or hand it over to the next generation.

Whether selling to a competitor, passing it on to family, or attracting private equity, accurate business valuations are the foundation for any deal. Without that clarity, deals tend to delay, or worse, close at prices far below what the business is truly worth.

Ultimately, knowing your value isn't just about preparing for a sale. It's about owning your story, on your terms, before someone else defines it for you.

What Buyers Are Looking For Now

Since interest rates have increased, buyers are more risk-averse and careful. They are more interested in secure foundations than ever, and less so in flashy growth promises. Businesses that are resilient, stable, and easy to step into are highly favored.

Nevertheless, there are definite red flags from a buyer's point of view that may delay deals in the early stages, such as relying too much on the owner for daily operations, unclear financials, or businesses whose revenue largely comes from a single client. On the other hand, green flags consist of a well-documented and detailed handover process, multiple streams of income, a strong management team, and recurring revenue.

When businesses present vague financial reporting, it's not surprising that owners might struggle to attract serious buyers and offers. Business value becomes much easier for buyers to assess once the revenue is broken down by transparent cash flow trends, customer segments, and clearly outlined debt obligations. This means that stronger offers can be facilitated by improved reporting, even potentially far beyond expectations.

In the current climate, it's how clearly a business is presented and not necessarily about what it does. When buyers are more confident in certain systems and numbers, they become much more likely to pay for the true value of the business.

Common Mistakes Before Selling

Unrealistic Expectations

During the sales process, lots of business owners can adopt unrealistic expectations due to past scenarios from different economic times and outdated market multiples. Valuations that may have held in 2019 can simply not accurately be applied to the more fundamentals-based and cautious economy of 2025. As buyers have become more aware of risk, pushing on too high a price at first can potentially cause serious buyers to back out.

Owner Reliance

Being too reliant on the founder or owner can commonly cause issues as well. This might indicate that a business cannot properly function without them. The confidence that operations, decision-making, and client relationships will flourish after the sale is essential to buyers.

Inadequate Records

Another deal breaker is improper record keeping like missing documentation, informal financials, or when reports aren't easily accessible. These indicate higher risk and make due diligence more difficult.

Timing

Proper timing of a sale plays an important role for buyers. Sometimes owners will be rushed to make a sale without the proper and needed foundations. Conversely, some owners might take too long and miss optimal market windows. Either way, both approaches may jeopardize the final outcome.

It's possible to avoid these common snags by planning earlier, honest assessments, and making use of expert advice. Besides being more appealing to buyers, a well-prepared, clean business is much easier to value, trust, and more likely to sell at a price that reflects its true value.

The 12-24 Month Planning Rule

Executing a business exit successfully won't happen immediately. If owners are serious about their goals to avoid unexpected problems and maximize value, it can take anywhere between 12 to 24 months to properly prepare to sell. Rushing the process may cause deals to fall apart, opportunities to be missed, and lower offers to fall through.

During the first year, owners need to prioritize preparing the business by using professional valuation, commissioning the right advisors, whether tax-related, financial, or legal, as well as making sure financials are cleaned up. This might also be the time to look at any other possible aspects that could delay a sale.

It's essential to not treat valuations like just numbers on a page, but rather a living tool. Valuations aren't static, they must be adjusted throughout the whole process to accurately reflect shifting market conditions, business improvements, and updated financials. This can ensure the timing of an exit is more strategic and sellers can respond with confidence during serious opportunities.

The Future of Valuations

What buyers value in businesses has started to change. While metrics like profit and revenue certainly still matter, more and more buyers are looking beyond just the basics. Once viewed as secondary, things like digital infrastructure, ESG credentials, and if a business can readily adapt to AI are increasingly considered, especially in fast-changing industries.

According to Deloitte's 2025 M&A Trends Survey, buyers are increasingly emphasizing strategic alignment, digital capability, and operational resilience. These non-financial factors are becoming essential parts of how value is being assessed, particularly in competitive or disrupted sectors.

Meanwhile, intangible qualities like proprietary tech, customer data, brand recognition, and a reliable team are now essential aspects of the long-term value of a business, especially those that are tech or service-based.

M&A activity is also becoming more stable after a few volatile years. That's pushing pricing strategies back toward fundamentals and making clear, reliable data more important than ever. For business owners, staying ahead of these trends isn't just about commanding a higher price, it's about making sure your business reflects what serious buyers care about today.

Understanding Value Before You Exit

At the end of the day, valuation is about clarity. It's not just a financial figure, it's a lens into how your business performs, where its strengths lie, and what it might be worth to someone else.

Even if you're not planning to sell tomorrow, there's value in knowing where you stand. The earlier you start that process, the more options you'll have, whether that means selling, scaling, or passing the business on.

You don't have to guess. With the right advisors, tools, and preparation, you can understand your worth and step into any future with confidence.