Most owners think their business is worth more than the market says. But the truth is, 95% of deals land in the same tight range—like it or not. Here’s what drives that number, what holds it back, and how to fix it.
If you’re thinking about selling your business one day—even if it’s five years from now—there’s something you should know: the market has a formula. It’s not emotional. It doesn’t reward effort, sacrifice, or long hours. It just cares about future cash flow, and how risky it is to keep it coming in. And if you don’t understand how that math works, you’ll be stuck arguing for a number the market won’t pay.
The Market Doesn’t Care What You Think It’s Worth
Last week, a manufacturing business owner told me he wouldn’t sell for less than 3X the value we came back with in a professional valuation. He said, “I’ve put twenty years into this. There’s no way it’s worth that little.” I told him, gently but directly: “That’s not a price. That’s a wish.”
The market doesn’t care how hard you’ve worked. It doesn’t care that you missed your kid’s soccer games to make payroll. It doesn’t care how long you’ve been in business or how good your reputation is around town. It only cares about this: how much profit the business will generate in the future—and how risky it is to keep that profit flowing.
Buyers are investors. They’re not paying for memories or sweat. They’re buying your future earnings, and they’re discounting those earnings for risk. That’s the calculation. The more stable and transferable your cash flow is, the better the price.
I once met a fabrication shop owner doing $1.2M in annual profit. He thought his business should sell for $10 million. But the business relied almost entirely on two clients, all quoting went through him, and the pricing was stored in his head. That’s not a $10 million business. That’s a risky job with overhead. A buyer would maybe pay $3 to $4 million—and only if they felt confident they could step in and not lose everything.
2x to 4x Is the Real Range for Most Deals
There’s a lot of talk out there about 8x, 10x, even 20x valuations. That’s not this world. That’s software. That’s high-growth, VC-funded startups. It’s not the average manufacturing business.
For businesses doing less than $5M in earnings, the market range is 2x to 4x. That’s 95% of real deals. So if your company earns $600K a year in adjusted profit, it’s likely worth between $1.2M and $2.4M.
You move up the scale—toward 4x—if the business has a few key things:
- Revenue spread across a variety of stable customers
- A team and systems that don’t rely on the owner
- Solid margins and consistent financials
- Some form of recurring work or contracts
- Clean books and clear documentation
You stay at the bottom—or worse—if any of those are missing. One CNC shop I looked at had $900K in profit, but every process was manual, quotes were in Excel, and the owner handled everything from sales to scheduling. That business got offers closer to 2x. It wasn’t because it wasn’t profitable—it was because it wasn’t transferable.
What Owners Think Adds Value vs. What Actually Does
Here’s where a lot of sellers go wrong: they think years in business equals value. Or they point to their equipment. Or their reputation.
Here’s the real test: if a buyer took over tomorrow, without you, how likely is it that they’ll make the same profit—or more—for the next five years? That’s the lens buyers use.
You can have brand recognition, clean equipment, and a stacked shop—but if that profit depends on your personal relationships, quoting skills, or knowledge, it’s not secure. And buyers know it.
I met a machining business with strong EBITDA, a great facility, and modern equipment. But all pricing was based on the owner’s gut feel. No documented system. No trained estimator. When he left, the margin went with him. Buyers lowered their offers accordingly.
“I Need This Much” Isn’t a Valuation Strategy
Many owners think their “need” drives price. “I need at least $5 million to retire.” Or “We’ve put too much into this to let it go for less.”
I hear it all the time. And I get it. You’ve built something real. But a buyer doesn’t price your business based on your retirement number. They price it based on returns.
If your business earns $700K a year, and someone offers $2.1M to $2.8M, that’s the market being fair. If you say no because you want $6 million, the buyer will simply move on.
And here’s the kicker: while you’re chasing that number, your business isn’t getting better. You’re just stuck.
Most Owners Waste Years Chasing the Wrong Number
Here’s what I’ve seen again and again: an owner hears their business is worth 2.5x earnings, they’re insulted, and then spend two years talking to brokers and fishing for higher offers. But nothing changes inside the business.
And nothing changes in the offers, either.
Instead of putting energy into growth, profitability, and systems, they stall. Meanwhile, businesses that face reality early use those two years to build better processes, hire stronger leaders, move quoting off the owner’s plate, and start winning larger accounts.
I worked with a metal parts company that made $800K a year. The owner wanted 4x, but the business was too dependent on him. He took that feedback, hired an ops manager, implemented a CRM, documented pricing, and restructured scheduling. Two years later, earnings were at $1.1M—and he sold for 3.9x. That’s what actually moves the number.
If You Want a Higher Multiple, Earn It
The good news? The multiple is moveable. But not by dreaming. Only by doing.
You can increase your business’s value by reducing risk and increasing profit. That means:
- Delegating leadership and creating a management structure
- Building systems for quoting, operations, and delivery
- Cleaning up your financials so buyers trust the numbers
- Diversifying your customer base so no one client is too big
- Creating recurring revenue streams (yes, even in manufacturing—it could be maintenance contracts, service agreements, or preferred vendor deals)
Start running your business like it’s already being reviewed by a buyer. Because eventually, it will be.
Take the Emotion Out of the Equation
I get it—this is your life’s work. But the minute you decide to sell, you have to step out of that role. Think like a buyer.
Would you pay a premium for a business that only works because the owner grinds 70 hours a week?
Would you invest in a business with shaky books and no systems?
Would you take a chance on a company with one massive customer that could disappear next month?
If not, why would someone else?
Selling a business is part math, part mindset. The math is your earnings and your risk profile. The mindset is accepting that price isn’t personal—it’s financial.
And the sooner you start thinking that way, the better shot you have at selling for what your business is truly worth—maybe even more.
What Smart Owners Are Doing Differently Right Now
While many owners stay stuck on the price they want, others are quietly building businesses that command higher valuations—because they understand the rules of the game. They’re not hoping the market will make an exception. They’re making their business an obvious yes for the right buyer.
One owner of a precision parts business realized he had too many single points of failure: he handled all the quoting, signed off every job, and was the only person who could talk to certain customers. Instead of ignoring it, he spent 18 months training a quoting lead, brought in a part-time controller to clean up the books, and shifted key customers to account managers. He didn’t just increase earnings—he de-risked the cash flow. That’s what made his business attractive. His buyer paid above 4x, not because he asked for it—but because he earned it.
This shift in thinking doesn’t require a five-year plan or a boardroom strategy. It starts with small, intentional changes that reduce your business’s dependence on you, make your profits more predictable, and build confidence in a future without your day-to-day involvement. Think less about what makes you feel proud, and more about what makes a buyer feel safe.
You don’t need to become a giant. You need to become clean, consistent, and transferable. That’s the game in manufacturing exits. And the owners who understand it—win.
Top 5 Questions Manufacturing Owners Ask About Business Valuations
1. What if I’m growing fast—won’t buyers pay more for that?
Yes, growth helps, especially if it’s profitable and sustainable. But buyers still look for structure behind that growth. Growth with chaos doesn’t get rewarded. Growth with systems and margin does.
2. How long does it take to prepare a business for sale?
If you want to improve value meaningfully, expect 12 to 24 months. That gives you time to build processes, improve financials, and remove key-person risk. Rushing into a sale rarely ends well.
3. Should I buy new equipment to increase value?
Not unless it increases cash flow or reduces key risks. Equipment is just a tool. Buyers want return on investment, not shiny machines sitting idle. Show them how it drives profitability.
4. How do buyers calculate “earnings”?
For smaller manufacturing businesses, most buyers use SDE (Seller’s Discretionary Earnings), which includes your salary, perks, and non-essential expenses. For larger companies, it’s EBITDA. But either way, the number must be clear and verifiable.
5. Can I sell my business and stay involved part-time?
Possibly, but it depends on the buyer. Some want a clean break, others value your expertise during a transition. Just know: the less the business relies on you, the more freedom you’ll have in that negotiation.
Ready to get serious about your exit?
Don’t wait for the right buyer—build the right business. Whether you want to sell next year or five years from now, the work starts now. Start small, stay focused, and make your business the kind buyers compete for—not walk away from.
3 Practical Takeaways You Can Use Starting Tomorrow
1. Stop guessing—know your real number.
Get a professional valuation based on actual earnings and market data. Even if you’re not selling today, it gives you a clear benchmark.
2. Spend less time dreaming, more time improving.
Use the next 12–24 months to increase earnings, build systems, and reduce reliance on you. That’s how you move the multiple.
3. Run your business like it’s for sale—even if it’s not.
A business that’s transferable is valuable. One that only works because of you is not. Build with the buyer in mind.
Thinking about your business’s future? Start treating it like an asset today, so one day it becomes a windfall—not a disappointment.