A CPA's valuation usually reflects the business exactly as it runs today — owner-dependent and priced for risk. It rarely accounts for what the company could be worth once the one real limit is fixed and the business is made transferable. That gap between as-is value and potential value is where most owners are underpaid.
Key takeaways
- A tax-focused valuation measures the business as-is, not its potential.
- Owner-dependence quietly lowers the multiple a buyer will pay.
- Purpose drives method — a sale valuation and a tax valuation are different numbers.
- The real question isn't what you'd sell for today — it's what you could sell for after the work.
You asked your CPA what the business is worth, and they gave you a number. It is probably too low — not because they are wrong, but because they answered a different question than the one that matters for a sale.
A tax valuation and a sale valuation are not the same thing
Most valuations owners receive are built for tax, estate, or financing purposes. They measure the business conservatively, as it runs today, often leaning on book value or a modest earnings multiple. A sale-focused valuation asks something else entirely: what would a real buyer pay for this company's future cash flow?
The number bakes in your biggest risk
The as-is number prices the business's largest risk straight into the multiple — its dependence on you. It says nothing about what the company could be worth once that risk is removed and the business is made to run without you. It also rarely normalizes earnings the way a buyer will, adding back owner perks and one-time costs to show true profitability.
Multiples, not just earnings
Two companies with identical profit can sell for very different prices because they earn different multiples. The multiple is a measure of risk and transferability. Reduce owner-dependence, customer concentration, and revenue lumpiness, and the multiple expands — sometimes more than the earnings themselves.
The question that actually matters
Do not ask what your business would sell for today. Ask what it could sell for after the work — and what it would take to close that gap. That is the number worth planning around, and it is usually far larger than the one on the tax valuation.
Frequently asked
Purpose drives method. A valuation for tax or estate planning measures the business conservatively and as-is. A valuation aimed at a sale considers the multiple a strategic buyer would pay once the business is made transferable — a very different number.
It's the difference between what you'd sell for today and what you could sell for after roughly four years of fixing the one real limit and building transferability. For many owner-operated companies, that gap is the majority of the eventual sale price.
Your move
Find the one thing capping your company’s value.