Matt Millsaps on Why Business Owners Misprice Their Company

Matt Millsaps on Why Most Business Owners Price Their Company Wrong Before They Sell

Most small business owners will sell a company only once. That makes the sale one of the biggest financial decisions of their lives, and one they have no practice making. According to business broker Matt Millsaps, the costly mistakes usually start before a buyer ever appears, with a number the owner has carried in their head for years.

Millsaps leads Sell With Millsaps with HedgeStone Business Advisors, helping owners across 22 states sell their companies confidentially. Before becoming a business broker, he spent 10 years in investment real estate and built, ran, and exited his own tree service company. We spoke with him about why owners misjudge what their companies are worth, what buyers actually pay for, and how sellers can get top dollar.

You’ve been on the seller’s side of the table yourself. How did that lead you to business brokering?

Before I got into brokering, I spent 10 years in investment real estate. During that time I was also an entrepreneur myself. I owned a tree service company and ran it for several years before I exited.

Going through that process firsthand changed how I see this work. Building a business, managing it day to day, and then deciding to let it go is personal. You’re not just selling equipment and a customer list. You’re selling years of your life. That experience is what sparked my passion for business brokering. Now I help owners navigate the sale of their business with confidence and for top dollar, because I know what it feels like to sit in their chair.

How does your real estate background shape the way you value a business?

Real estate taught me to look at any asset the way an investor does. An investor isn’t paying for the effort that went into something. They’re paying for the income it produces and how reliable that income is.

Business buyers think exactly the same way. They want to know what the company will earn after the owner walks away and how much risk sits on top of that. When owners start seeing their business through that lens, their expectations get much more realistic, and their decisions get better.

You say most owners price their business wrong. Wrong in which direction?

Both, and that surprises people. Some owners are anchored to a number they heard about a competitor’s sale. They don’t know that deal’s real terms. Maybe half the price was tied to future performance, or the company was twice the size of theirs. Other owners undervalue badly because they only look at the profit on their tax return.

Either mistake costs real money. Price too high and the business sits on the market until buyers start wondering what’s wrong with it. Price too low and you’ve given away years of work in one signature.

Why is the tax return such a misleading starting point?

Because small business tax returns are built to minimize taxable income, not to show what the business really earns. Owners pay themselves a salary. They run a vehicle, a phone, and insurance through the company. There’s depreciation, which is an accounting entry rather than cash leaving the account. There may be a one-time legal bill or equipment purchase that won’t repeat.

Buyers price on seller’s discretionary earnings. You start with net profit and add those items back to see what the business actually puts in one owner’s pocket each year. It’s common for that figure to come out well above the profit line on the return, and that gap changes the sale price dramatically.

Once you know that number, how does it become a price?

It gets multiplied. Most owner-operated businesses sell somewhere between two and four times seller’s discretionary earnings. Larger companies with management teams in place are usually valued on EBITDA instead.

Where a business lands inside that range isn’t random. It comes down to how risky the business looks to someone who has to run it after the current owner leaves.

What pushes a business toward the top of that range?

Recurring revenue is the big one. A service agreement or maintenance contract is income a buyer can see before they own the company. A spread-out customer base matters too. If one client makes up a third of your revenue, a buyer is pricing in the chance that client walks.

Clean financial records help, and so does a trained team that plans to stay. But the biggest factor, in my experience, is how much the business depends on the owner.

Why does owner dependency hurt the price so much?

Because a buyer can’t purchase you. Your relationships, your judgment, the fact that every key customer has your cell number, none of that transfers at closing. A buyer is paying for whatever keeps running after you’re gone.

I saw this in my own company. When you’re the one doing everything, it feels like strength. To a buyer, it looks like risk. I ask owners a simple question: if you disappeared for 90 days with no phone, what would the business look like when you came back? Most don’t love their answer, and that’s fine. It tells us exactly where the work is.

How far ahead should an owner start preparing?

Ideally 12 to 24 months. That sounds like a long time, but the things that raise a sale price take time to build. Moving customer relationships onto your team. Writing down how the work gets done. Getting three years of financials clean and consistent. Dealing with aging equipment or a lease with little time left before a buyer finds it and uses it to negotiate.

Owners who rush to market in a few weeks almost always leave money on the table. Owners who prepare tend to sell faster and for more.

What do you see in the trades and home service businesses you work with?

Coming from a service business myself, I have a soft spot for these companies. They’re some of the most sellable businesses out there. Demand for HVAC, electrical, plumbing, roofing, tree work, and construction doesn’t disappear when the economy slows, and buyers know it.

The challenge is that many were built around one person. The owner does the estimates, holds the big accounts, and makes every call. When that’s addressed before the sale, these companies can attract strong interest from individual buyers, regional competitors, and private equity groups.

Many owners worry about word getting out. How do you handle confidentiality?

It’s the first thing most sellers ask about, and for good reason. If employees hear early, good people start looking elsewhere. Customers get nervous. Competitors take advantage.

We market each business through a blind profile that describes the opportunity without naming the company. Buyers sign a non-disclosure agreement before they learn anything identifying, and they’re screened financially before they see real numbers. Information comes out in stages.

Honestly, most leaks don’t come from the marketing. They come from an owner telling one trusted person too early. Keeping the circle small until you’re ready protects everything you’ve built.

What’s the one thing you’d tell an owner who’s thinking about selling someday?

Find out what your business is worth now, even if you’re years away. That number tells you whether your retirement plan works, which improvements would actually move the price, and how much time you have to make them. The owners who end up with a great outcome almost always started that conversation well before they were ready to act.

About Matt Millsaps

Matt Millsaps is a business broker with HedgeStone Business Advisors and founder of Sell With Millsaps. After 10 years in investment real estate and building and exiting his own tree service company, he now helps business owners across 22 states sell their companies confidentially, with confidence, and for top dollar.