Valuing your business isn’t just crunching numbers—it’s ensuring those numbers reflect your hard work’s true worth. Sadly, too many business owners make avoidable mistakes that drag their valuation down. The good news? You can avoid the most common pitfalls with a little knowledge and preparation. 

We review the seven most common valuation problems that can trip you up and, most importantly, how to fix them:

1. Leaving documents a mess

2. Relying on an overly simple valuation method 

3. Choosing the wrong earnings metric 

4. Misjudging your multiple estimate 

5. Accounting method holding you back 

6. Waiting until the last minute to get a valuation

7. Stopping at the valuation

Related Article: 3 Reasons For a Business Valuation Besides Selling

Problem #1: Disorganized Documents

The Issue: You can’t expect a solid valuation when your documents are a mess. Disorganization doesn’t just waste time; it screws up the whole process and leaves you with a valuation that’s less than accurate. 

The Fix: Get both your financial and nonfinancial data in order. This means: 

• Profit and loss statements
• Balance sheets
• Tax returns
• Forecasts
• Market data
• A list of assets, inventory, and liabilities

Without all this, you’re flying blind. Don’t hand over half-baked info and expect a clear picture of what your business is worth.

“You can’t expect a solid valuation when your documents are a mess.”

Problem #2: An Overly Simplified Valuation Method

The Issue: Think you can use a basic formula and call it a day? Big mistake. Your domain, SEO rankings, customer base—none of that is captured in something like “a + b = c”. If you’re not careful and comprehensive, you’ll drastically undervalue (or overvalue) your business. 

The Fix: Get familiar with the different valuation methods out there. Some of the most common are: 

• Book Value
• Market Value
• Discounted Cash Flow
• SDE Multiple

Here’s the deal: valuation is not just a sum of all parts. The market looks at valuation on a scale, and this requires figuring out the multiplier that should be applied to your business.

“Valuation is not just a sum of all parts.”

Problem #3: The Wrong Earnings Metric

The Issue: If you’re using net income to value your business, you’re doing it wrong. Income doesn’t tell the full story of your business’s profitability. 

The Fix: Use seller’s discretionary earnings (SDE) instead. SDE gives you a clearer view of your business’s actual money-making potential by accounting for: 

• Interest
• Taxes
• Depreciation
• Amortization
• One-time expenses
• Owner’s benefits

SDE gives you a much more realistic snapshot of your earnings power and, ultimately, your value.

“Income doesn’t tell the full story of your business’s profitability.”

Problem #4: Inaccurate Multiple Estimate 

The Issue: The multiple is the magic number that makes or breaks your valuation. If you get it wrong, your entire calculation is off. Relying on an outdated or incorrect multiple can be a killer. 

The Fix: Your multiple should factor in both tangible and intangible elements, including: 

• Market trends
• Growth potential
• Intellectual property
• Automation
• Transferability of ownership

There are many aspects you need to consider to determine your business’s unique position and true value. A professional business Advisor can help ensure you don’t leave any stones unturned. 

“The multiple is the magic number that makes or breaks your valuation.”

Problem #5: Insufficient Accounting Method 

The Issue: Using cash-based rather than accrual-based accounting can dramatically lower your valuation. Cash-based accounting only shows what’s happening right now, not the bigger picture.

The Fix: Switch to accrual accounting. This method records income and expenses when they are earned or incurred, not when the money physically changes hands. Accrual accounting is better for forecasting, budgeting, and presenting a clearer view of your business’s true financial health. In short, it boosts your SDE and improves your valuation.

“Accrual accounting is better for forecasting, budgeting, and presenting a clearer view of your business’s true financial health.”

Problem #6: Delaying a Valuation 

The Issue: Do you think you only need a valuation when you’re ready to sell? Think again. Waiting until the last minute gives you no time to make meaningful improvements or fix potential issues raised by the valuation.

The Fix: Get a valuation at least 12–24 months before considering selling. This gives you time to implement changes, clean up your finances, and increase your business’s value. Even if you’re not looking to sell, having a valuation on hand lets you run your business smarter and more efficiently.

“Get a valuation at least 12–24 months before considering selling.”

Problem #7: Stopping at the Valuation 

The Issue: Are you under the impression that a valuation is just a number? It’s not. It’s a road map. Stopping at the valuation number without taking action means you’re missing a major opportunity to improve. 

The Fix: Don’t let that valuation sit in a drawer gathering dust. Use it to make better business decisions. Clean up your financials, optimize operations, cut down risks, and, if you want, prepare for an eventual sale. A business valuation is more than a number—it’s an insight into what you need to fix to make your business worth even more.

“A business valuation is more than a number—it’s an insight into what you need to fix to make your business worth even more.”

Simplify Business Valuations with Quiet Light

At Quiet Light, we’ve sold over 750 online businesses and helped business owners just like you get the valuations they deserve. Our process is transparent, honest, and pressure-free. 

We’ll give you an accurate business valuation with no strings attached—and we won’t pressure you to sell. Why? Because we believe knowledge is power. The more you know about your business’s value, the better decisions you can make—whether you’re selling or not. 

When you’re ready to discover the true value of your business, check out Quiet Light’s free valuation service.