Why most SME owners overvalue their business (and how to avoid failure)
Introduction
You have built your business over 20 years. You know every client, every process, every detail that keeps the machine running. When the time comes to set a sale price, you naturally think about all that work, all those sacrifices.
The problem? The market does not pay for your past. It pays for the future that the business can generate without you.
The data is unequivocal: more than 70% of SMEs put up for sale never find a buyer. The main cause? A price disconnected from the real SME market value. Sellers systematically overestimate their business, often by 30 to 50% above the price acceptable to serious buyers.
This gap is not coincidental. It results from predictable psychological biases and recurring company valuation errors. Understanding these mechanisms helps avoid months of fruitless negotiations and a sale that never materialises.
This article deciphers why you probably see more value than the market, which concrete errors fuel this overestimation, and how to obtain a valuation that withstands confrontation with market reality.
📌 Summary (TL;DR)
The majority of SME owners overvalue their business by 30 to 50%, primarily by confusing turnover and profitability, ignoring their own dependence in operations, and comparing themselves to the wrong benchmarks. This overestimation causes the sale to fail and unnecessarily prolongs the process.
A realistic valuation relies on market multiples, independent expertise, and market testing via platforms such as Leez. Warning signals include the absence of serious offers after 3 months and buyers who abandon after due diligence.
📚 Table of contents
The owner's psychological bias: why you see more value than the market
After 20 or 30 years building your business, it is natural to attribute considerable value to it. Every sacrifice, every sleepless night, every crisis overcome reinforces this feeling.
The problem: the market does not pay for your past efforts. It pays for the future profits that the business will generate without you.
This gap is called emotional attachment bias. You see the complete history, the loyal clients, the untapped potential. The buyer sees figures, risks and a return on investment to calculate.
Result: a gap of 30 to 50% between the value perceived by the seller and the real market value. This chasm explains why some SMEs never find a buyer.
The 3 concrete reasons for overvaluation
Beyond emotional attachment, three technical errors systematically lead to an overvaluation of the business sale price.
These errors are recurring, measurable and identifiable. They concern industrial SMEs as much as service companies.
Understanding these mechanisms allows you to adjust your approach before putting your company on the market.
Reason 1: Confusing turnover and profitability
Many owners value their business based on turnover. "I generate 2 million CHF per year, so my business is worth at least 1 million."
Fundamental error. Buyers pay for profitability, not activity volume.
Concrete example: an SME with 2M CHF turnover but only 50K CHF net profit is worth approximately 150-250K CHF (3-5x EBITDA), not 1M CHF.
If your margins are low or your profitability fragile, your SME market value will be proportionally reduced. To understand the calculation methods, consult our guide on how to value an SME without being an expert.
Reason 2: Ignoring dependence on the owner
Can your business function without you for 3 months? If the answer is no, you have a valuation problem.
An SME where the owner holds key client relationships, technical know-how or strategic decisions suffers a discount of 30 to 50%.
The buyer pays for a machine that runs, not for a full-time job with high risk. Absence of documented processes, non-autonomous team, personal clientele: all warning signals.
This is precisely what buyers check first when analysing an opportunity.
Reason 3: Comparing yourself to the wrong benchmarks
"I read that a tech startup sold for 10 times its turnover, so I can aim for the same multiple."
No. Publicised transactions concern hypergrowth companies, with high margins and international scale potential. This is not comparable to an established Swiss SME.
A service company in French-speaking Switzerland is valued between 3 and 5 times EBITDA. A mature industrial SME, between 4 and 6 times. Multiples vary according to sector, size and region.
Compare yourself to similar businesses, not to exceptions. Consult the companies currently for sale to calibrate your expectations.
The real cost of an overvalued price
An excessively high sale price does not merely delay the sale. It compromises it.
Swiss market data: a business valued at market price sells in 6 to 12 months. A business overvalued by 30% remains on the market for an average of 18 to 36 months, often without success.
Serious buyers pass immediately. Your listing loses credibility. After several months without an offer, you must lower the price, which sends a negative signal to the market.
Negotiations become tense, due diligence reveals the gap and the transaction fails in the final phase. Result: loss of time, money and opportunities. Avoid classic seller mistakes by setting a defensible price from the start.
How to obtain a realistic (and defensible) valuation
A realistic company valuation relies on objective data and proven methods.
Three complementary approaches allow you to establish a credible price, defensible to buyers and consistent with Swiss market reality.
Use them in combination to refine your valuation range.
Method 1: Use market multiples
Sector multiples are the standard reference in Switzerland. For a typical SME, count between 3 and 5 times EBITDA (earnings before interest, taxes, depreciation and amortisation).
Example: EBITDA of 200K CHF → valuation between 600K and 1M CHF.
Multiples vary according to revenue recurrence, asset quality and competitive position. This method offers a quick and factual initial estimate.
Limitations: it does not account for the unique specificities of your business. To go further, consult our guide on detailed valuation methods.
Method 2: Engage an independent expert
A professional valuation by an M&A expert or fiduciary costs between 3,000 and 8,000 CHF depending on complexity.
This cost is quickly amortised: a credible valuation facilitates negotiations, reassures buyers and accelerates the transaction.
The expert analyses your finances, your market, your assets and produces a defensible report. This positions you as a serious and professional seller.
Leez collaborates with a network of certified experts in Switzerland. You remain free to choose your partner.
Method 3: Test the market with the Leez tool
Before investing in a complete valuation, obtain a free initial estimate with the Leez valuation tool.
Based on real Swiss market data, this tool provides you with an SME market value range in a few minutes.
It takes into account your sector, your size, your profitability and your region. It is a quick initial audit that allows you to calibrate your expectations before undertaking more extensive steps.
Use this estimate as a starting point to refine your sale strategy.
Warning signals: your price is probably too high if...
Certain indicators do not lie. If you observe one of these signals, your business sale price is probably overvalued:
- No serious enquiries after 3 months on the market
- Buyers disappear after the first financial presentation
- Recurring feedback on price from potential acquirers
- Unfavourable comparison with similar businesses on the Leez platform
- Your expert or fiduciary alerts you to the gap with the market
- You systematically refuse to negotiate or adjust your price
Recognising these signals early saves you months of stagnation and preserves the credibility of your file.
Overvaluing an SME is not a question of ego or bad faith. It is a natural bias, reinforced by years of personal and emotional investment. But in the market, this bias is paid for in cash: extended delays, damaged credibility, missed opportunities.
The three most frequent errors, confusing turnover and profitability, ignoring dependence on the owner, comparing yourself to the wrong benchmarks, are avoidable. It suffices to adopt a factual approach: use market multiples, confront your estimate with that of an independent expert, and test market reaction.
A defensible price is not the highest possible. It is the one that generates interest, triggers serious discussions, and results in a transaction within a reasonable timeframe. Estimate the value of your business free of charge with our online tool, or publish your listing to obtain concrete market feedback. Qualified acquirers will quickly tell you if your price holds up.
