Common Valuation Myths That Cost Founders Millions
Valuation myths don’t usually blow up deals overnight. They do something more dangerous: they quietly distort expectations, delay decisions, and push founders into positions where they negotiate against reality instead of with it. By the time the consequences show up—in price, structure, or lost momentum—the damage is already done.
I’ve seen founders lose millions not because their businesses weren’t good enough, but because they believed the wrong things about how value is created, perceived, and paid for. These myths are persistent. They’re reinforced by headlines, cocktail-party anecdotes, and half-truths passed around founder circles. And once they take hold, they’re hard to shake.
In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I spend a lot of time dismantling these assumptions because valuation mistakes rarely come from lack of intelligence—they come from misaligned mental models. And if you’ve listened to the Legacy Advisors Podcast, you’ve heard Ed and me return to this theme repeatedly: buyers don’t price hope; they price risk and durability.
Let’s walk through the most common valuation myths that cost founders real money—and more importantly, how to replace them with thinking that actually works in live M&A processes.
Myth #1: “My Business Is Worth X Because That’s What I Need”
This is the most human myth of all—and one of the most expensive.
Founders often anchor valuation to personal needs:
- Retirement targets
- Lifestyle goals
- Time invested
- Opportunity cost
- Sacrifice made
While all of that matters deeply on a personal level, none of it factors into how buyers price businesses.
Buyers don’t ask, “What does the founder need?”
They ask, “What risk am I taking, and what return compensates for it?”
When founders anchor to need instead of market reality, three things happen:
- Offers feel insulting even when they’re fair
- Negotiations become emotional
- Good deals are passed over while waiting for a number that never arrives
In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I stress that valuation anchored to personal need creates disappointment before negotiations even begin. The market doesn’t adjust to your goals—you have to adjust your strategy to the market.
Myth #2: “There’s a Market Multiple for Companies Like Mine”
Founders love the idea of a clean, authoritative multiple. It feels fair. It feels predictable. It feels earned.
It’s also misleading.
There is no single “market multiple.” There is a range—and where you land in that range depends on risk, size, growth, revenue quality, buyer type, timing, and structure. Two companies in the same industry with the same EBITDA can trade at wildly different multiples for completely rational reasons.
When founders anchor to an average multiple without context, they often:
- Overestimate value
- Misread buyer pushback
- Argue comps instead of addressing risk
- Miss what’s actually depressing valuation
On the Legacy Advisors Podcast, we often say that averages describe history—not entitlement. Buyers don’t pay averages; they pay for specifics.
Myth #3: “Growth Automatically Increases Valuation”
Growth is powerful—but only when it’s the right kind of growth.
Founders often assume that higher growth equals higher multiples. In reality, buyers are constantly asking a more nuanced question: What kind of growth is this, and how risky is it?
Buyers reward growth that is:
- Consistent
- Predictable
- Efficient
- Supported by history
- Sustainable without the founder
They discount growth that is:
- Volatile
- Recently accelerated without proof
- Expensive to acquire
- Founder-driven
- Margin-eroding
I’ve seen businesses grow faster and trade lower because the growth introduced risk instead of reducing it.
In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I explain that buyers don’t pay for ambition—they pay for momentum they believe will survive the transition.
Myth #4: “A Strong Brand Guarantees a Premium”
Brand is one of the most misunderstood valuation drivers.
Founders often assume brand equity automatically translates into higher value. Buyers don’t disagree that brand matters—but they value brand only when it produces measurable, defensible outcomes.
Buyers look for evidence that brand:
- Lowers customer acquisition costs
- Increases pricing power
- Improves retention
- Reduces sales friction
- Drives inbound demand
If brand recognition doesn’t show up in margins, churn, or growth efficiency, buyers see it as marketing—not an asset.
This myth costs founders millions because they overestimate intangible value without operational proof. Brand must be monetized to be valued.
Myth #5: “Buyers Will Pay for Future Potential”
This myth is everywhere—and it’s one of the fastest ways to miss market windows.
Founders live in the future. Buyers live in the downside.
Buyers care about growth and opportunity, but they discount future potential aggressively because projections are promises, not proof. The further value is pushed into the future, the less buyers are willing to pay for it upfront.
Buyers pay premiums for:
- Proven growth trajectories
- Demonstrated expansion
- Repeatable execution
They discount:
- Untested ideas
- New markets not yet entered
- Products not yet launched
- Assumptions without evidence
On the Legacy Advisors Podcast, Ed and I often say that buyers will pay for future value only when it feels inevitable—not hypothetical.
Myth #6: “Founder Involvement Increases Value”
This one surprises a lot of founders.
While founder energy and vision create early value, ongoing founder dependency often suppresses valuation at exit. Buyers don’t want to buy jobs. They want to buy systems.
If the business depends on the founder for:
- Sales
- Strategy
- Key relationships
- Decision-making
…buyers price that risk through lower multiples, earnouts, or retention requirements.
The paradox is real: the more indispensable the founder, the less transferable the business.
In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I emphasize that building a company that runs without you is one of the highest-ROI valuation moves available.
Myth #7: “Comparable Deals Prove My Valuation”
Founders love comps—especially favorable ones. But comparables are often misused.
Comps only matter when they’re truly comparable:
- Similar size
- Similar growth
- Similar margins
- Similar risk
- Similar timing
- Similar buyer
A headline like “Company X sold for 8x” tells you almost nothing without context. Founders who anchor to cherry-picked comps often end up defending narratives instead of responding to market feedback.
Buyers use comps as a sanity check—not a pricing mandate.
Myth #8: “A Third-Party Valuation Will Force Buyers to Pay More”
This myth quietly drains time, money, and leverage.
Third-party valuations have legitimate uses—tax planning, estate planning, governance—but they rarely dictate M&A outcomes. Buyers have their own models, assumptions, and return requirements.
When founders treat valuation reports as price anchors, they often:
- Become inflexible
- Dismiss real buyer signals
- Anchor to outdated assumptions
- Lose momentum
In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I warn that false precision creates false confidence. Buyers don’t buy reports—they buy businesses.
Myth #9: “If I Wait Long Enough, Valuation Will Improve”
Time can be a friend—or an enemy.
Valuation improves with:
- Risk reduction
- Better systems
- Stronger leadership
- Cleaner financials
- More predictable revenue
But time alone doesn’t guarantee any of that.
Markets shift. Buyer appetite changes. Interest rates move. Industries cycle. Founders who wait without actively improving fundamentals often miss windows where outcomes would have been stronger.
Waiting is not a strategy unless you’re using the time to change the risk profile of the business.
Myth #10: “The Highest Offer Is the Best Offer”
This myth costs founders money in ways they don’t see until it’s too late.
Headline price is only part of value. Structure matters:
- Cash at close
- Earnouts
- Holdbacks
- Rollover equity
- Retention requirements
A higher price loaded with contingencies can deliver less realized value—and more stress—than a slightly lower, cleaner deal.
Sophisticated founders evaluate certainty-adjusted value, not just the number.
On the Legacy Advisors Podcast, we regularly discuss deals where founders chased the highest price and ended up with the weakest outcome.
Why These Myths Persist
These myths stick around because they’re comforting. They simplify complexity. They make outcomes feel controllable. And they’re reinforced by survivorship bias—stories of outlier exits that ignore context.
But M&A is not a lottery. It’s a risk-pricing exercise.
Founders who replace myths with market literacy make better decisions earlier—and negotiate from a position of strength later.
The Real Drivers of Valuation (That Don’t Make Headlines)
The founders who consistently achieve strong outcomes focus on fundamentals:
- Predictable cash flow
- Revenue quality
- Customer diversification
- Leadership depth
- Documented processes
- Reduced founder dependency
- Clear strategic positioning
- Buyer competition
None of these are flashy. All of them matter.
In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I emphasize that valuation expands when risk contracts. Every myth above distracts founders from that simple truth.
How to Replace Myths With Strategy
The shift founders need to make is subtle but powerful.
Stop asking:
“What multiple should I get?”
Start asking:
“What risks will buyers price, and how do I reduce them before going to market?”
That reframing changes everything—from preparation to timing to buyer targeting.
At Legacy Advisors, this is the work we focus on long before a business is for sale. Not arguing valuation—but engineering conditions where strong valuation becomes inevitable.
Final Thought: Myths Are Expensive—Clarity Is Profitable
Valuation myths don’t just distort expectations. They cost time. They cost leverage. They cost momentum. And too often, they cost millions.
The founders who win aren’t the ones with the best stories. They’re the ones who understand how buyers actually think—and prepare accordingly.
That’s not pessimism.
That’s professionalism.
Find the Right Partner to Help Sell Your Business
Avoiding valuation myths requires perspective, experience, and honest market feedback. If you want help separating signal from noise and positioning your business for a valuation grounded in reality—not mythology—Legacy Advisors can help you navigate the process with clarity and confidence.
Frequently Asked Questions About Valuation Myths in M&A
1. Why do valuation myths persist even among experienced founders?
Because valuation myths feel intuitive—and they’re reinforced by selective stories. Founders hear about outlier exits, headline multiples, or “what someone else got,” without seeing the full context: timing, risk profile, deal structure, or buyer motivation. Survivorship bias plays a huge role. In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I explain that founders often internalize simplified narratives because they’re comforting and easy to repeat. On the Legacy Advisors Podcast, Ed and I frequently point out that most deals don’t fail because founders are uninformed—they fail because founders believe half-truths that distort expectations long before negotiations begin.
2. How does believing in a “market multiple” actually cost founders money?
Anchoring to a perceived market multiple often causes founders to miss what buyers are really pricing: risk. When buyers push back, founders defend comps instead of addressing customer concentration, founder dependency, margin volatility, or growth sustainability. That leads to stalled negotiations or forced concessions later. In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I stress that arguing averages is rarely productive. On the Legacy Advisors Podcast, we often say that multiples don’t drive value—risk profiles do. Founders who fix the risk drivers typically see valuation improve without ever debating the multiple.
3. Why don’t buyers pay more just because a company has strong future potential?
Because future potential is uncertain—and buyers are paid to manage uncertainty. Buyers discount projections aggressively unless growth is already proven, repeatable, and scalable without the founder. Ideas, roadmaps, and expansion plans matter only when there’s evidence behind them. In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I explain that buyers don’t pay for possibility; they pay for inevitability. On the Legacy Advisors Podcast, Ed and I regularly discuss how founders who overemphasize future upside often end up with more earnouts and contingencies, not higher upfront value.
4. How can founder dependency quietly suppress valuation?
Founder dependency increases execution risk for buyers. If the business relies heavily on the founder for sales, strategy, relationships, or decision-making, buyers worry about what happens post-close. That risk is priced through lower multiples, earnouts, retention agreements, or longer transition periods. In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I highlight the paradox that founders often create the very dependency that limits their exit. On the Legacy Advisors Podcast, we consistently see that companies with strong second-tier leadership and documented processes command cleaner, more confident offers—even with similar financials.
5. What’s the most effective way to avoid valuation myths before going to market?
Shift the focus from price to risk reduction. Instead of asking what your business should be worth, ask what buyers are likely to worry about—and address those issues early. Clean financials, diversified customers, predictable revenue, leadership depth, and documented processes matter more than chasing theoretical multiples. In The Entrepreneur’s Exit Playbook (https://amzn.to/4iG7BAH), I emphasize that preparation beats persuasion every time. If you want real-world guidance grounded in how buyers actually think, Legacy Advisors helps founders replace myths with strategy—long before value is negotiated.