Exit Planning
Why Selling a Small Business Is More Heart Than Head
Accountant and acquisitions adviser Saul Cohen explains why sellers trade price for a buyer who understands them, and why owners who can name their assets get paid more.
Entrepreneurs: Don’t Sell Your Business Without Doing This First | Ep #425
Video from Jason Balara.
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Why is selling a small business more emotional than financial?
Because owners see the business as their baby, and the deal turns on trust. Saul Cohen says he has seen sellers accept a 30% lower price from a buyer who seemed to understand them. His advice is to prepare from the first day, fix the accounts, and learn to name and evidence the assets a buyer is paying for.
Most founders assume a business sale is a numbers exercise built on profit, a multiple and a price. Saul Cohen, an acquisitions adviser who started out as an accountant at PwC, sees something different when he guides owners through a deal. Speaking with Jason Balara on the Know Your Why podcast, he described small business acquisitions as far more about heart than head.
That emotional pull cuts both ways. It can cost a seller real money, and it can blind owners to the way an investor looks at their company. Cohen's firm works with businesses that first come to it at around £1 million to £5 million in revenue, helping them buy other companies and prepare their own for an eventual sale.
His central message is simple. Owners who start preparing early, who fix the quality of their accounts, and who can name the specific assets behind their profit give buyers less risk to price in. That, he argues, is how entrepreneurs get the exit they deserve rather than the one they are left with.
Key takeaways
- Saul Cohen has seen sellers accept a 30% lower price from a buyer they felt understood them and their business.
- The ideal time to prepare a business for sale is the day it starts, and the next best time is today.
- Cleaning up weak accounting records can make a deal more likely and may lift the value by 10 to 20%.
- Owners who can name and evidence their systems, brand, reputation and key contracts make a business easier to value.
1. Sellers decide with their hearts
Cohen says many people assume emotion simply colours the way a seller reads the numbers. In his experience it goes much further than that. He has seen owners accept a transaction value 30% lower than they could have achieved because they believed the buyer understood them and their business, and had connected with them on an emotional level.
Jason Balara, who has invested in real estate and is now looking to acquire businesses, recognised the contrast. Property deals feel transactional, he said, while a business sale is bound up with decades of ownership and staff who feel like family. Cohen agreed that owners tend to see the business as their baby, which makes it hard to step back and judge it as an investor would.
For that reason, Cohen describes his work with sellers as closer to counselling than to handing over spreadsheets. Guiding an owner through a sale means helping them see the company through the eyes of a buyer who has no attachment to it yet, while respecting the story the owner has spent years building.
2. Start preparing on day one
Asked when owners should start preparing for an exit, Cohen did not hesitate. The ideal moment is the day the business is founded, so that it is built ready to sell from the start. Most owners never do that, so the next best time is today. In his view there is never a point where it is too late to make useful changes.
The quickest win he usually finds is the quality of the underlying accounting records. He estimates that around 80% of the businesses his team comes across have problems there. Fixing them makes a deal more likely to happen and can lift the value of the business by 10 to 20%, simply because a buyer sees less risk.
The next step is to understand how valuation works. Cohen explains that a buyer values a business on its ability to generate income and on the risk attached to it. For most owner-managed firms that means applying a multiple to earnings, often in the region of three to five times, and less if the company relies heavily on its owner.
3. Name the assets a buyer is paying for
Cohen's sharpest point concerns what he calls conscious competence. If a buyer has to go looking for why a business is valuable, the business is worth less, because it has not understood its own strengths. An owner who can say the company is very good for specific reasons gives a buyer something solid to pay for.
Those reasons can include systems, processes and controls, the brand and what it is worth, and a genuine reputation backed by numbers. The numbers need not sit in the accounts. Enquiry levels, high-value relationships and high-value contracts all count, provided the owner can point to them and show the evidence to an investor.
The contrast is stark. Cohen's example is a business making 150k a year whose owner cannot explain where the money comes from, or how it will keep coming once the seller leaves. That business is worth less to a buyer, however profitable it looks, because the seller cannot show where its future income will come from.
