Ep 14: Business Valuation: What Buyers Actually Pay For, with Alex Shteriev

Key points

Before any valuation, ask whether what you’ve built is sellable at all. Extreme owner dependency or one dominant customer can change the answer.
Preparing to sell takes at least one to two years: clean financials, less dependence on the owner, and a diversified customer and supplier base.
Sell on the upswing. Buyers want two to three years of growth and room left to grow.
Earn-outs and rolling equity into a deal let a seller share in future growth.
Due diligence should start only after price and terms are agreed in writing.

Profitable Isn’t the Same as Sellable

An owner offered his business to his key employee for $250,000. The employee said that was too much. Alex Shteriev’s firm later sold it on the open market for $2.5 million.

In Episode 14 of Keep What You Build, Martin Ochwat and Greg Rozdeba sit down with Alex Shteriev, MBA, CBI, IM&A, M&AP, Partner and Managing Director at Beacon Advisors, who has valued and sold family-owned private businesses since 2009. His order of operations: is it sellable, what is it worth, and then how do you run a confidential, competitive process.

If your business is worth $5 or $10 million, that doesn’t mean you end up with $5 or $10 million in your pocket if you’re not planning correctly.

What Buyers Are Quietly Judging

Everything starts and ends with the numbers. Alex explains why clean financial records matter so much (the buyer’s bank has to underwrite the loan), how dependent the business is on the owner, and why one big customer or one key supplier can cap the price. The more a buyer has to fix, the less they’ll pay.

Sell on the Upswing

It feels backwards, but the best time to sell is while things look good and there’s still more to come. Buyers want two to three years of growth in revenue and gross profit and some “green pasture” ahead. Alex also covers earn-outs and rolling equity into the deal for owners who want to share in future growth.

What the Episode Covers

When due diligence really starts

Not when a buyer sends you 25 questions. Only after price and terms are agreed in writing.

Selling to a key employee or family

Why banks like lending to insiders, and why some owners decide it isn’t the right path.

Buy-sell agreements funded with insurance

Greg and Alex on what happens to the shares when a partner dies and there’s no money to buy them out.

If an exit is anywhere on your horizon, the tax and estate planning belongs on the same two-to-three-year runway as the work to raise your value.

Timestamps

0:00The $250K offer nobody took

0:50Welcome + who this episode is for

1:10Meet Alex Shteriev, Beacon Advisors

2:45Is your business even sellable?

5:03How far ahead to start preparing

6:04Clean financials, owner dependency and buyer risk

7:21Customer and supplier concentration

9:44Sell on the upswing: showing “green pastures”

12:21When growth plateaus

12:48Earn-outs and rollover equity

17:33What buyers look for in diligence

19:04When due diligence really starts

22:02The $250K offer that became a $2.5M sale

24:57Selling to a key employee vs. family

26:53Buy-sell agreements funded with life insurance

28:26The one thing to do today if you’re on the fence

31:34Pairing tax and estate planning with the exit runway

This episode is general information, not tax, legal or investment advice. Figures, multiples and deal examples are illustrative, drawn from our guest’s past experience, and are not a promise or guarantee of any outcome. Speak with your own accountant, lawyer and advisor before acting. Reach Alex at beaconadvisors.com.

Business Valuation: What Buyers Actually Pay For