In almost every first-phase SME succession discussion the same dynamic shows up. The owner has a number in mind. The buyer has a different number in mind. The figures usually aren't 5 to 10% apart. They are 40, 60, sometimes 100% apart. Neither party is necessarily wrong; they are using different frames.
Why owners systematically overestimate
An owner has typically put thirty or forty years into the business. Personal effort, missed holidays, personal risk. All real, but none of these count as value drivers in an external sale. A new owner buys the future cash flow, not the past effort. Add three biases: loss aversion, anchoring, and disproportionate weight on outlier years. A 20 to 40% overestimate is structural, not personal.
Why buyers systematically underestimate
The mirror side. Buyers, especially financial ones, are trained to price risk. They subtract multiples for customer concentration, owner dependency, undocumented processes. Some discounts are legitimate; many compound into an unrealistically low offer. Add negotiation tactics. A low first bid is often a test, and the seller-side reads it as personal rejection. The conversation dies before the real work starts.
What data actually solves
Not the negotiation itself. The basis on which they negotiate. EBITDA normalised on shared rules. Multiples drawn from a transparent transaction database. Sensitivity analysis showing which 2-3 levers actually drive the outcome. A coverage score per method indicating which approach the data supports best. Buyer and seller stop arguing about the facts; they start arguing about the strategy. That argument is productive. The Upswitch Index per business type is exactly that external benchmark, public sub-segment bands with explicit methodology the advisor can fall back on.
“The valuation you can defend is not always the valuation you hoped for. But it is the only one that actually closes a deal.”
Frequently asked questions
How wide is the typical owner-vs-market gap?
In the Benelux lower mid-market, owner overestimates average 20-40%. Higher in sectors with strong family tradition (construction, manufacturing, traditional retail); lower in tech and services.
Does a high first offer speed things up?
Not automatically. A high first bid can kill a negotiation because moving lower later damages trust. A defensible first bid, near the median of the market range, closes more often.
How do you handle an owner who refuses to go below a number even when the data disagrees?
Three options: structurally improve the business (12 to 18 months of work to reduce customer concentration and lift margins), wait for a strategic buyer with synergy that justifies the number, or reconsider the deal. Forcing an indefensible number rarely closes.
Upswitch is the M&A infrastructure layer for the European SME economy. Defensible valuations and structured transaction matching for the lower mid-market.
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Live multiples for the sectors this article touches
Each link opens the live published EV/EBITDA, EV/Revenue and P/E bands per business type. Anchored at the right parent industry on the Upswitch Index.
Manufacturing
Owner overestimate vs. buyer reality is starkest in family manufacturers. See the bands.
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B2B services
Recurring revenue weight inside multiple is what separates owner price from market price.
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Wholesale & distribution
Margin compression discount eats 0.5 to 1× off the multiple. Buyers price it in, owners often miss it.
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