Comparison
What a broker's opinion of value does not cover
The asking price on a listing usually comes from a broker's opinion of value, prepared for the person selling. It is a real professional judgment about what the market may pay — but it is not an appraisal, not a verification of the numbers it uses, and not advice to you.
This page describes how these documents are normally prepared in the small-business market. It is not a claim about any particular broker.
Where the number comes from
Most opinions of value on Main Street are built the same way: take the earnings the seller reports, adjust them into SDE using the seller's own add-back schedule, apply a multiple drawn from comparable sales, and adjust for the story — growth, staff, location, how long the owner has been there.
Every step of that is defensible. The problem is what sits underneath it: the earnings are taken as given. A multiple applied to an unverified number produces a confident price built on an assumption nobody tested.
Three things it is structurally not
| What it is | What it is not | |
|---|---|---|
| Basis | Market comparables and the seller's adjusted earnings | A verification that those earnings are real — that is a Quality of Earnings review |
| Standard | A broker's professional opinion of likely market price | A formal appraisal by a credentialed business appraiser, prepared to a recognised standard |
| Client | Prepared for the seller, who pays the fee | Advice to you, and not a document you can rely on as independent |
The incentive, said plainly
A broker is paid a commission on a completed sale, by the seller. That is not a scandal — it is the same arrangement as every estate agent, and good brokers protect their reputation by pricing realistically, because an overpriced business sits unsold for a year. But it does mean the document in your hands was written to sell, by someone whose duty runs to the other side. Read it as advocacy, not as evidence.
It also means the questions a buyer needs answered are simply outside its scope. The lease that must be assigned, the blanket lien from a disaster loan, the customer who is a third of revenue, the licence that does not transfer, the franchise agreement with two years left — none of that changes a multiple, and all of it changes whether you should buy.
The five questions to ask about any opinion of value
- Which earnings figure was used, and was it reconciled to tax returns? Ask to see both the adjusted and the unadjusted numbers.
- Which comparables, from when? Multiples move with credit conditions; a 2021 comparable is not evidence in a different rate environment.
- Was every add-back supported by a document, or accepted as described by the seller?
- What was excluded? Working capital, deferred maintenance, capital spending the business will need — see working capital.
- Who prepared it, and to what standard? "Opinion of value" and "appraisal" are different products with different accountability.
What to do instead of arguing about the price
Prices are argued from evidence, and evidence is documents. Establish what the earnings survive, what the paperwork fails to prove and which structural risks exist — then negotiate from that list. A price challenged with "it feels high" goes nowhere; a price challenged with "three of the add-backs have no support and the lease has eighteen months left" moves.
Questions buyers ask
Is a broker's opinion of value the same as a business appraisal?
No. An opinion of value is a broker's professional judgment about likely market price, usually built from the seller's adjusted earnings and comparable sales. A formal appraisal is prepared by a credentialed appraiser to a recognised standard, with different scope and accountability. Neither verifies that the underlying earnings are real.
Should I trust the asking price on a listing?
Treat it as the seller's position rather than as evidence. It is typically built by applying a market multiple to earnings the seller reported and adjusted, without independent verification, and it does not address the lease, liens, licences, customer concentration or franchise terms that decide whether the business is worth buying at any price.
Related
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Last updated: 2026-08-22