Every founder who has commissioned a business valuation has had a version of the same experience. The valuation report produces a number. Months or years later, offers arrive. The offers are different from the number, usually lower. Founders reasonably ask why the valuation was wrong. The honest answer is that the valuation was probably not wrong. It was simply measuring something different from what a buyer is actually willing to pay.
A valuation opinion is a professional estimate of fair market value for a defined purpose. Common purposes include estate planning, gift tax reporting, buy-sell agreement pricing, divorce proceedings, and internal share transfers. Each of those purposes has different methodological requirements. A valuation for estate tax is guided by IRS rulings and tends to be conservative because overstating value creates tax exposure. A valuation for a buy-sell agreement follows whatever formula the agreement specifies, which may have been written twenty years ago for reasons no one currently remembers. None of those purposes is the same as answering the question of what a buyer in today's market will pay.
The sale price is determined by three things the valuation report cannot fully capture. The first is buyer type. A strategic acquirer integrating the business into an existing platform can often pay more than a financial buyer because they can realize cost synergies and revenue cross-sell that a standalone owner cannot. A search fund buyer constrained by SBA underwriting can often pay less because their financing is capped. A family office buying for long-term hold can pay in the middle of that range and structure the deal more flexibly than either extreme.
The second is how the diligence process goes. Buyers do not pay their initial offer. They pay their adjusted offer after diligence. If diligence surfaces issues, the price moves down or the structure hardens. If diligence confirms the story the seller told at the start, the initial offer can hold. The gap between a valuation-based expectation and a post-diligence reality is where most sellers learn what multiple compression actually means in dollars.
The third is EBITDA itself. A valuation report uses a normalized earnings figure. A buyer rebuilds that figure from the ground up, strips out add-backs they cannot defend to their own investment committee, and applies their own methodology. The buyer's EBITDA is almost always lower than the valuation report's EBITDA. The multiple applied to that lower number is also sometimes lower, because the buyer's underwriting discounts for risks the valuation report did not need to fully price.
None of this makes the valuation report wrong. It makes the valuation report the wrong instrument for a different question. The question of what a business will sell for in today's market, to a specific kind of buyer, after a specific diligence process, is a transaction question. It requires transaction analysis, not a valuation opinion. Founders who confuse the two end up disappointed. Founders who understand the difference know which tool to use when.