Obtaining a Fair Market Value for Your Business

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 780 words

The surest way to obtain a fair market value for your business is to let a competitive market set it: prepare the company so its strengths can be proven, put it in front of enough qualified buyers at the same time, and accept that the price reflects what buyers will pay rather than what you need.

Fair market value, in the usual definition, is the price a willing, informed buyer and a willing, informed seller would agree on when neither is forced to act. Real sales rarely meet every part of that definition, but a well-run process comes close: informed buyers, no pressure to accept the first offer, and competition to show what the company is really worth.

Why expectations and offers drift apart

Owners arrive at a number in understandable ways. They know what they need for retirement, they remember the years of work, they hear what a competitor supposedly sold for. None of that appears in a buyer's model. A buyer is paying for future cash flow and pricing the risk that it will not arrive. When the two views are far apart, the company often sits unsold, and a business that has been shopped for a long time starts to look like something buyers should avoid.

The gap usually closes one of three ways: the owner's expectation moves, the company improves, or the terms change so the buyer takes less risk. Competition among buyers is what keeps the first option from becoming a surrender.

Four characteristics that move a buyer's price

Buyers weigh four characteristics above most others. Our answer on how recurring revenue affects the sale price goes deeper into the first of them.

• Recurring revenue under contract. Service agreements, maintenance plans and multi-year supply contracts make future earnings predictable, and buyers pay more for predictable.
• A durable competitive advantage. A reason customers choose you that a rival cannot copy quickly: licenses, a trained workforce, location, reputation, specialized equipment or know-how.
• Growth. A steady, explainable growth rate lifts the multiple; flat or falling revenue lowers it and shrinks the pool of buyers.
• Customer concentration. The more of your revenue that depends on a few accounts, the more a buyer discounts the price or defers part of it.

Concentration and your role after closing

When one customer supplies a large share of revenue, a buyer worries that the customer will leave once you do. The usual responses are to lower the price, to tie part of it to an earnout (a payment that depends on results after closing), or to require the owner to stay longer to hold the relationship. All three shift value away from the seller. Reducing concentration before a sale, or at least documenting the length and health of the relationship, is one of the most direct ways to protect value. Our answer on how customer concentration affects valuation explains what buyers look for.

Letting competition close the gap

A single interested buyer sets the price it wants. Several buyers, each aware that others are looking, set a price closer to what the company is actually worth to the market. That requires reaching the right mix of buyers confidentially: individual buyers with capital, strategic acquirers and private equity groups, each screened before they see any detail, then asked for letters of intent in the same window.

If the offers still come in below your expectation, you have learned something real. You can accept, adjust terms, or step back and work on the drivers above before trying again.

When terms can bridge what price cannot

Sometimes the best offer is close to your expectation but not quite there. Terms can close a modest gap. A seller note, where you finance part of the price, lets a buyer pay more in total while borrowing less. An earnout lets a buyer pay for growth you project but have not yet delivered. A consulting agreement can compensate you for helping with the transition. Each of these moves part of your price into the future and ties it to the buyer's performance, so treat the deferred portion as worth less than cash at closing, and have your transaction attorney protect it.

How MDR & Associates approaches fair market value

We start with a free, confidential opinion of value, a low-to-high range, after reviewing three years of financials, and we tell you plainly if we do not think we can sell the company for maximum value. Through our sell-side representation, buyers see a blind profile first, then sign a confidentiality agreement and prove they can fund a purchase before learning more. We aim for multiple letters of intent negotiated at once. For a first range, request a free valuation snapshot.

Where this fitsBusiness valuation in Texas →

Questions owners ask next

Is fair market value the same as the price I will get?

Not exactly. Fair market value is an estimate of what informed parties would agree on. The price you receive depends on the buyers who actually bid, the terms you accept and how well the process creates competition. A strategic buyer can sometimes pay more than fair market value.

Why would a buyer pay more than fair market value?

A strategic buyer may save costs or add sales by combining your company with its own. Those savings, called synergies, can justify a higher price for that one buyer. Competition is what persuades it to share part of that value with you.