Valuation
The Difficult Issues Often Attached to Valuing a Business
The six issues that most often complicate a valuation, how each shows up in an offer, and which ones an owner can fix in time.
By Michael D. Rubin, CEO & Founder · Updated September 2026 · 783 words
The issues that most often complicate a valuation are intangible assets, dependence on a single product or service, employee ownership, fragile supply sources, customer concentration and an aging industry, and each usually affects the terms of an offer as well as the price. They are difficult because each is a matter of judgment, and each raises the chance that today's earnings will not continue.
None of them makes a company unsellable. But an owner who knows which ones apply can fix some, explain others, and avoid being surprised by the rest.
Why these issues are hard to value
A valuation estimates future earnings and the risk attached to them. Most of the issues below do not show up directly in the financial statements; they change the likelihood that the statements will look the same in three years. Valuers and buyers weigh them differently, which is why they account for much of the disagreement over price. They also depend heavily on information only the owner has, such as the real health of a customer relationship or how easily a supplier could be replaced.
The list is not complete. Inventory that is dated or hard to sell, contracts that run only a few months, and third-party or franchisor approvals needed before a sale can close all complicate a valuation too. What the six issues share is that buyers treat them as reasons the future may look worse than the past.
The six issues at a glance
| Issue | Why buyers worry | How it tends to show up in an offer |
|---|---|---|
| Intangible assets | Patents, trademarks and know-how are hard to price and to transfer | Wide range of opinions on value; more diligence on ownership |
| One product or service | A single change in demand or technology hits all revenue | Lower multiple; interest mainly from buyers in the same niche |
| Employee ownership (ESOP) | Plan rules and a trustee must approve any sale | Fewer buyers; longer timeline; legal complexity |
| Critical supply source | A low-cost edge may depend on one supplier who can change terms | Questions about margins; supply contracts reviewed closely |
| Customer concentration | Losing one account could remove a large share of profit | Earnouts, longer owner transition, lower cash at closing |
| Company or industry life cycle | Demand may be shrinking or moving to new technology | Lower multiple and a smaller pool of buyers |
Intangibles and employee ownership need special care
Intellectual property adds value only when the company clearly owns it. Register trademarks, record patents in the company's name, and make sure employees and contractors who created important work signed agreements assigning it to the company. Buyers check.
A company partly or wholly owned through an employee stock ownership plan (ESOP) faces a different kind of complexity. The plan's trustee and its rules govern how a sale is approved and how proceeds are handled, which narrows the list of practical buyers and lengthens the process. An attorney experienced with these plans should be involved from the start.
Which issues you can fix, and how long it takes
Some issues can be fixed in months and others take years. Our answer on how customer concentration affects company valuation covers the most common one in detail.
- Supply risk: often months. Qualify a second supplier or sign a longer supply agreement.
- Intellectual property: months. Complete filings and assignment agreements.
- Customer concentration: usually years. Win more mid-sized accounts and put multi-year contracts in place with the large ones.
- Product or service diversity: years. Add related services existing customers already buy elsewhere.
- Life cycle: strategic. Show how the company is moving into the growing parts of its market, with results already in the numbers.
Disclose early, on your terms
An issue a buyer discovers in due diligence costs more than one you disclosed at the start, because it raises the question of what else has not been said. Present each issue alongside the facts that limit it: the length of the key customer relationship, the backup supplier already qualified, the trademark registration completed. Buyers price known and managed risks far more calmly than surprises.
Timing matters here too. Raising an issue in the first meeting, with the mitigating facts ready, lets it be priced into competing offers. Raising it after a letter of intent is signed, when only one buyer remains, hands that buyer the leverage.
How MDR & Associates deals with these issues
In a free discovery meeting we identify which issues apply to your company and how buyers are likely to weigh them. Manufacturers, for example, often face supply and customer questions that our manufacturing work addresses early. When there is time before a sale, pre-exit consulting tackles the fixable items first. To see where your company stands, request a free valuation snapshot.
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Questions owners ask next
Can a company with an ESOP be sold to an outside buyer?
Yes, but the plan's trustee must act in the participants' interest and follow the plan's rules, which adds steps, advisors and time. The details depend on the plan documents, so involve an attorney experienced with employee ownership before approaching any buyer.
Is a single large customer always a problem?
Not always. A long relationship under a multi-year contract, with several contacts at the customer rather than only the owner, reduces the concern. Buyers will still examine it closely and may tie part of the price to keeping that customer after closing.