Valuation gap
A valuation gap is the difference between the price a seller expects for their business and the price buyers in the market are actually willing to pay. It’s one of the most common reasons a listing sits unsold, and it usually narrows only once one or both sides adjust their expectations based on real market feedback.
Owners often anchor on what the business is worth to them personally — years of work, a peak revenue year, or what a competitor supposedly sold for. Buyers anchor on what the numbers actually support once normalized earnings, growth trend, and risk factors like owner dependence are taken into account. Those two anchors don’t always land in the same place.
Common causes
- Optimistic add-backs the seller believes in but can’t fully document
- Comparing to a single favourable rule of thumb or comp instead of a full valuation
- Emotional attachment to the business, separate from what a buyer will actually pay
- Outdated expectations from a stronger year that isn’t representative of current performance
How it typically closes
A valuation gap usually narrows through evidence — real buyer interest, offers on the table, or a professional valuation — rather than through argument. Extended time on market without offers is itself a strong signal that the asking price sits above what the market will bear.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Treadstone LawLegal commentaryGetting a Business Valuation Before You List
- 02Treadstone LawLegal commentaryHow Long Does It Take to Sell a Business in Ontario?
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.