Why You Should NEVER Skip “Overpriced” Listings
Updated on December 2, 2025
Transcript
What’s up, YouTube? It’s Greg. I’m back with another video here.
I just got back from Chiang Mai SEO, and I had an interesting experience there that inspired this video. It’s probably going to be a shorter video, but basically I want to talk about why overpriced businesses can actually be an opportunity for you.
Now, that sounds a bit counterintuitive. You know me—bit counterintuitive. So why is that?
First, let me set the stage. I have helped sell over 2,400 businesses over the last few years, made 90 millionaires at the moment of exit. And on the sell side I often hear, “Oh, you guys price so low. Obviously my business is worth way more.” And on the buy side I often hear, “You guys are too premium with your pricing.” So obviously both of these can’t be true.
But I have a friend—he just recently went live, and he’s going to be trying to sell his business (or at least he’s trying to go live and sell his business) at around a 6x multiple. Now, I told him this will be very difficult. This will be high-priced, and you will probably get not that many buyers looking at you because of that really high 6x price.
Now this got me thinking. Some businesses really are worth that much, but most businesses are really going to be priced between 1 to 4x of their annual EBITDA or SDE. Now, as your businesses get bigger, of course the multiples can get bigger. As you move up into, say, seven figures, it’s possible to be more in the 3 to 5x range. Now you can get up to 6x—not saying that’s impossible. We have certainly sold businesses at 6x, but a lot of things need to be happening and going right with the business to do that.
Now the problem from the sell side on this is: if you list a business for such a high price, a lot of times buyers will not even take a deeper look at your business at all. They’ll just check, “Oh, 6x. This guy’s crazy. I’m not going to look at this business at all.” And they might actually be missing out on an awesome opportunity.
You as a seller will probably be getting less buyers overall looking at your deal, which creates less competition, which ultimately means you’ll most likely need to reprice it and lower that multiple down to something more realistic.
Now where the opportunity here exists for the buyer is right in what I just said. So if you are a business buyer and you are perusing a marketplace, say such as Empire Flippers or one of our competitors that shall not be named, and you see a business with a high multiple—high listing multiple—it’s very important you understand that that’s a listing multiple.
A listing multiple is usually going to be comprised of a few different factors. One, the broker (such as us) will come up with the valuation, but also the seller’s own feelings and their own calculations about what their business is worth. The broker might be benchmarking it across all industry comparables that other brokers have sold, or even their own database of comparables of similar businesses that they have sold. But that doesn’t mean that that listing multiple is set in stone. In fact, that’s really the start of the offer.
Now, I’ve often said—because I’ve seen people on stage say, “Oh, I get all these offers all the time from PE that are going to offer me 15, 20 million dollars at this outrageous multiple,” often like 7x—and it always makes me laugh a little bit. Because just like the listing multiple is not set in stone, when a buyer approaches you with that kind of offer, with that kind of LOI (letter of intent), that’s also not set in stone. In fact, that’s probably not the offer you’re actually going to get.
A buyer will reach out to you and claim these outlandish prices for your business to get you interested, to agree to give them an NDA, to start looking at the business so they can start doing actual due diligence and their valuation. The final price that they’re going to pay for your business is going to be based on what they find during that due diligence. And of course, good buyers know due diligence is your secret weapon to get prices cheaper.
Now on the buy side here, when it comes to the listing multiple: if buyers are not looking at a business because it has a high multiple, that gives you a couple advantages when you look at the business.
One, there are way less buyers, so you’re not competing with as many people putting in offers. This seller most likely feels kind of like they’re in a desert because a lot of people just, in general, don’t want to look at it. They’re probably not talking to that many buyers. So you are in less competition for that deal.
Now, if that seller has been on the market for a while trying to sell their business at this higher multiple, that often creates an effect that I call seller fatigue, where they’re either fatigued because they’re just not getting any offers, or the offers that they are getting are nowhere close to where they thought their business was valued at.
Now how this can happen—one of the reasons why this listing multiple could happen, where it seems very, very high—you might say like, “Well, isn’t this the broker’s fault for listing at that high?”
So usually, I’ll give you a little bit of inside baseball here. What’s going on? Usually when a broker accepts a deal with a very high multiple, that’s because they are, you know, submitting to what the seller really wants. The seller is hard line about it: “No, it must be this.” And the broker—at least if they’re a good broker—they’re going to tell the seller, like, “Great. Are you in a rush or not? Are you patient? What’s your timeline to sell?” And if they say like, “Oh, you know, I’ve got all the time in the world,” like, “Okay, fine. If you have all the time in the world, then we could put it up at this price. But I’m just telling you, you most likely are not going to get a deal at this price. And this might really hurt the marketing momentum that goes behind each of these listings.”
“So I’m not going to push it that hard because I know this multiple is a bit crazy. But we’ll see what we can see, right? Maybe you’ll get lucky. Maybe someone sees it as a perfect fit.”
And there are cases where a buyer might come—say, in the case of a strategic—where they would come and acquire that business at a very high multiple. And despite that high multiple, it’s still a fantastic deal for them because they’re a strategic. This one plus one equals like 5,000 for them, right? So they are always willing to pay over market price.
And it’s possible that you could get lucky where you do get a fantastic deal at a big multiple, but most likely that’s not going to happen.
So when you see a broker list a business at an outlandish multiple, it’s usually not because the broker is bad at valuations or bad at setting a price that buyers actually want. It’s usually more on the seller side. The seller’s like, “Hey, I am only going to do this if we do it this way.” And the broker sets expectations like, “Great. Just so you know, you most likely won’t sell. But hey, we’ve got everything—let’s try it out. We can always readjust in a couple months if you get no momentum behind you,” right?
Usually the seller agrees, it goes live, a couple months goes by, and either two things usually happen—one of two things (sometimes both). Usually during that two-month period, the seller won’t get that many bites and will have the seller be like, “Damn, maybe the broker was right after all.”
And what will happen is either the seller will lower their price—lower their listing multiple, rather—or the business is growing. In a case that that is a very healthy business, the business is growing really, really fast over a period of months. That listing multiple actually comes down naturally because the profit, the EBITDA and SDE of the business is going up at a fast clip.
So you might start off at, say, 6x, but because the business is growing so fast, even though you didn’t get any bites, say five, six months later when you’re looking at the new adjusted valuation for this business, it might be closer to a 5.2x now.
Now we already have the seller pretty happy with the price that they were going to get earlier on. So now we can get them to the same price, but at a more reasonable listing multiple, and we get more buyers interested in looking at that business, right?
I bring all this up because it sets the stage—all this background. Because if you are looking at a business, whether it’s on Empire Flippers or somewhere else, and it has a high listing multiple, that doesn’t mean you should stop. Like, yes, that should be taken into account, but that shouldn’t be the yes-or-no decision on whether you look deeper into the business.
Because here is another fun fact for you that’s also pretty inside baseball that most brokers never talk about: the majority of businesses that you see a broker market at their list price or list multiple, typically that business will sell between 15% to 30% less than the listing price.
So if you have a million-dollar business, there’s a good chance it could sell between $700,000 to $850,000 instead, which obviously brings down that listing multiple quite a lot.
So remember: a listing multiple is a listing multiple, not a sales multiple. Everything changes on the back end. And you as a buyer, coming in to a seller that is, you know, in the metaphorical desert here—not getting that many offers—now have a chance to reason, build rapport with that seller.
And most of the time the sellers are not unreasonable, especially if they’re using a good broker that has set proper expectations. They just want to get a very good deal for the business. And that makes a lot of sense, right?
So you can come in and start negotiating with that seller. You already know like, “Hey, there’s probably at least 15% to 30% wiggle room here.” That could bring down that sales multiple for me quite a lot—and maybe even more.
Because what do we know about the seller? Well, they’ve listed at a high, high listing multiple, and they probably aren’t entertaining that many serious offers, if any. So that allows you, ironically, to be in a less competitive pool for a business that might be listed at 6x but might actually sell, say, at 3.5x to 4x, or maybe like 4.5x, or some kind of earn-out.
And one of the other cool things about going after overpriced businesses with sellers with these expectations is what you can do with the deal structure.
Like, let’s say you only end up buying it for 5x. It might still be a bit overpriced, right? But what about the deal structure? Did you pay that 5x all in cash, or is that 5x really deal-structured in a way where it brings down the true sales multiple to, say, a 3.5x?
Now what do I mean by that?
Let’s say we’re looking at a 6x deal. We negotiate them down to 5x. Great. And then the actual deal structure is, say, 30% to 40% cash—maybe 50% cash—and then say 20% seller financing, and then another, let’s say, 30% (I don’t know if those numbers add up, but you get what I mean) earn-out over a period of time if the business does X, Y, and Z over that period of time.
Now, an earn-out is a great tool for you as a buyer to use as a bridge between the seller valuation expectations and your expectations of what is a good deal, right?
So if we just look at the cash given to the seller and the seller finance portion of the business, now the actual sales multiple of the business might be closer to 3.5x or 3.8x or something like that—significantly lower than the initial 6x.
But if the business does really, really well, if the seller is actually confident in the business growth, then they can still get paid their 6x on the earn-out portion (or the 5x on the earn-out portion), right?
And if the business is doing so well on that front, you as the buyer—like, you’re never happy to spend money—but in general you’re probably a lot more okay with that because it de-risks the deal from you paying that premium price quite significantly.
Because if the business is hitting these earn-out milestones, you have more than enough to spare to actually pay out that seller what they initially wanted without adding any real additional risk to you.
So that’s it. That’s the video. If you see a business and you’re like, “Wow, this is priced really high,” that’s a little bit of the insider knowledge as to why that might be.
Now remember, there are some businesses that do command a much higher-than-normal multiple.
If you would like to come see some reasonably priced businesses, that’s something we are actually pretty famous for at Empire Flippers. Make sure you go to empireflippers.com/marketplace and sign up for a free account.
Talk to you later. Bye.
