I run a small distribution company doing about 2.5M revenue. When I listed it, I threw out a number that was maybe 30-40% above what I figured it was worth. I was hoping to leave room to negotiate. The reactions have been all over the place. Some buyers just laugh and walk away. Others get weirdly aggressive, like I insulted their intelligence. A few have tried to use it as proof that I'm delusional and then lowball me even harder. What's the actual psychology here? Is quoting high ever a viable strategy or does it just kill the deal before it starts?
Valuation
How buyers react when you quote them an inflated valuation
Quoting high works if you have somethng truly unique and youre not in a hurry. For a generic distribution business? Most buyers have seen a hundred of these and they know the multiples. You show up with a crazy number and they just mentally file you under 'time waster' and move on to the next listing.
The aggressive ones are usually brokers or serial acquirers who've been through this song and dance. They're not insulted, they're just annoyed they have to spend time on a call with someone who isn't realistic. That annoyance comes out as hostility.
lol @ 'weirdly aggressive'. I've had a guy literally yell at me over the phone because my asking price was 'insulting' to him. Like bro, it's a starting point. Calm down.
Honest answer: your 30-40% cushion might as well be 400% in the eyes of a buyer who knows the industry. They don't see it as a negotiting tactic. They see it as you not knowing your own business. If you you don't know what it's worth, why should they trust your numbers?
Define aggressive. Are we talking stern email or did someone actually raise their voice? Because one of those is normal and the other is a red flag on them, not you.
Voice raised on a call, then a follow-up email basically calling me a clown. Bullet dodged, honestly. Cant imagine closing a deal with someone who communicates like that from day one.
I'm on the buy side. A high ask tells me the seller is either emotional about the business or has an inflated sense of the goodwill. It doesn't make me walk instantly, but it does make me re-evaluate how much time I'm willing to invest. If the first call is all about why the numbe is justifiied and no mention of what's actually for sale, I'm out.
Honestly the reactions you're getting are useful info. The people who laugh and leave were never going to pay fair value anyway. The ones who get angry might actually be interested but are frustrated. The trick is figuring out which is which before you burn the bridge.
30-40% high is actually not that crazy for a first ask. The problem is distribution has a very narrow range of acceptable multiples. If you were in tech or some niche niche service business, maybe you'd have more room. But in distribution, buyers can just look at comparable deals and see through it instantly.
So basically you're asking if you can lie about the price and still get a good outcome. The answer is sometimes yes but you'd better be a very good liar or have a very good business. Yours sounds pretty average, no offense.
I've bought two businesses and sold one. When I sold mine I quoted about 25% above what I expected to get. Buyers didn't walk, they just countered low. We met in the middle. It can work. But if you quote so high that buyers don't even bother countering, you've overplayed it. That's what's happening to you with the walk-away crowd.