I keep seeing owners use those instant valuation apps and then get angry when real buyers offer 30% less. Is it really a surprise? Those algorithms only look at revenue multiples and ignore customer concentration, lease terms, owner dependence... I mean, they're a starting point, not a real number. Am I crazy here?
Valuation
Why smart sellers never rely solely on automated valuation apps
Not crazy. But also not telling us anything new. Appraisers have been saying this for years. The real problem is sellers who want a 5-minute answer to a 6-month question.
I used one of those apps on my laundromat and it said $1.2M. My eventual sale was $680k. So yeah, they’re about as accurate as a fortune cookie.
The apps are fine for a quick gut check. The mistake is treating them as a floor. I’ve seen sellers walk away from fair offers because 'the appp said more.' Six months later they’re still listed.
That’s exactly my point. The app isn’t the villain—the user who refuses to look under the hood is. But try explaining that to someone who just wants a number.
Most of these apps are just lead gen for brokers anyway. They give you a high number so you’ll call them, then 'discover' the real value after an NDA.
Wait, so you’re saying a free online tool isn’t a substitute for a full valuation? Hold on, let me alert the press.
fictional_greg I know you’re joking, but I’ve literally had that conversation with sellers. The sarcasm is earned
Also, the apps don’t care about add-backs. If you run your personal truckk through the business, the algorithm treats it as a real expense. That alone can swing the number by 10-15%.
I’m a buyer. When I see a listing that says 'valued at $X by [app]', I immediately assume the seller is either lazy or delusional. Usually both. It’s a red flag, not a selling point.
sprocket_finagle That’s a bit harsh. I used one before I knew better. You don’t know what you don’t know until you’ve been burned.
Fair point, gumball. I’m not trying to shame anyone for using the tools. Just wish more sellers understood that 'the the app said so' isn’t a negotiating strategy.
At the end of the day, the only valuation that matters is the one someone actually writes a check for. Everything else is just a conversation starter.
So what you’re saying is… I should trust the magic eight ball instead? Because mine said 'outlook good.'