“They offered $8.5 million for my company, and now you’re telling me it’s only worth $5 million. What did they know that you don’t?” Sandra (not her real name) was not happy with me. After reviewing her company's financial history and her forecast for 2018, I told her that her company could be sold for $5 million, maybe $6 million, if a couple of things fell in our favor. I could see her obvious frustration as she explained that a few months earlier she had an offer of $8.5 million for the company. A guy who knew her industry seemed to be the perfect buyer, and he had a partner to help finance the deal. Sandra was going to stay on for a year to facilitate the transition. It all seemed so great, until it wasn’t. Sandra told me this seemingly-perfect buyer was excited to buy the company but his financing partner got cold feet during due diligence. Sandra and the buyer tried to keep the deal alive, but after a few weeks, it was clear the buyer didn’t have the financial capability to get the deal over the goal line on his own. With that deal dead, Sandra needed a new plan to sell her company. The topic of valuation came up early during our discussion of my strategy. My $5 to $6 million valuation did not comport with her expectation of $8.5 million. Sandra had a perfectly legitimate question: if the first buyer would offer $8.5 million, why wouldn’t the next buyer do the same? I relate this story because I see this situation all the time. A business owner gets an offer or an expression of interest, and though the deal never closes, the valuation sticks in their head. I have to be the one to explain the obvious ...perhaps one reason the deal didn’t close was the potential buyer was inexperienced or didn’t know how to value a business. I have to communicate this carefully; I have been in conversations like this and have seen how it can be terribly deflating to a business owner. Sometimes they just plain get mad at me, like Sandra was. She decided to not retain me but instead find an intermediary “who understood her real valuation.” I gave her the names of two brokerage firms in town that I knew would tell her what she wanted to hear. Maybe she will call me in another year when those firms don’t get her business sold. I will never tell a client or prospective what they want to hear if I don’t believe it to be true. My professional counsel built on 30+ years of deal structuring is what it is. Sometimes the truth can hurt, but never have I regretted relying on the truth of my experience and market knowledge. Even when it hurts.   JIM CUMBEE is President of Tennessee Valley Group, Inc. a retainer-based business brokerage and transition mediation firm in Franklin, TN. Cumbee is an attorney and has an MBA from Harvard Business School. He has a wide range of corporate and entrepreneurial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee.