Andrew Stotz interviewed David Barnett on My Worst Investment Ever podcast episode 825 titled Business and Asset Values: Why Most Small Businesses Never Sell (6 Oct 2026).
« “Success is not closing the deal. It is buying a successful cash-flowing business at a reasonable price that’s going to allow you to get a reasonable rate of return—or you avoid a bad deal.” »
« BizBuySell, one of the largest business-for-sale marketplaces, reports that roughly 70% of listed businesses never sell. »
« According to David, most listed businesses never sell due to dead capital. These businesses have equipment or assets that cost money but do not generate a return, which makes the business harder to finance and harder to sell. If a buyer would have to borrow money to pay fair value for those assets, and the resulting cash flow doesn’t cover the debt service, the deal simply doesn’t work, no matter how much the owner believes their business is worth. »
« David adds that public companies are often valued on their future because investors are buying an experienced leadership team along with a plan. Small businesses, on the other hand, are valued almost entirely on their past, because when the owner leaves, most of the knowledge and relationships that made the business work leave with them… which is one reason small businesses trade at much lower multiples of cash flow than anything publicly traded. »
« Another factor that affects a business sale, David says, is seller’s discretionary earnings (SDE), which is EBITDA plus the owner’s salary. A healthy SDE margin usually falls between 10% and 20%. Above 40% is a red flag worth investigating, and below 5% requires looking for what is off, whether that is pricing, high costs, or high gross margins. Often what turns up is unrecorded sales or personal expenses run through the business to lower its tax bill. That kind of underreporting can make an otherwise sellable business unbankable, since no lender will finance a deal built on numbers the owner cannot legally document. »
« Easier access to credit pushes prices up. The same business in Ontario, Canada, and across the water in upstate New York will typically sell for around 25% more on the American side, simply because more buyers there can access the financing to pay for it. »
Related Reading:
- Business and Asset Values: How Owners, Buyers, Sellers, Lenders, and Advisors Should Think About Small Business and Equipment Values by David C. Barnett (2026)
- Small Business Finance and Valuation by Rick Nason and Dan Nordqvist (2021)
- HBR Guide to Buying a Small Business: Think big, buy small, own your own company by Richard S. Ruback and Royce Yudkoff (2017)
