One possible reason for the disconnect is that business owners tend to overestimate the value of their intangible assets, such as customer loyalty, brand recognition, reputation, and goodwill. While these factors are important and can enhance the value of a business, they are not easily quantified and verified by potential buyers. Buyers are more interested in the tangible assets, such as inventory, equipment, real estate, and cash flow, that can generate a return on their investment.
Another possible reason for the disconnect is that business owners may not have a realistic view of the market conditions and the competition. They may assume that their business is unique and has no comparable peers, or that their industry is growing and stable, when in fact there may be many similar businesses for sale, or the industry may be facing challenges and uncertainties. Buyers will compare the business with other available options and factor in the risks and opportunities of the industry.