A company too dependent on the owner? Business valuation expert and appraiser Karol Balco explains why it can reduce its value by millions

Selling a business is not just about the numbers on the books. While most owners focus on financial metrics, the true value of a business is often hidden in less visible aspects. Karol Balco, Head of Valuation and Financial Modelling at KPMG and an expert in corporate transactions, explains what really determines the value of a business in a sale, apart from assets, numbers and results. And it’s not always the factors you would expect.

One man as a cornerstone? For an investor, this may not look like a positive at all

“When a company is too tied to its owner – whether it’s key customer relationships or day-to-day management – investors see that as a significant risk,” Balco explains. “The moment the owner plans to leave, the value of such a company naturally declines.” It’s like building a house on a single pillar – it may stand firm while the pillar is in place, but then what? This scenario is very common in Slovakia. Many successful companies have grown thanks to the strong personality of the founder, who is also the face of the company, the main salesperson and the key manager.

Paradoxically, it is this addiction that can be the biggest barrier to a sale. The investor is not only buying the current state, but above all the future potential. And this can be significantly compromised if the success of the company is too tied to one person. “That’s why it’s crucial to build a strong management team and systems that ensure the business will thrive without the owner’s day-to-day presence,” Balco advises.

It is not enough to be the number one in Slovakia. The investor is looking for international potential

But this is not the only blind spot that Balco observes in Slovak entrepreneurs. Many settle for a dominant position in the domestic market, forgetting that the Slovak market may be too small for major investors. “Fixation on the local market significantly limits the potential valuation of a company,” he notes. “Investors are looking for growth potential, opportunities to expand into larger markets. Even a small company with a clear international expansion strategy may be more interesting to investors than a local market leader with no ambition to grow across borders. Look at how many times bigger markets we have in neighbouring countries such as the Czech Republic, Austria or Poland. If a company has been able to establish itself there it has unlocked significant value growth potential in the eyes of many investors”.

Learn how to prepare your company for a successful sale

Balco stresses that the successful sale of a company is a complex process that requires thorough preparation. “The most common mistake is that owners start preparing too late. The ideal is to start preparing the business for sale two to three years in advance. This will give you ample time to eliminate weaknesses and strengthen the factors that truly enhance the value of the business.”

If you are interested in how to properly prepare your company for an investor or want to learn more about the factors that really affect its value, you have a unique opportunity.

Karol Balco will be one of the keynote speakers at the largest Slovak conference on selling and investing in companies, which will take place on 13 March 2025 in Bratislava. At the conference you will learn not only the theoretical basics, but above all practical advice and experience from real transactions. For business owners who are considering selling or bringing in an investor, this is the key event of the year that can significantly impact the future value of their business.