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The HŪMNZ Element: Issue 31 - Why Every CEO Is a First-Time Seller

You will do this once. The person across the table does it for a living. The questions that cost you the most are not financial — they are about who holds what, and what happens if they leave.

Author

Tim Dennis
September 15, 2026

💡 Editor's Note

Most of what determines the number is decided years before anyone opens a data room.

That is the uncomfortable part. Not that valuation is unfair, but that it is largely retrospective. It prices decisions you made back when a sale was nowhere near your mind.

If you stepped out for ninety days, what would a buyer find out?

You do not have to be selling for that question to earn its keep. It is simply the cleanest test available of whether you have built a business or a very demanding job.

Before a buyer audits your operation, audit it yourself.

Five questions, about 90 seconds, and a personalized read on where execution is already stuck. No call booked at the end, no gate, nothing to sit through.

Executive Brief

Bottom line: The lower middle market is made up almost entirely of people selling for the first time, across the table from buyers who do this for a living — and the gap shows up in the one area owners almost never instrument, which is whether the business runs without them.

The IBBA and M&A Source Market Pulse survey, 56th edition, was fielded April 1 to 16, 2026 among 300 business brokers and M&A advisors covering 203 completed transactions.

86% of advisors said first-time sellers make up more than half their pipeline. 60% said first-time sellers are at least three quarters of their engagements.

And preparedness runs backwards from where you would expect it to. Among businesses in the $5M to $50M band, 62% came to market with no formal exit planning — a higher share than the $2M to $5M band at 41%, or the $1M to $2M band at 35%.

The largest companies in the segment were the least prepared.

In 30 seconds

  • 86% of M&A advisors say first-time sellers are most of their pipeline, and 60% say they are at least three quarters of it, according to the Q1 2026 IBBA and M&A Source Market Pulse survey of 300 advisors.

  • 62% of sellers in the $5M to $50M range arrived with no formal exit planning, against 41% at $2M to $5M and 35% at $1M to $2M — preparedness falls as the stakes rise.

  • Run the ninety-day test now. Write down what breaks if you are unreachable for a quarter. That list is the diligence list, and almost all of it is a workforce list.

⚠️ Four signals leaders should be watching this week

1. Why does the information asymmetry run entirely one way?

Signal: Owners prepare for a transaction as a finance exercise, then meet a counterparty who has run this same play hundreds of times.

Evidence: In the Q1 2026 IBBA and M&A Source Market Pulse survey — 56th edition, fielded April 1 to 16, 2026 across 300 advisors covering 203 closed transactions — 86% of advisors reported that first-time sellers make up more than half of their pipeline, and 60% reported they make up at least 75%.

Implication: You will run this process once. The buyer runs it continuously and arrives with a standing list of things that reduce what they are willing to pay. A large part of that list is about people: who holds the customer relationships, who holds the undocumented knowledge, and what happens to either if that person leaves.

Action: Get the buyer's list before you need it. Ask an advisor what they would flag in your business today, while there is still time to fix it rather than be discounted for it.

2. Why are the biggest businesses the least prepared?

Signal: Scale gets mistaken for readiness, because a company that feels institutional is assumed to be documented.

Evidence: The same survey found 62% of sellers in the $5M to $50M band had done no formal exit planning, against 41% in the $2M to $5M band and 35% in the $1M to $2M band.

Implication: The band with the most value riding on each turn of multiple is the band least likely to have planned for it. Informality that worked fine at $3M becomes invisible rather than absent, and it stays invisible until somebody audits it line by line.

Action: Separate what is written down from what lives in somebody's head. The second list is your actual risk register, and nobody has ever been surprised by what is on it.

3. What actually sets the price?

Signal: Owners work on the multiple as though it were a negotiating outcome, when it is mostly a function of how many credible buyers turn up.

Evidence: Market Pulse reported median multiples stepping from 4.0x EBITDA in the $2M to $5M band to 4.5x in the $5M to $50M band, with average offers per deal rising from 3.15 to 4.71. 83% of deals above $5M attracted three or more offers and 18% drew ten or more. Lower middle market sellers achieved 100% of benchmark asking price, against 84% to 87% in the Main Street segment.

Implication: Price follows competition, and competition requires a business that a stranger could plausibly operate. Worth being precise about the limits here: the survey reports these figures by deal size, not by management depth. That transferability is what draws the extra bidders is the prevailing advisor view, not a measured finding in this dataset.

Action: Count how many of your ten largest customer relationships are genuinely held by someone other than you. That number tells you more about your transferability than your EBITDA does.

4. Is the AI story moving your valuation yet?

Signal: AI capability gets positioned as a value story well before the market is paying for one.

Evidence: Asked about AI's effect on business valuations, 67% of advisors in the Q1 2026 Market Pulse survey reported no material impact. 15% said it was too early to tell, 12% saw slight increases and 3% saw slight decreases. The report's own summary is that AI is part of the conversation but has not yet translated into value.

Implication: In this size range the market is not currently paying for AI adoption. It pays for earnings quality and transferability. That does not make the AI work wrong, but it does make the sequencing matter more than the announcement.

Action: If your AI investment is not reducing owner dependence or turning undocumented process into documented process, it is not yet a value story. Right now it is a cost with a good narrative attached.

Stat of the Week

62%

The share of sellers in the $5M to $50M range who came to market with no formal exit planning — against 41% at $2M to $5M and 35% at $1M to $2M, per the Q1 2026 IBBA and M&A Source Market Pulse survey of 300 advisors.

Readiness does not scale with revenue. It has to be built on purpose, and usually years earlier than feels necessary.

Source: IBBA and M&A Source, Market Pulse Survey, 56th edition, Q1 2026, fielded April 1 to 16, 2026 among 300 business brokers and M&A advisors covering 203 completed transactions.

The Core Question

A buyer is not really assessing what the business earned. They are assessing how much of that is likely to survive your departure.

Which means the diligence questions that hurt are almost never financial. They are about concentration — of relationships, of knowledge, of decisions — and every one of those concentrations was created by an ordinary workforce choice made years earlier, usually for good reasons, usually without anyone noticing it was a valuation decision.

If you were unreachable for ninety days, what would a buyer find out?

The VALŪE lens: EBITDA is what the business earned. The multiple is what a buyer believes it will keep earning without you. Every workforce decision you make is quietly casting a vote on the second number, and only the first one shows up in this year's reporting.

You will do this once. Build as though the audit has already started.

Know a CEO three years out from a transaction? That is exactly when this is worth reading.

Until next time,

The HŪMNZ Element — Weekly Pulse

If this was useful, forward it to one person: a CEO who plans to sell eventually, or whoever would have to run the place if they could not.

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