Every business for sale comes with a story about where it's headed, and the story is almost always more optimistic than the evidence underneath it. Testing that gap is not about disproving the seller's enthusiasm — it's about finding out which parts of the story are load-bearing.
Key takeaways
The most persuasive growth pitches borrow credibility from numbers that already happened — three years of clean historical earnings, a documented process, a loyal customer base — and extend a line forward from them. The extension itself is where the story stops being evidence and starts being a claim. Testing it means separating what is actually documented from what is simply asserted with confidence.
A growth claim inherits every weakness already present in the historical numbers it's projecting from. The same red flags worth chasing down in a margin review — unexplained year-over-year swings, one-time items, related-party pricing — matter twice as much here, because a growth projection typically multiplies the flawed base forward rather than correcting for it. A margin propped up by a below-market related-party lease, projected to grow another 20% over three years, is compounding an error the buyer hasn't yet identified as one.
Buyers looking for an objective multiple or growth rate to measure a specific story against won't find a single one published for the Canadian SME market. “None of this amounts to a single 'market multiple' that applies across the board,” and the same source is explicit that two businesses with similar revenue can trade at noticeably different multiples depending on owner-dependence, documentation and customer concentration — the same three variables that determine whether a growth story is credible in the first place. Absent an external yardstick, the only honest test is internal: does the story hold up against the target's own contracted pipeline, its own capacity, and its own historical conversion rate, not against a number nobody actually publishes.
Deavo's own list of seller mistakes puts the asking-price problem in blunt terms: “an unrealistic asking price — pricing based on what the owner needs rather than on how comparable businesses have actually traded.” A growth story is frequently the vehicle that carries that price to a buyer — it is easier to justify a stretch valuation with a confident forward narrative than to defend it against the trailing numbers alone. Testing the growth claim and testing the asking price against comparable transactions are, in practice, the same diligence exercise approached from two directions.
Federal SME statistics give a genuine, dated reference point for what real high growth looks like, sector by sector: employment growth among Canadian high-growth firms between 2019 and 2022 was concentrated in “information and cultural industries (7.5%), mining, quarrying and oil and gas extraction (6.9%), and professional, scientific and technical services (6.4%).” A growth story well outside those bands, from a sector that isn't one of them, is not automatically wrong — but it needs a specific, documented reason, not the general confidence a seller has in their own business.
What separates a documented growth story from an asserted one
A pipeline that has been rebuilt from actual contracts, not read off the vendor's forecast slide.
A stated cause for any planned growth — new capacity, a signed contract, a new territory — rather than a straight-line extrapolation of the historical trend.
Confirmation that the growth doesn't assume the margin holds without ever being pricing-tested.
A conversion-rate history: how much of the target's own past pipeline actually became revenue, applied to the current pipeline rather than assumed at 100%.
A target with $10,000,000 in current annual revenue projects 25% growth over the next two years — $2,500,000 of new revenue — attributed to “strong market demand” with no further detail. Its qualified pipeline stands at $5,000,000, and the historical pipeline-to-revenue conversion rate over the prior three years averaged 40%. Applying that same 40% conversion rate to the current $5,000,000 pipeline produces $2,000,000 of new revenue — 20% growth, not 25%. Hitting the projected $2,500,000 from the same pipeline would require converting it at 50%, a full ten points above the historical average, and the projection includes no new capacity, no signed contracts beyond the existing base, and no stated reason conversion would improve. The gap itself becomes the negotiating point — either the seller can document what specifically changes the conversion rate, or the purchase price reflects the evidenced number rather than the asserted one. This is the same rebuilt-pipeline exercise described in mapping the sales pipeline before you buy, applied one step further forward: a growth story is a claim about the pipeline that doesn't exist yet, so it deserves at least as much scrutiny as the one that already does.
No published Canadian benchmark exists for either one. The honest test is internal: does the projection hold up against the target's own contracted pipeline, capacity and historical conversion rate, rather than against an external number that doesn't actually exist in any published source.
Apply the target's own historical pipeline-to-revenue conversion rate to its current pipeline, rather than accepting the projection's implied conversion rate at face value. The gap between the two is usually where the story and the evidence diverge, and it's a calculation that uses numbers already sitting in the data room rather than a new assumption of its own.
Often, yes. The same underlying issue — pricing based on what the owner wants rather than on evidence — tends to show up as an unrealistic asking price, an aggressive add-back schedule, and an optimistic growth story at the same time, because all three come from the same source.
They're a plausibility check, not a valuation input. A projection well outside the growth pattern typical of its sector isn't automatically wrong, but it should come with a specific, documented reason — a new contract, added capacity, a stated cause — rather than rest on the seller's general optimism about where the business is headed.
Nobody publishes Canadian transaction data, so every valuation in this country quotes an American benchmark. We are building the Canadian one — multiples, asking-to-sale spreads and days on market, by sector and by city. Leave an email and you will see it first.
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