I think colleges use the info. on the profile to get an overall picture of finances. If value and assets of a business are in the 7-figures and a family claims a low 5-figure salary, the financial aid office will probably take a closer look.
Nobody expects families to sell their business to pay for college. If a family owns rentals, they can borrow against them. If they own a business without concrete assets, I suppose the assumption is that they’ve been saving because they knew college was coming. I expect some calculations are based on possible future income. We have friends who own a partner law firm. When one wanted to retire the others bought him out. The value of his share of the firm wasn’t $0. The money may not be there now, but that doesn’t mean it won’t be in the future. I don’t think it’s unrealistic for colleges to expect families to borrow against future income. Whether the money comes from savings or parent loans that are paid back when the family sells the business or liquidates the assets isn’t the colleges’ concern.
I don’t think anyone gets a pass because they tied up all their money in inventory either. If families can’t run a business on less or live on a smaller percentage of their income for the years their kids are in college then they probably have to look at less expensive colleges. A lot of people have to adjust expectations during the application process. That’s why it’s important to have financial safeties.