Two companies with the same revenue can sell for very different prices. The difference is almost never the product. It is how much of the profit will still be there after the owner leaves.
What raises the multiple
- Profit that does not depend on the owner: a management layer and documented processes
- Recurring or repeat revenue with low customer concentration
- Clean, credible financials with three years of consistent reporting
- A growth story with evidence: a pipeline, a channel that scales, a market that is growing
- Systems a buyer can see: CRM, dashboards, SOPs, contracts
What lowers it
- The owner is the top salesperson and the only person clients know
- One customer above 20 percent of revenue
- Adjustments the accountant has to explain
- Key staff without contracts or incentives to stay
- Deferred maintenance, expired licences, unresolved disputes
The 24-month plan
Most of the value drivers take one to two years to establish. Owners who start when they decide to sell get the discount. Owners who start two years earlier get the premium. Exit preparation is a consulting engagement, not a listing.
By Ali Sedighi, MBA. 6 minute read.