What Your Business Is Worth

Two businesses with identical profit routinely sell for very different amounts. The difference is risk: how confident a buyer is that the cash flow continues without you, and how much of it they can finance.

Value is set by the durability of earnings, not their size. That is why a smaller company with contracted revenue and a capable second layer of management can outprice a larger one that runs on the owner’s relationships.

• Normalized, verifiable earnings with clean records behind them
• Revenue that recurs or is contracted rather than won again each year
• A management layer that operates without the founder present
• Customer diversification and long tenure
• Growth a buyer can see a path to continuing

A buyer builds a model, then spends diligence trying to break it. They adjust your earnings for owner compensation and discretionary expense, subtract the cost of replacing what you personally do, and test the result against what a lender will finance.

Strategic acquirers, private investors, and internal successors each weigh the same facts differently. Understanding which buyer type your business suits determines both the price and the terms you can hold.

• Quality of earnings and the reliability of your records
• Concentration risk in customers, suppliers, and key employees
• Working capital requirement and capital expenditure history
• Contract assignability, leases, and licensing
• Cultural fit and what happens to the team after closing

Most value is lost quietly, over years, through things that felt reasonable at the time. Cash-basis reporting, personal expenses run through the company, deferred equipment replacement, and undocumented processes all read to a buyer as risk.

The most expensive single factor in a founder-owned business is owner dependence — when the owner is the salesperson, the estimator, the quality control, and the reason customers stay.

• Owner dependence in sales, delivery, or key relationships
• A single customer at a large share of revenue
• Incomplete or inconsistent financial statements
• Deferred maintenance and aging equipment
• Key-employee risk with no retention arrangement

This is the highest-return work available to an owner considering a transition, and almost none of it requires committing to a sale. Every item strengthens the business whether you sell or not.

We sequence the work by payback period so improvements compound before you go to market rather than being discovered during diligence.

• Move to accrual reporting and have statements reviewed
• Build the second layer of management and document delegation
• Convert one-off work to service agreements where the market allows
• Reduce the largest customer’s share of revenue
• Put retention arrangements around the people a buyer will worry about