Insights
Short, practical notes on what actually moves the needle when you sell: valuation, margin, the numbers buyers trust, and getting ready before you go to market. No theory, just what I see work.
It is the first question almost every owner asks. Value starts with real earnings, not revenue, and the multiple is where the money moves. Here is how buyers actually arrive at a number, and what you can do to raise it.
One or two big relationships can feel like the strength of your business. To a buyer, customer concentration reads as risk, and it can lower both your multiple and how much of the price you get in cash at closing. Here is how it works, and how to fix it before you go to market.
Most owners want a single number. The honest answer is 9 to 12 months once you go to market, and often longer counting prep. Here is where the time actually goes, stage by stage, and what makes the difference between a clean close and a deal that drags or dies.
Most owners live in the profit and loss statement. It tells a story they like: revenue climbing, profit on the bottom line. But when a buyer wants to know how healthy your business really is, they turn to the balance sheet. The P&L is a highlight reel of one stretch of time. The balance sheet shows what you actually own, what you owe, and where the cash really came from.
That is where deals get real. A business can post a strong year on the income statement while the balance sheet tells a different story: thin cash, debt stacked up, receivables that are not collecting, owner money moving in and out. Buyers and lenders read those signals fast, and they price the risk in. If you are thinking about selling, get the balance sheet clean and defensible long before you go to market. It is the document that decides whether a buyer trusts your numbers.
Revenue is the number owners brag about. It is also the number that hides the most. Two businesses can post the same top line and be worth wildly different amounts, because what matters is gross margin: what is left after the cost of actually delivering the product or service. A company doing big revenue at thin margin is working hard to make a little. A buyer sees that immediately.
When you sell, the valuation is built on profitability and the quality of those earnings, not the headline sales figure. Strong, stable margin tells a buyer the business is durable and the growth is real. Weak or shrinking margin raises questions no pitch can answer. Before you go to market, know your margin by product and by service line, understand what drives it, and fix what you can. That is the work that quietly raises your price.
A lot of owners run real business operations out of a home office and never claim the deduction they are owed. If a part of your home is used regularly and only for the business, the IRS lets you write off a share of your rent or mortgage interest, utilities, insurance, and upkeep. Most people either skip it because they are scared of an audit, or they guess and leave money on the table.
Two reasons it matters beyond this year's tax bill. First, that is cash back in the business, real dollars, not a rounding error. Second, the habit behind it is what counts when you sell: an owner who tracks expenses cleanly and claims what they are due has books a buyer can trust. Sloppy expense tracking is the same sloppiness that shows up in diligence. Claim what is yours, document it properly, and you get a lower tax bill now and a more defensible set of numbers later.
Cash accounting records money when it actually moves: revenue when the customer pays, expenses when you pay them. It is simple and it tells you what is in the bank. Accrual records revenue when it is earned and expenses when they are incurred, whether or not cash has changed hands. It is more work, but it shows what the business actually did in a period.
Why this matters for selling: serious buyers and lenders read accrual financials, because cash-basis books can make a business look lumpy or hide what is really going on with receivables, payables, and timing. If you plan to sell in the next few years, moving to accrual early, or at least being able to present accrual statements, makes your numbers credible and your diligence smoother. The method you pick is not just a tax preference. It is how a buyer decides whether to trust your story.
EBITDA is earnings before interest, taxes, depreciation, and amortization. Strip those four things out of your profit and you get a cleaner read on what the business actually earns from operations, before financing choices and accounting decisions cloud the picture. That is why buyers anchor on it: it lets them compare your business to others and to their own, on an apples-to-apples basis.
It matters because your sale price is usually EBITDA times a multiple. Lift normalized EBITDA by a dollar and, at a five-times multiple, you have added five dollars of enterprise value. That is the whole game in one line. Before you go to market, know your real EBITDA, get your owner add-backs documented and defensible, and understand which dollars of earnings a buyer will actually credit. The cleaner that number, the higher the multiple a buyer will pay on it.
The accounts receivable aging report shows who owes you money and how long it has been outstanding, sorted into buckets: current, thirty days, sixty, ninety and beyond. Most owners glance at the total and move on. The real signal is in the buckets. Money stacking up in the ninety-plus column is revenue you booked but may never collect, and it is quietly choking your cash flow while the income statement still looks fine.
For a sale, this report does double duty. Run it weekly and it becomes a collections tool: you chase the right invoices before they go bad and you keep cash in the business. Hand it to a buyer in diligence and it tells them whether your revenue is real and whether your customers actually pay. A clean, current aging report says the business is run tightly. A messy one full of stale balances raises exactly the questions you do not want surfacing at the negotiating table.
The first call is free. Thirty minutes, no pitch. You tell me where you are and I tell you straight what I see.
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