Article by:
Rachel Lugo
Originally published at stellaandmain.com/blog-sde-multiple
Most business owners think about their sale price in terms of revenue. Buyers don't — they think in multiples, a number applied to your profit that reflects how much risk they're taking on. Two businesses with identical revenue and profit can sell for very different amounts, and the gap has nothing to do with the top line.
The multiple is really just a shorthand for one question: how confident is a buyer that this business keeps performing after they own it? Clean, provable financials move that confidence up. Operations that don't depend on the owner move it up. Diversified revenue and relationships that transfer to the company instead of the founder move it up. Deferred problems — lease issues, compliance gaps, tax issues — move it down fast, because buyers find them in due diligence and use them to renegotiate or walk.
The businesses that close at a strong multiple aren't the ones that scrambled in the weeks before listing. They're the ones that spent 12 to 24 months systematically removing the things that make buyers nervous — before a buyer ever showed up to notice them.
Read the full piece — all five factors that move the number, and how to know where you stand before a buyer does — on the Stella and Main blog: stellaandmain.com/blog-sde-multiple
