Most businesses are under-valued at sale — not because of market conditions, but because the value wasn't built properly before the process started.
Where this fits
Demand → Pricing → Cash → EBITDA → Network → Visibility → Value
Most owners think about maximising value at the wrong time. They think about it when the deal is already in progress — when the buyer has made an offer, due diligence has started, and the only thing left is to negotiate the gap between expectation and reality.
What this means in practice: the buyer will test whether every improvement you have made is real, sustainable, and achievable without you present. Structural improvements survive this test. One-off cost cuts often do not.
By that point, the opportunities that would have moved the number significantly have passed.
Value is built in the twelve to twenty-four months before a sale, not during it. The things that build value are not cosmetic. They are operational. They are the same things that make the business perform better every day — it just turns out they also make the business worth more when it comes time to sell.
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Most founders don’t see this clearly until they’re already in a process.
If you want to talk it through properly before that, we can do that.
→ Discuss your situationA business is valued — in most private equity and trade sale contexts — as a multiple of its earnings. The multiple is determined by factors like industry, growth rate, customer quality, and risk. Your EBITDA is the number those factors are applied to.
What this means in practice: the EBITDA figure on your P&L is not the one buyers use. They normalise it — removing items they consider non-representative. The gap between your reported figure and the normalised figure is the number that determines value.
In plain terms: EBITDA is what your business earns from its operations before accounting for how it is financed and before depreciation charges. Think of it as the core profit from running the business, before your accountant's adjustments. This is the number buyers use to set a price.
There are two ways to improve the outcome: improve the multiple — which is largely outside your control — or improve the earnings, which is very much within it.
The earnings number a buyer uses is not simply your last twelve months of net profit. It is an adjusted figure that strips out financing, accounting decisions, and any owner-specific costs. It also accounts for working capital and the sustainability of those earnings going forward.
What this means in practice: cash tied up in debtors, inventory, and creditor terms. Releasing it before a sale improves your net proceeds at settlement.
In plain terms: Working capital is the cash the business needs to operate day to day — what customers owe you, minus what you owe suppliers, adjusted for stock. If the business is tying up too much cash here, it reduces what you actually receive at settlement.
At a 6x multiple, a genuine $200,000 improvement in adjusted EBITDA is worth $1.2 million at exit. That is the scale of the opportunity — and why preparation is worth treating seriously.
What this means for you:
Built by an operator who has scaled and exited businesses across private equity, listed and private environments. View track record →
Built on real operating and private equity metrics — not generic multiples.
Used by founders and operators preparing for growth, capital or exit.
Start valuation →Do you know what actually drives your valuation?
This is usually where things get misread.
Owners think the earnings number on their P&L is what buyers will use. It is not. If you want to know what your normalised EBITDA actually looks like, that is worth working through before any process starts.
→ Discuss your situationMost founders misjudge valuation. Get clarity in minutes using a structured commercial model built from 25 years of P&L accountability across industrial and distribution businesses.
Start valuation →What they say:
Quality of earnings
What it means:
The buyer's advisors will test whether your profits are real, repeatable, and not dependent on one-off events. Clean, consistent earnings are worth more than the same number with noise in it. This assessment is called a quality of earnings review and is almost always commissioned by the buyer's advisors during due diligence.
What they say:
Normalised EBITDA
What this means in practice: your adjusted earnings after removing items that are not representative of ongoing performance. This is the number the multiple is applied to — and it is often lower than the reported P&L figure.
What it means:
The adjusted earnings figure — after removing items that are not representative of ongoing performance. This is the number the multiple is applied to. Owners often do not know what their normalised EBITDA is until due diligence surfaces it. Knowing it yourself, before the process starts, gives you control over the frame.
What they say:
Customer concentration risk
What it means:
When a significant portion of revenue comes from one or two customers, buyers discount the value of that revenue. The risk is that the business could lose a large share of earnings if one relationship changes. Diversification of the customer base increases both earnings quality and the multiple.
What they say:
Recurring vs one-off revenue
What it means:
Revenue that repeats — through contracts, repeat purchasing, or service agreements — is valued more highly than project-based or transactional revenue. Buyers model what revenue they can count on after the acquisition. Visible, reliable revenue is worth more than assumed revenue.
What they say:
Working capital adjustment
What it means:
At settlement, the buyer assesses how much cash the business needs to operate at normal levels. If debtors are high, inventory is heavy, or creditors are tightly managed, this reduces the net proceeds you receive. It is often called a working capital peg, and it can move the net outcome significantly.
What they say:
Vendor due diligence
What it means:
Commissioning your own due diligence report before going to market. It surfaces issues before buyers find them — and lets you fix what can be fixed rather than having it used to reduce the price. Vendors who do this tend to achieve better outcomes because they control the information.
The difference between a good outcome and a great one is almost always in the preparation, not the process.
Owners think the earnings number on their P&L is what buyers will use. It is not. If you want to know what your normalised EBITDA actually looks like — and where the gap is — that is worth working through before you enter any process.
→ Discuss your situationThe improvements that move the valuation most are not always the ones that feel most urgent day-to-day. If you want a clear view of where to focus in the time you have, we can work through that together.
What this means in practice: your view of value and the buyer's view are formed differently. Knowing where the gap is — and closing it before a process starts — is the work that produces measurably better outcomes.
→ Discuss your situationA manufacturing business preparing for sale had $3.2 million in reported EBITDA. The owner had been running the business for eighteen years and had a clear view of what the business was worth based on conversations with industry peers who had recently sold.
During due diligence, three issues surfaced: a large customer representing 38% of revenue had informally indicated they were reviewing suppliers; margin on a key product line was being overstated due to how overhead was allocated; and debtor days were running at 67, creating a working capital position significantly above industry norms.
None of these issues had been identified or addressed before the process started. Each one gave the buyer grounds to adjust the normalised earnings figure downward. The adjusted EBITDA the buyer was prepared to underwrite came in at $2.6 million — not $3.2 million.
At a 6x multiple, the $600,000 reduction in normalised EBITDA translated to a $3.6 million gap in enterprise value. Not because the business was worse than the owner thought — but because the owner had not done the work to demonstrate the quality of what was there. All three issues were addressable in the twelve months prior. None had been surfaced because nobody had looked at the business through a buyer's lens.
What this means for you:
Most businesses have pricing that has drifted — rates set years ago, customers who have never been reviewed, margin that varies across the book for reasons nobody has traced. A disciplined pricing review — not a price increase, but an understanding of where margin is and is not — is one of the highest-return activities in sale preparation.
Knowing what it actually costs to deliver each product or service to each customer type is the foundation of margin improvement. Without it, you cannot make good decisions about where to grow and what to walk away from.
Growing the right revenue — from customers and products that deliver margin — improves the quality of earnings, not just the size. Buyers look at the composition of growth, not just the trend line.
Fixed costs that cannot be explained relative to the revenue they support create risk in a buyer's model. Transparency over cost structure — what it is, why it is there, what it enables — removes uncertainty from the valuation.
Not all preparation activities produce results in the same timeframe. Understanding the timeline helps you prioritise what to focus on first.
Pricing review, margin improvement, debtor management, working capital position, and financial reporting quality. Focused effort here produces visible, measurable results — and the returns in a sale context are immediate because they flow into the trailing earnings history.
Customer diversification, team capability development, reducing owner dependency, and formalising key customer relationships. These cannot be rushed. A buyer looking at a business where the founder has been genuinely absent from day-to-day decisions for twelve months finds that more credible than one where it happened recently.
Meaningful revenue diversification, management team development, and structural changes to the business model. If these are needed, they are best identified as early as possible.
The implication is clear: the right time to start preparation is as soon as you have a realistic view of when you might want to sell — not when you receive an approach.
What this means for you:
Twelve to twenty-four months is the meaningful window. Changes made in that period flow into the earnings figure that is being valued. Changes made after a process starts are too late to move the number in any meaningful way. The earlier you start, the more options you have.
Customer concentration. When one customer represents more than 20 to 25 percent of revenue, buyers consistently discount the value of that revenue. It is also one of the hardest things to fix quickly — which is why identifying it early matters.
Not automatically. The quality and sustainability of the improvement matters. Buyers test whether earnings are real, repeatable, and achievable without you present. Genuine structural improvement is valued. One-off cost cuts that cannot be sustained are not — and experienced buyers can usually tell the difference.
Fix what you can fix. Disclose what you cannot. Buyers will find everything during due diligence. Surprises discovered during a process — rather than disclosed upfront — damage trust and are used as price chips. Transparency gives you control over how the issue is framed.
Working capital is assessed at the time of settlement and compared to a normalised level. If your debtors are high or your inventory is heavy, the buyer will argue the business needs that cash to operate — and the net proceeds you receive will be adjusted accordingly. This can be a significant number.
It is an assessment of whether your profits are real and repeatable — from core operations, not one-off items; not dependent on you personally; able to be sustained after you leave. The higher the quality, the more each dollar of EBITDA is worth in a sale.
Only in areas that demonstrably improve earnings or reduce buyer risk. Investment in systems, team capability, and customer relationships has a high return in a sale context. Cosmetic improvements rarely receive appropriate credit in a transaction.
The capability and independence of the leadership team below the founder. A business where the team can run operations, manage customers, and make sound decisions without the founder present is structurally more valuable and gives the seller more control over deal structure.
If you want to work this through yourself
→ Run the diagnosticIf you’d rather get a clear view quickly
→ Discuss your situationIf you’re already being approached or thinking about a sale
→ Before You Say YesHow far in advance should I prepare to sell?
Twelve to twenty-four months is the meaningful window. Changes made in that period — in earnings quality, working capital, customer documentation, and team capability — flow directly into the numbers a buyer will use to value the business.
What is the single biggest driver of business value?
EBITDA — adjusted, defensible, recurring earnings. Every dollar of genuine improvement in normalised EBITDA translates directly into value at the multiple applied to your business. At 6x, a $200,000 improvement is worth $1.2 million at exit.
How does working capital affect sale proceeds?
Working capital is assessed at settlement against a normalised level. If your debtors are elevated or inventory is heavy, this reduces the net proceeds you receive. Improving debtor days and managing inventory before a sale is a direct cash improvement at settlement.
What does quality of earnings mean?
It refers to whether your profits are real, repeatable, and not dependent on one-off items or your personal involvement. High quality earnings survive due diligence and support the multiple being applied. Low quality earnings are discounted or challenged.
Does improving EBITDA always increase sale price?
Only if the improvement is structural. A buyer will test whether changes are genuine and sustainable without the founder present. Operational improvements — pricing, margin, cost clarity — are valued. One-off cost reductions typically are not.
Built by an operator who has scaled and exited businesses across private equity, listed and private environments. View track record →
Built on real operating and private equity metrics — not generic multiples.
Used by founders and operators preparing for growth, capital or exit.
Start valuation →See also: Profit & Working Capital · Pricing & Margin Improvement