businessvaluation.fyi

PRACTICAL OWNER GUIDE

What makes a business worth more?

A multiple is a starting point. Buyers still need to believe the earnings will transfer, customers will stay, and the company can operate without one person carrying it.

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2-MINUTE TRANSFERABILITY SCREEN

Pressure-test the business behind the multiple.

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These are transparent screening bands, not universal valuation thresholds. Business model, margins, contracts, deal terms, and evidence quality still matter.

Complete all four fields.

You’ll see the strengths a buyer may credit, the questions they may ask, and the evidence to prepare next.

0 / 4 factors answered

FOUR QUESTIONS BEHIND THE NUMBER

What a buyer is trying to learn.

None of these factors works as a universal percentage adjustment. Together, they shape confidence in whether today’s cash flow can continue after ownership changes.

01

Can the business run without the owner?

Hours are only the surface. Buyers also test who approves decisions, owns customer relationships, solves exceptions, and holds undocumented knowledge.

Prepare:A duty map, delegated authority, process documents, and evidence that operations continue during owner absences.
02

How visible is future revenue?

Contracts and subscriptions help only when renewal, churn, pricing, and gross margin are understood. Repeat purchasing can also be valuable even without a contract.

Prepare:Revenue by type, retention cohorts, churn, backlog, contract terms, and repeat-purchase behavior.
03

What happens if one customer leaves?

A large account can be a strength and a risk. The issue is how much earnings change, who owns the relationship, and whether the customer will remain after a transfer.

Prepare:Customer-level revenue history, contract length, retention, switching costs, and a diversification plan.
04

Are growth and earnings durable?

Growth is more persuasive when it improves cash flow and comes from repeatable channels—not one project, temporary pricing, or spending a buyer must continue.

Prepare:Three-year revenue and margin bridges, channel economics, pipeline conversion, and normalized owner compensation.

TURN THE STORY INTO EVIDENCE

The diligence file matters as much as the claim.

“The team runs everything” is a claim. An org chart, decision rights, documented procedures, clean monthly financials, customer retention, and an owner-absence operating record are evidence.

  1. 1
    Quantify the factorUse customer, contract, retention, margin, and owner-time data.
  2. 2
    Show the historyOne good month is not a transferable operating record.
  3. 3
    Explain exceptionsSeparate one-time events from the repeatable business.
  4. 4
    Connect it to the transitionMake clear what continues after the owner leaves.

Standards behind the screen

The IRS notes that valuation is fact-specific and considers earning capacity, earnings stability, goodwill, financial condition, and relevant market evidence. The SBA describes income, market, and asset approaches and emphasizes intangible assets and future revenue. IVSC guidance identifies customer concentration as useful risk information. The diagnostic turns four practical inputs into questions to investigate; it is not a formal appraisal.

IRS valuation guidelines SBA: selling a business IVSC: valuing intangibles

NEXT: YOUR FINANCIALS + MARKET DATA

Turn the operating story into a private valuation range.

Use your actual revenue and the normalized earnings measure that fits the business: SDE or EBITDA. Then contribute an operating profile to compare your result with protected transaction evidence.

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