Price is usually earnings multiplied by a number — the multiple. Owners focus on the earnings, but the multiple is where most of the value is won or lost. It is essentially a measure of how confident a buyer is in those earnings continuing.
What pushes the multiple up
- Owner independence — the business runs without you in it every day.
- Recurring or repeat revenue rather than one-off project work.
- A diversified customer base with no single dominant account.
- Consistent margins and a credible, modest growth story.
- Clean records that make diligence fast and reassuring.
What drags it down
- Heavy dependence on the owner's relationships or knowledge.
- Customer concentration — one client who could leave and take the profit with them.
- Lumpy or declining earnings that are hard to forecast.
- Aging equipment that will demand reinvestment soon.
- Disorganised books that make a buyer assume the worst.
The encouraging part is that most of these are fixable. A year or two of work on owner-dependence and customer concentration often moves the multiple more than any negotiation ever will.
Think of the multiple as the price of certainty. Every risk you remove before a sale is something a buyer no longer has to discount for.