The four numbers, and why each one matters
- Growth rate. The single strongest driver of the multiple. A firm compounding fast reads as a firm with a repeatable engine, and that's what a buyer is really acquiring.
- Flagship customers, especially new logos. Marquee accounts that are new to the buyer bring relationships and credibility the buyer can't easily build, so they pay up for the logos as much as the revenue.
- Profitable revenue. EBITDA and EBITDA growth, the profit that scales. Profit that scales tells the buyer the model holds as it grows, and a good CFO who presents the books the way a buyer reads them protects every point of it.
- A wildcard differentiator. Something the buyer can't get elsewhere: an innovation, an offshore capability in a specific part of the world, or a product or managed service that extends what they can sell. There has to be a reason you, over the next firm.
What carried the highest multiple
When 3Cloud sold to Cognizant at a 15x EBITDA multiple, two of the four did most of the work: the growth rate, and the near-total ownership of the Microsoft ecosystem in North America. That second one was the wildcard, a position a buyer couldn't replicate by writing a check anywhere else. Founders tend to fixate on revenue and profitability, both of which matter, and the deal was won on the total picture, with the differentiator doing the heavy lifting.
What gets a firm repriced in diligence
The fastest way to lose millions is to let the business drift while the deal runs. I watched one firm get repriced because a major customer shrank its renewals during the diligence process, and the price moved against them by millions. Keep taking care of your customers and keep the business at full strength through the whole process. A soft quarter in the room is expensive in a way a soft quarter anywhere else never is.
The first move if you want to run to these numbers
Start by understanding how the business performs today, with the right KPIs and a fast, honest read of them. Then put the operating system in place where you're talking to the right people about the right things, and every one of those critical numbers has a single person accountable for it to the CEO. Pair that with a CFO who can restructure the books to reflect what a buyer will actually look at, and you're running the business toward the price, every quarter, long before anyone's in the room.
