The 12–24 months before listing are the highest-leverage period of an owner’s exit. The same business with the same earnings can sell for 50% more or 50% less depending on what the owner did in this window. Most owners use it poorly — running flat, doing nothing different, then listing reactively. The owners who use it well change six things deliberately.
The six levers
Each lever moves either the earnings base (your SDE or EBITDA) or the multiple applied to it. The biggest gains come from moving the multiple, because multiples cascade — a 0.5x improvement on $500K SDE is $250K of sale price.
| Lever | Effect | Time to impact |
|---|---|---|
| 1. Reduce owner-dependence | Multiple +0.5x to +1.0x | 12–24 months |
| 2. Diversify customer concentration | Multiple +0.3x to +0.7x | 6–18 months |
| 3. Increase recurring revenue % | Multiple +0.5x to +1.0x | 12–24 months |
| 4. Raise prices | SDE +5–15% | 3–9 months |
| 5. Clean up books and add-backs | Multiple +0.2x to +0.4x | 1–6 months |
| 6. Time the sale (3+ years SDE growth) | Multiple +0.3x to +0.5x | 12–36 months |
Lever 1: Reduce owner-dependence
The single biggest valuation killer. Buyers ask: “If the owner walks out the day after closing, does the business survive 90 days?” If the answer is no — for any reason — the multiple drops 0.5x to 1.5x.
Specific things to do:
- Hire or elevate a general manager. Someone who can run day-to-day without you for 30 days. Title matters less than operational ownership.
- Move customer relationships to account managers. If you personally hold the top five customer relationships, those customers will require careful transition planning — and the buyer prices the risk of losing them.
- Document SOPs. Pricing decisions, hiring rubrics, vendor management, complaint resolution. A 30-page operations manual is fine; it doesn’t need to be perfect.
- Cross-train on every single-source-of-knowledge function. Billing, payroll, key technical roles. If only one person knows how to do something, that person is leverage on you.
- Take a real two-week vacation 6 months before listing. With your phone off. What breaks tells you what still needs work.
The litmus test: if your operations team can quote, deliver, bill, and collect on a typical job without involving you for two weeks, you’ve broken owner-dependence enough to support a higher multiple.
Lever 2: Diversify customer concentration
If one customer is over 30% of revenue, your multiple is capped — sometimes severely. Buyers price the worst-case (that customer leaves the year after closing) and discount accordingly.
Specific things to do:
- Pursue net-new customers smaller than your current top. Don’t replace your big customer with another big customer; spread across 15–25 mid-tier accounts.
- Sign multi-year contracts with the existing top accounts to demonstrate durability.
- Upsell mid-tier accounts to grow them as a percentage of revenue.
- Track concentration monthly. It’s the most-watched metric in your eventual CIM.
Targets: top customer under 20%, top 5 customers under 50%, top 10 under 75%. Hitting these moves you toward the high end of your industry’s multiple range.
Lever 3: Increase recurring revenue percentage
Recurring revenue is worth more than project revenue, even if the dollar amount is identical. A landscaper with 70% commercial recurring trades at 3.5x SDE; the same landscaper with 70% project revenue trades at 2.0x SDE.
Specific things to do:
- Sell service contracts and maintenance agreements to existing project customers. Annual prepay or monthly subscription both work; both create durable revenue.
- Subscription-ize a one-time offering. A pest control company that sold one-time treatments now sells $40/month plans. A landscaper that did one-time installs now sells maintenance tiers.
- Multi-year customer agreements even without subscription pricing. A 36-month commercial cleaning contract is recurring even if invoiced monthly.
- Track Annual Recurring Revenue (ARR) as a metric in addition to total revenue. This is what buyers will look for in your CIM.
This is a slow lever — recurring revenue percentage typically moves 5–10 points per year with focused effort. Start as early as you can.
Lever 4: Raise prices
The simplest, most-overlooked lever. Most small-business owners are 5–15% below market price for their work because they set prices years ago and never adjusted. Every dollar of price increase flows directly to SDE — and gets multiplied at sale.
Specific things to do:
- Audit your pricing against direct competitors and adjacent industries. Most owners discover they’re underpriced in 80% of their service mix.
- Implement on new customers first. No churn risk. If conversion holds at the new price, you’ve discovered your price was too low.
- Roll forward to existing customers with notice. 60–90 days of warning, paired with a small value-add (extended service hours, faster response, an additional service tier), holds churn under 5% in most cases.
- Pass through cost increases. Inflation, fuel, materials, labor — most owners absorb cost increases instead of passing them through, which silently destroys margin.
A 10% price increase on $1M in revenue with no churn adds $100K to revenue. Most of that drops to SDE. At a 3x multiple, that’s $300K of sale price from a single decision.
Lever 5: Clean up books and add-backs
The cheapest, fastest lever. Doesn’t grow your business — but maximizes the percentage of value buyers will pay for what you’ve already built.
Specific things to do:
- Move to accrual accounting if you’re on cash. Buyers normalize anyway; doing it yourself protects your narrative.
- Reconcile every account through year-end for the last three years.
- Build the add-back schedule as a documented spreadsheet — see Add-backs in Business Valuation.
- Commission a Quality of Earnings report if SDE is over $1M.
- Resolve any commingled personal expenses that are hard to defend as add-backs.
Clean books push you to the top of your industry’s multiple range. Messy books cap you at the bottom regardless of underlying quality.
Lever 6: Time the sale to your trajectory
Buyers pay for trends, not snapshots. Three years of growing SDE earns the high end of your industry’s range. Flat earns the middle. Declining drops you 0.5x to 1.0x below the bottom — buyers project further decline.
Specific things to do:
- Don’t list during a down year if you can avoid it. Even if last year was an anomaly, buyers anchor to the most recent twelve months.
- Track trailing twelve months (TTM) SDE monthly. Your listing date should target a strong TTM, not necessarily a strong calendar year.
- Avoid lumpy revenue distortions. A big one-time contract inflating one year then disappearing the next is worse than steady growth.
- Watch industry tailwinds. Some industries (HVAC, vet, accounting) are seeing PE roll-up activity that’s elevated multiples; others (restaurants, brick-and-mortar retail) are seeing the opposite. Selling into a hot market matters.
If you’re already at peak earnings and growth has slowed, that may be your best year. If your SDE is up 25% in the trailing twelve, list now. Waiting for “even better” often means waiting for a reversion.
Sequencing the levers
If you have 24 months:
| Months | Focus |
|---|---|
| 24–18 | Owner-dependence (hire GM, document SOPs) |
| 18–12 | Customer diversification, recurring revenue |
| 12–6 | Pricing review, financial cleanup |
| 6–0 | Add-back schedule, QoE if applicable, listing prep |
If you have 12 months:
| Months | Focus |
|---|---|
| 12–9 | Owner-dependence (whatever you can do) + financial cleanup |
| 9–6 | Pricing review |
| 6–3 | Add-back schedule, customer diversification where possible |
| 3–0 | Listing prep, QoE |
If you have 6 months: focus on cleanup and add-backs only. The multiple-moving levers need more time.
What this looks like in dollars
Take a service business with $500K SDE today, currently in a 2.5x–4.0x industry range, sitting at 2.7x because of owner-dependence and 35% top-customer concentration. Sale price today: $1.35M.
In 18 months of focused work:
- Hired a GM and reduced owner-dependence: +0.6x multiple
- Diversified top customer to 18%: +0.4x multiple
- Raised prices 8% across the book: SDE rises to $560K
- Clean books, defensible add-back schedule: +0.2x multiple
- Three years of growing SDE: +0.3x multiple
New multiple: 4.2x. New SDE: $560K. New sale price: $2.35M.
That’s a $1M difference from 18 months of intentional work — most of which doesn’t require capital, just focus.
What to do now
- Pull your latest P&L and calculate current SDE.
- Get a baseline valuation — see where you currently sit in your industry’s multiple range.
- Identify the 1–3 levers with the most room for you (use the table above).
- Build a 12- or 24-month plan, work it monthly.
- Re-baseline at 12 months — multiple movement is real and measurable.
A free valuation gives you the starting number to plan against. Without it, you’re guessing whether the work is paying off.
And when you’re evaluating deal structure at closing, don’t overlook seller financing: accepting a seller note can spread your capital gains tax over multiple years under the IRS installment sale method, improving your net after-tax return even without changing the headline price. The Seller Financing Calculator lets you model any note structure against an all-cash sale in real time.
