Part 4 of 6: CLEAN™ Exit-Readiness Series
Series recap: Cash Flow ✅ Leadership ✅ Earnings ⬅️ Assets • Next Steps
When owners think earnings, they think tax returns or net profit. But buyers look beyond numbers to assess earning quality and revenue predictability.
💬 “Where your money comes from matters more than how much you made last year.”
🏆 The 5 Types of Revenue (Ranked by Buyer Value)
- Contractual Recurring — Locked-in agreements (SaaS, contracts) — Premium valuation
- Non-Contractual Recurring — Memberships, subscriptions — High value
- Repeat Revenue — Customers return voluntarily — Good value
- Actuarial Revenue — Predictable cohort behavior — Moderate value
- Transactional Revenue — Each sale is a new decision — Lowest value
📊 CLEAN™ Earnings Benchmarks
6-Point Scale Assessment:
- Customer concentration: No single client >20% of revenue
- Revenue predictability: 60%+ recurring or repeat
- Margin stability: Consistent 15%+ over 3 years
- Growth trajectory: Sustainable 10%+ annually
- Financial cleanliness: Well-documented add-backs
🚩 Red Flags That Scare Buyers ❌ 50%+ revenue from one client ❌ Declining margins over 2+ years
❌ Large one-time contracts with no renewals ❌ Undocumented owner benefits/add-backs ❌ Earnings heavily dependent on input cost fluctuations
✅ What Premium Earnings Look Like
- Multi-year normalized EBITDA/SDE trending upward
- Revenue diversified across customers and products
- 60%+ recurring or highly predictable revenue
- Margins of 15%+ with clear pricing strategy
- Clean financials ready for due diligence
📈 This Week’s Earnings Audit
- Categorize your revenue — What percentage is recurring vs. transactional?
- Calculate customer concentration — List your top 5 clients’ revenue percentage
- Analyze margin trends — Are they stable, improving, or declining?
- Document add-backs — Owner salary adjustments, personal expenses, one-time costs
- Create a 3-year earnings summary — Show the trend story buyers want to see
💡 Pro Tip: If 70%+ of your revenue is transactional, focus on building repeat customer programs before considering a sale.
📩 Want a confidential earnings quality assessment? Message us for your free CLEAN™ Scorecard review.
📈 Optimizing Earnings for Maximum Value Having built and sold businesses ourselves, we understand the complexities of financial positioning. If your earnings need improvement, we provide:
- Financial presentation and recasting guidance
- Strategies to build recurring revenue streams
- Customer diversification planning
- Connections to fractional CFOs and specialized CPAs who understand M&A
Remember—buyers don’t just buy businesses, they buy income streams. Let’s make yours irresistible.
Next week: Assets — What you think you’re selling might not be what buyers want.
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