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)

1. Contractual Recurring — Locked-in agreements (SaaS, contracts) — Premium valuation
2. Non-Contractual Recurring — Memberships, subscriptions — High value
3. Repeat Revenue — Customers return voluntarily — Good value
4. Actuarial Revenue — Predictable cohort behavior — Moderate value
5. 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

1. Categorize your revenue — What percentage is recurring vs. transactional?
2. Calculate customer concentration — List your top 5 clients’ revenue percentage
3. Analyze margin trends — Are they stable, improving, or declining?
4. Document add-backs — Owner salary adjustments, personal expenses, one-time costs
5. 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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