6 min read · 735 words
At a glance
- A sale price is a multiple times earnings. Two numbers, and most owners only work one of them, usually revenue, which is neither.
- Each number has three levers. Earnings grows on pricing, mix, and margin truth. The multiple is earned and protected by believability, concentration, and owner independence.
- The effect compounds: at one $15M manufacturer, moving margin from 15% to 22% grew earnings and the multiple that earnings gets paid, because a business that knows its numbers earns a higher multiple than one that guesses.
A sale price is a multiple times earnings, and that simple sentence is the whole game. Two numbers decide what your company is worth, and most owners spend their energy on a third one, revenue, that a buyer treats as a claim to verify. This piece is about the two numbers that actually set the price and the six levers that move them.
What are the two numbers?
Earnings, and the multiple applied to earnings. Grow either and the price grows. Grow both and the price grows twice, because they multiply. A company earning $2M at a 5x multiple is worth $10M. Add a point of margin and earn the trust that lifts the multiple to 6x, and the same business is worth well beyond the arithmetic of either move alone.
That is why working only the top line is a trap. Revenue that a buyer cannot verify does not lift the multiple, and revenue at a thin or unknown margin does not lift earnings. The two numbers a buyer actually pays on are the ones most owners look at least.
How do you grow the earnings number?
Three levers, all offense, all about growing what the multiple multiplies:
- Pricing. The price you set years ago and never re-decided. The line still priced on old cost is quietly bleeding, and re-pricing it drops straight to earnings.
- Mix. Which products, jobs, and customers actually make money. Shift effort toward the lines that pay and stop feeding the ones that do not.
- Margin truth. Costs allocated to reality, so you can see profit where decisions get made instead of hiding it in a company-wide average.
At a $15M manufacturer, the largest, proudest customer turned out to be the least profitable once full cost was loaded on. Re-pricing and shifting mix moved margins from 15% to 22% inside 90 days, on roughly the same revenue. That is the earnings number moving.
How do you earn the multiple number?
Three more levers, all defense, all about earning and protecting the multiple a buyer is willing to pay:
- Believability. Numbers that survive a buyer’s read. Earnings he cannot trust get discounted no matter how real they are.
- Concentration. No customer, vendor, or channel a buyer prices as risk. One account at 40% of revenue can cut the multiple by itself.
- Owner independence. A business that runs on rhythm and system, not the owner’s memory. If it needs you in every decision, a buyer is pricing a job, not an asset.
These do not show up in a single month’s P&L. They show up in what a buyer is willing to pay for the earnings you can prove.
Why working both numbers beats chasing revenue
Because the levers compound and revenue alone does not. A few points of margin, run through a multiple, is often the single largest lever in the entire sale, larger than a year of top-line growth. And believable numbers protect every point you build. Work both numbers and you get a more valuable company and the numbers to prove it, which is exactly what a buyer pays a premium for.
Where this leads
Each lever has its own field note: which job, product, or customer actually makes money, the pricing swing hiding in your worst-priced line, pricing off today’s cost, not last year’s, and the customer concentration that halves your multiple. The full picture is growing what the company is worth before you sell.
The Sellable-Numbers Scan works both numbers and dollarizes what each lever is worth to you, in 14 days, guaranteed: at least 3x the Scan fee in owner-accepted value identified, or you pay nothing.
If that is the question in front of you, book a fit call. Thirty minutes, no pitch.
Russell Fette · Decisive Finance · Creator of Financial Rhythms™