Valuation
What can I do during the next year to increase my business valuation?
A quarter-by-quarter plan for the changes that raise what a buyer will pay within twelve months, and the moves that backfire.
By Michael D. Rubin, CEO & Founder · September 2026 · 929 words
In the next twelve months you can raise your company's value by making its earnings easier to prove, less dependent on you and less risky for a buyer. Those three changes lift both the profit a buyer pays for and the multiple they apply to it, and all three fit inside a year.
Buyers of companies with $3 million to $100 million in revenue most often pay three to seven times adjusted EBITDA. EBITDA is earnings before interest, taxes, depreciation and amortization, roughly your operating profit. Adjusted EBITDA adds back owner expenses a new owner would not carry, such as a personal vehicle or a one-time lawsuit. Where you land in that range depends on how confident a buyer is that the earnings will continue after you leave. A year of focused work is enough to move that confidence.
First quarter: make the numbers something a buyer can verify
Buyers pay for earnings they can check. If your books are kept once a year for the tax return, run on a cash basis, or mix personal and business spending, a buyer will discount whatever they cannot confirm. Start here, because every later improvement only counts if it shows up in clean records.
- Close the books every month, within a few weeks of month-end, and review a profit and loss statement and a balance sheet each time.
- Reconcile the books to your tax returns so the two tell the same story.
- Keep a running list of add-backs with the receipt or invoice behind each one.
- Move personal expenses off the company card now, so next year's numbers need fewer explanations.
- Ask your CPA whether accrual-basis or CPA-reviewed statements make sense at your size.
Second quarter: take yourself out of the middle of the business
Owner dependence is one of the most common reasons a lower middle market company sells at the low end of its range. If you set every price, hold every key customer relationship and approve every purchase, a buyer is really buying a job, not a company. They will pay less, or insist on a long earnout, which is part of the price paid later and only if the business hits targets after you hand it over.
Name a second-in-command or give more authority to the manager you already have. Write down how quoting, scheduling, hiring and purchasing work. Introduce your top customers to the people who will serve them. Then take a real two-week vacation and see what breaks. Whatever breaks is your list for the next quarter.
Third quarter: reduce the risks buyers price in
Buyers lower their multiple for anything that might make next year's profit smaller than last year's. Work down the items that apply to you:
- Customer concentration. If one customer is a large share of revenue, win new accounts or put the big one under a written agreement.
- Recurring revenue. Maintenance plans, service agreements and contracts are worth more than one-off jobs. A home-services company that moves customers onto annual plans is easier to value.
- Key people. Identify the two or three employees a buyer would worry about losing, and talk with your attorney about a retention bonus tied to a future sale.
- Loose ends. Extend the lease if it is close to expiring, settle open disputes, and confirm licenses and permits are current and held in the company's name.
Which changes pay off inside a year
| Change | What a buyer sees | Where it shows up in the price |
|---|---|---|
| Monthly closes and reconciled books | Earnings they can verify quickly | Fewer disputes and price cuts in due diligence |
| Documented add-backs | A higher adjusted EBITDA they accept | The number the multiple is applied to |
| A capable second-in-command | A company that runs without the founder | Higher multiple, shorter or no earnout |
| A broader customer base | Revenue that survives losing one account | Higher multiple |
| Service agreements and contracts | Predictable repeat revenue | Higher multiple |
| Pricing reviewed and raised where justified | Better margins than last year | Higher EBITDA |
Fourth quarter: protect the trend and avoid the final-year traps
The last months before a sale are when owners are most tempted to dress up the numbers. Buyers compare years side by side and ask about every change, so some moves that look good on paper cost you at the table.
- Cutting marketing, maintenance or staff just to inflate profit. A buyer will ask why spending dropped and add it back as a cost they must restore.
- Buying expensive equipment that will not pay for itself before the sale.
- Opening a new location or product line that is still losing money when buyers look.
- Letting sales slide because your attention has moved to the exit. A falling trend during a sale is one of the fastest ways to lose price.
- Telling employees you plan to sell before there is a deal to talk about.
Where MDR & Associates fits
Our pre-exit consulting covers exactly this period, the 12 to 24 months before a sale. It is a separate, optional service with its own price, and its purpose is simple: find the changes that move your number and skip the ones that are only cosmetic. The guide to preparing your business for sale goes deeper on the checklist, and what is my business worth explains how buyers build a price.
If you want a starting point before you commit to anything, request the free valuation snapshot. From there, a free and confidential discovery meeting turns that quick range into an opinion of value based on three years of your financials, along with a plain list of what to fix first.
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