* **Episode 2 of the Business Growth and Exit Strategies Podcast**
Revenue growth can go up while enterprise value goes down.
A lot of founders, owners, and CEOs believe that if they just get to a magic number—$5 million in revenue, $10 million, $20 million—they can exit for massive multiples.
That is not the truth.
## When Revenue Becomes a Vanity Metric
When you treat revenue as the scoreboard, buyers look at it and say: we have some problems here. We have some issues.
You were able to get revenue. You were able to brag to your buddies. You were able to go to the meeting and tell everyone how much you brought in.
But how much did you keep? How much stayed as profits?
If you are going to get a multiple, you are going to be paid on profit. The real brag is: I had a $10 million company with a 25, 30, or 40% profit margin. Someone who brags about a $100 million company that made $1 million in profit—that is nothing to brag about.
## Growth That Does Not Transfer
Growth that looks impressive does not transfer in underwriting.
There will be someone who looks at your books—probably a younger person from an Ivy League college who is really good at Excel. Their job is to validate facts. Feelings do not fit inside an Excel file. They look and say: nope, the feelings are not there. What they want is the facts of your business.
The scorecard that investors use is completely different than just looking at the vanity metric of what you did last year.
## Price Is a Function of Durability
Price is a function of durability and confidence—not effort.
Can you do it again? If you had a $10 million year last year, can you have a $12 million year this year? If you had a $20 million year, can you do $25 million?
What buyers look for is predictability. Somewhat boring, consistent growth where magic keeps happening.
## The Founder Dependence Problem
One of the problems I see constantly is founder dependence—where everything has to go through the owner, the founder, the CEO. There is no layer of management, no decision making outside of the main person who owns and runs the company.
When there is that much dependence, buyers say: we are going to have to fill that role. We are going to have to find somebody, bring a new management team in, or bring the old management team up to speed.
And by the way, we are going to discount because of that.
They might say: we were going to give you $5 million, but we are going to give you $4 million and hold back a million in a basket. That is one of the ways someone may refer to a holdback.
## How You Earn It Matters
The quality of your earnings matters as much as how much you earn.
When you look at how you got there, the question is: who helped you? Was it systems and documented processes? Was it one or two magical people on your team? Is your entire team magical when it comes to producing revenue and profits?
A hot streak—a heater, as they call it in Vegas—is not the same thing as bankable profit predictability.
If there was a magical word for today, it would be predictability. How do you make your business predictable? That is what compounds valuation.
## The Clearer the Forward View
The clearer the forward view the buyer has, the less they have to guess.
In really large firms, salespeople go out and farm leads. They meet with owners and ask: what is your time horizon for selling? Someone might say three years. They get the financials, set up a war room, rank the companies, and say: strategically, who is the best opportunity for us to buy based on what we are trying to achieve?
If they are breaking into a market, they are looking for a platform business—a company they can purchase and then do bolt-ons with. They find smaller companies to bring under the brand.
That has value when you are looking to sell. They will pay extra for a platform company because of the name, the reputation, the reviews, the systems, the processes.
## Stop Chasing More
What you want to do is stop chasing more—the vanity metric of more revenue—and start building repeatable and transferable actions inside your business.
You will find it stabilizes growth. It stabilizes activity. As investors start looking in, they start salivating, because you went from a possibility to something they really want.
## The Grading System
I use a grading system when it comes to investing in a company:
**A Plus:** The dream. Standard operating procedures in place, team in place, profitable, turnkey. The owner could walk away and the business runs.
**A Minus:** A little bit of work needed. Some bumps and bruises.
**A:** A little bit more work required.
**B:** Probably going to have to find a manager or operator to run this business.
**C:** Chaos. Pure chaos.
**Your action this quarter:** Pick one initiative that improves predictability or transferability—not just top-line growth.
—
📊 **Free Framework Assessments:**
– [SELL Framework (Revenue Quality)](https://scottsylvanbell.com/sell-framework)
– [SCALE Framework (Operational Readiness)](https://scottsylvanbell.com/scale-framework)
– [DRIVER Test (Execution Capability)](https://scottsylvanbell.com/driver-test)
🎙️ **Listen to this episode:**
Apple Podcasts: https://podcasts.apple.com/us/podcast/episode-2-revenue-growth-vs-enterprise-value-creation-ep-2/id1876771297?i=1000749397520
Spotify: https://open.spotify.com/episode/1rpwwsS2DHHS00GSKIouZe
YouTube: https://youtu.be/OcJjbB6UeGU
Transcripts:
Revenue can go up while enterprise value goes down. That’s a belief many founders, owners, and CEOs struggle with. They think, “If I can just get to $5 million in revenue… $10 million… $20 million… then I’ll exit for a massive multiple.” But that’s not how it works.
When you treat revenue as the scoreboard, buyers see something different. They don’t just ask how much you generated. They ask how much you kept. Profitability is what drives multiples. The real brag isn’t having a $10 million company. It’s having a $10 million company with a 25, 30, or 40 percent profit margin. A $100 million company that produces $1 million in profit isn’t impressive from a valuation standpoint.
Growth that looks impressive doesn’t always transfer in underwriting. During due diligence, someone—often a sharp analyst with strong financial skills—will comb through your books line by line. Their job is to validate facts. Feelings don’t fit inside an Excel file. The story must be supported by numbers.
Price is a function of durability and confidence, not effort. Buyers want to know: can it happen again? If you did $10 million last year, can you do $12 million this year? If you did $20 million, can you do $25 million? Predictability compounds valuation. The clearer the forward view, the less guesswork for the buyer.
Founder dependence is one of the biggest value killers. If every decision runs through you, the risk profile increases. Buyers assume they’ll need to hire leadership, install management, and rebuild structure. That means discounts, holdbacks, and performance baskets tied to future results. The more the business depends on you personally, the more the valuation reflects that risk.
The quality of earnings matters as much as the amount earned. How did you get there? Was it systems and documented processes, or one or two exceptional performers? Was it a sustainable engine, or a hot streak? A “heater” is not the same as bankable, predictable profit.
Predictability is the magic word. Investors evaluate companies inside competitive “war rooms,” comparing opportunities across regions and industries. They rank businesses strategically. If they’re building a platform company—one that will serve as the base for acquiring additional businesses—they look for strong systems, brand reputation, reviews, leadership, and operational cadence. When your business fits that profile, it can command a premium multiple.
Processes and cadence turn performance into something transferable. The easier it is for a buyer to walk in while you walk out, the more valuable the company becomes. Stop chasing vanity revenue and start building repeatable, transferable actions. That shift stabilizes growth and transforms your business from a possibility into a target acquisition.
When evaluating businesses, I use a grading scale. An A+ company is turnkey: documented systems, leadership in place, profitability, and minimal founder dependence. An A− needs minor cleanup. A requires more work. A B likely needs management added. A C represents chaos. Each grade down results in a valuation deduction. A+ may command above-market multiples. A lands at market. B and below see significant discounts.
I recently worked with a business owner who believed they had strong enterprise value. After reviewing the numbers and risk factors, it became clear there wasn’t much to sell. Their retirement timeline changed dramatically. That’s why planning years in advance matters.
Replace growth goals with value drivers. Focus on risk reduction, proof, and transferability. At a minimum, you need standard operating procedures, org charts, job descriptions, and defined job titles. That’s the baseline. Yes, it may create discomfort inside the organization. Yes, it leads to scorecards. But clarity builds value.
Ask yourself: if you stepped away for 30 days, would revenue sustain or stall? That’s the transferability test. If it would stall, identify what must be true for the company to operate without you. Then fix it.
Choose one initiative over the next 90 days—starting now, not next quarter—that improves predictability or transferability. It doesn’t have to align with the calendar. The new cycle can start tomorrow. What matters is building durability, not just chasing top-line growth.