**Episode 1 of the Business Growth and Exit Strategies Podcast**
You can grow revenue and still make your company worth less.
That statement surprises most business owners. They believe revenue drives the multiple. But there is magic behind the scenes that happens when companies prepare for exits. The businesses that command massive multiples started planning 10, five, or three years in advance and had all the right pieces in place.
Here is what you need to understand: growth is not the same thing as value creation.
## Growth Filtered Through Transferability
You could take a business from $2 million to $10 million. That is impressive. But that is not necessarily value creation, because growth is filtered through transferability and risk reduction.
What can you transfer? What is the new owner going to receive? What are they getting for the money?
When a buyer comes in, when an investor evaluates your company, they are looking at the risk profile. If they buy and invest today, and the owner walks away tomorrow, can this company run? Can it operate?
We are talking standard operating procedures. We are talking org charts. We are talking how to make the business work without you.
## Bad Growth Creates Fragility
What you need to know is that bad growth creates fragility, complexity, dependence, volatility, and unclear economics.
When someone comes in and realizes they are going to have to put systems and operations in place and bring in managers—that is a discount on your price.
Investors look at this and think: we are buying under market value because all we have to do is a year’s worth of work, and we will double or triple revenue. They are used to doing it. They have all the playbooks, all the people to put in place, all the standard operating procedures. What might take you two or three years, they can do faster because they have teams that have implemented this before.
## Revenue Growth That Increases Risk
There is revenue growth that actually increases risk:
– One big customer
– One channel
– One rainmaker
– One product line
If 80% of your business comes from one client, you are in trouble. This is one of the first things examined in due diligence. Almost every deal I have looked at—mine or someone else’s—one of the first questions is about client density. Who is your biggest client, and how much do they represent?
The general rule is somewhere around 30%. I prefer 20%. If I am looking at a business to invest in, I want to see no more than 20% density to one client.
## Scale Is Not the Same as Sprawl
Scale is repeatable. You could go in on a Monday and the business runs somewhat predictably.
Sprawl is chaos. Sprawl is messy expansion that breaks control. There is no consistency.
If you are an owner, operator, or founder, I am trying to illuminate the corners for you to look in first, so you can get an exit strategy that delivers maximum value.
## The Cleanup Cost Discount
When investors come in, they discount based upon cleanup cost.
Let us use easy numbers. A company made $1 million in profits. If there is a three times multiple for an A-plus company—that is what you should shoot for—they would get $3 million.
But if there is sprawl, chaos, or lack of diversification, they will discount it. They might offer 70%—$2.1 million. If there are a lot of problems, maybe 50 cents on the dollar. Then they come in, do all the things we are talking about, raise the value, and double revenue within 18 months.
## The Wrong Scoreboard
A lot of founders optimize for the wrong scoreboard. They optimize for top-line vanity—bragging rights at the bar about having a $10 million or $100 million company.
I have seen $10 million and $100 million companies with zero profit. I have seen $5 million companies with massive profit. The key is what is kept after everything is paid.
## What Buyers See in Diligence
Buyers detect risk through:
– Informal processes
– Missing reporting
– Weak documentation
If you are not documenting what is going on inside your business, and there is no dashboard—whether expensive software or just Excel—you are missing what could be done.
The major three things everyone looks at: sales, marketing, and accounting.
**Sales:** Leads ran, leads sold, revenue. With that basic information, you can calculate a lot.
**Marketing:** Leads in, leads talked to, closing rate.
**Accounting:** Money in, money out, accounts receivable.
Across the board, one of the biggest problems companies face is the burden of accounts receivable.
## The Exit Strategy Filter
Use this decision rule: Does this move improve transferability and reduce perceived risk?
Build the business like an asset someone else can operate—with systems, people, and proof.
**Your action this week:** Audit one growth initiative. Does it increase sellability—or increase dependence?
—
📊 **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-1-why-business-growth-without-exit-strategy/id1876771297?i=1000749397521
Spotify: https://open.spotify.com/episode/5eVgxwfusn5fMcoBvIKWLp
YouTube: https://youtu.be/cKFC3tJEqCo
Transcript of the episode:
You can grow revenue and still make your company worth less. That’s a hard truth for many founders. It’s easy to believe that revenue alone drives valuation, but there’s more happening behind the scenes. Companies that achieve massive exits usually start planning five, ten, even three years in advance. They intentionally put the right pieces in place long before the transaction.
Growth is not the same as value creation. You can take a company from $2 million to $10 million in revenue and still fail to create real enterprise value. Growth must pass through two filters: transferability and risk reduction. What can the new owner actually take over? What are they truly buying?
When an investor evaluates your business, they’re asking a simple question: if we buy this company today and the owner walks away tomorrow, will it run? Can it operate without you? They’re looking at systems, standard operating procedures, org charts, and leadership depth. Financials matter, but only after they’ve assessed risk and transferability.
Bad growth creates fragility, complexity, dependence, volatility, and unclear economics. Investors see companies that look big on the surface but lack systems. They know that with a year of cleanup—installing managers, implementing SOPs, tightening operations—they can dramatically increase value. That’s why some businesses sell under market value. The investor already sees the upside because they have the playbooks and teams to execute quickly.
Revenue growth can actually increase risk. If 80 percent of your revenue comes from one client, you have a concentration problem. In nearly every deal, one of the first due diligence questions is client density. Who’s your largest customer, and what percentage of revenue do they represent? Many investors look for no more than 30 percent concentration. Personally, I prefer 20 percent or less. The same applies to channels, rainmakers, and product lines. If you depend on one salesperson or one traffic source, that’s risk.
Scale is not the same as sprawl. Scale is repeatable and predictable. You can walk in on a Monday, follow the process, and the business moves forward. Sprawl is chaotic expansion that breaks control. It lacks consistency and documentation.
Valuation reflects this. If a business generates $1 million in profit and deserves a three-times multiple, that’s a $3 million valuation for an A-plus company. But if there’s chaos, concentration risk, and weak systems, buyers discount. Maybe they offer 70 percent of value. Maybe 50 percent. Then they implement structure, improve operations, and grow the business after acquiring it.
Founders often use the wrong scoreboard. They optimize for top-line vanity—bragging rights about revenue—rather than profit, predictability, and asset strength. I’ve seen $100 million companies with zero profit and $5 million companies with significant profit. The real question is what remains after everything is paid.
Weak documentation and informal processes create skepticism in due diligence. If you don’t have reporting dashboards—whether simple spreadsheets or advanced software—you’re missing clarity. In sales, you should track leads generated, leads converted, and revenue produced. In marketing, track leads in and conversion performance. In accounting, track money in, money out, and accounts receivable.
Accounts receivable is a major issue in many deals. Buyers often discount aged receivables. They may pay 80 cents on the dollar for current receivables, 50 cents for older ones, and heavily discount anything past 90 or 120 days. A strong collection process protects value and demonstrates operational discipline.
Before pursuing any growth initiative, ask: does this improve transferability and reduce perceived risk? If not, reconsider. Reframe growth as asset construction. Build the business as something someone else can operate. When you sell a car, you hand over the keys and walk away. Ideally, selling your business should work the same way. You may stay on briefly, but the company should operate independently.
Here’s a simple five-point growth test: repeatability, predictability, documented execution, leadership depth, and customer diversity. Can what you’re doing be repeated? Is it predictable? Is it documented so someone else can step in? Is there leadership in place to run daily operations? And do you have diversified customers?
Ask yourself: if you left for a week, would the company run without you? If yes, double it. Two weeks. Then a month. What would break? Fix it. Double it again. Two months. Three to six months. If you can be gone for three to six months and the company performs well, you’ve built transferable value.
Investors want to know the business can operate without you. That’s enterprise value.