**Episode 7 of the Business Growth and Exit Strategies Podcast**
If revenue is predictable, your potential buyer relaxes. Uncertainty is what they discount.
Investors and buyers look at uncertainty like a problem. It is either a really small ding or a huge ding, and you are going to lose money on your exit.
Your end goal is maximum multiple. That is what you can brag about at the bar. That is what you can brag about at the clubhouse.
## What Predictability Does
Predictable revenue:
– Lowers perceived risk
– Increases transferability
– Expands valuation models because future cash flow can be forecasted
If you can prove to an investor that you have numbers over the last couple of years with increases, they are buying history. You can sometimes demand more for your business on the scale of multiples.
## Demanding a Higher Multiple
Let us say in your industry the typical multiple is five. The companies that get five are good companies, okay companies.
You run an exceptionally tight company. You can walk in and say: I have three years of history proving year-over-year growth of 8, 9, 10%—and industry average is 4%.
Look, I have proof. I know you paid everybody else five, but I want eight.
Then it becomes a negotiation. Because you paid attention to the numbers. Because you paid attention to what was going on.
## What Buyers Actually Want
Buyers do not want to buy your best month. They do not want to buy your best season.
They want to buy the predictable run of the year. The predictable trailing 12 months. They want to see consistency.
What that comes down to:
– Confidence in the intervals
– Stability
– Retention
– Repeatability
– Ability to forecast without heroics
Revenue you can reasonably forecast based on repeating clients, contracts, renewal patterns, and consistent pipelines—without last-minute saves—is proof you deserve to get paid.
## The Chaos Problem
I have seen companies that know they are going to sell, and instead of preparing 5, 4, 3, 2 years in advance, they try to do it all on the fly.
It gets tricky. They may not remember everything they did. They may not be able to replicate the numbers. Investors, private equity, buyers start asking: what is going on here?
I have a belief: wherever there is chaos, there may be deception. Not 100%, but it is something to think about. If you have chaos in a department, ask: is there some deception here?
## Volatility Forces Downside Assumptions
Volatility forces buyers to assume downside scenarios.
In almost every large company, every large PE firm, every private family office, there is a really smart MBA—probably 24, 25, 26 years old—whose only role is to crunch numbers.
Each department has one of these people. Their job is to come up with a ratio. Then they all come together: ratio, ratio, ratio. Based on four or five ratios, here is the magic number we are willing to pay.
Uncertainty lowers that multiple. It takes away your money.
If you are not going to make that money, somebody else is. You sell at a discount, they go in, put the management in place, put the policies and procedures in place, and benefit from what you did not do.
## The Engines of Predictability
Look at:
– Retention and renewals
– Repeatable acquisitions—are clients coming through a consistent process?
– Proven funnels
– Proven sales process (can you say you close at 50% or 60%?)
– Proven marketing models (can you drive 20, 30, 100 new clients a week consistently?)
Buyers look for proof: cohorts, retention trends, renewal rates, churn reasons, backlog, pipeline conversion history, word of mouth, referrals, and consistency.
## Recurring vs. Repeatable Revenue
**Recurring revenue:** At the beginning of the month, credit cards and ACH charges land automatically in your bank.
**Repeatable revenue:** You know through your marketing and sales funnels that you will hit revenue consistently. You do not need subscriptions or MRR, but it helps.
Repeatable projects over and over are also a sign of a healthy business.
## Where Predictability Leaks
Watch for:
– Concentration on a small group of clients or one client
– Founder-closed deals
– Custom one-off work
– Inconsistent pricing (which means inconsistent profits)
– Weak handoffs where nobody knows what happens next
– Clients not getting the success you promised
If you ask clients “are you happy?” and “would you refer people?” and hear a lot of no’s—that is tough to hear, but important to know.
## Building Forecast Credibility
Define your pipeline stages. Name them. Visualize them.
Look for:
– Where people enter
– Where people pause
– Where people bounce out
– Where they exit or fail
– Historical conversion over time
– Cycle length
If you can prove that from opt-in to close is 63 days (or whatever your number is), and especially if it is shorter than industry average, something magical is happening. That leads to maximum multiple.
## Retention Proves Your Claims
Retention proves what you are saying is true.
How often do people cancel? How often do people want out?
In my own personal life, I do not want to start over. I do not want to recreate. I do not want to find a new vendor. But there are times when people make it easy for me to want to look elsewhere.
Do you have policies and procedures to identify where people are falling off? Is that a report? A KPI? Do you know the three most common reasons someone leaves and what percentage each represents?
If there is a fulfillment issue, the sooner you fix it, the sooner you get to maximum multiple.
## Standardize Predictability
– Productize offers
– Tighten scope
– Document delivery
– Create a definition of done checklist
– Assign ownership
Predictability is managed, not hoped for.
When I was a corporate sales trainer, we standardized everything across departments so someone could step into a role and know roughly what needed to be done. It did not remove all chaos, but it removed some.
## Action Framework: Build Predictability in Five Moves
1. Track retention
2. Install pipeline definitions
3. Standardize pricing and scope
4. Document delivery
5. Assign ownership before anything leaves the building
It will make life easier.
—
📊 **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-7-why-predictable-revenue-changes-everything-ep-7/id1876771297?i=1000749397375
Spotify: https://open.spotify.com/episode/3lcnZHG7VXTLX3eJoluDUB?si=ZoNll2EUSWemTVj2IyRtdA
YouTube: https://youtu.be/8oC9ZiJbN00
Podcast Transcripts:
What you’re going to find is that if revenue is predictable, your potential buyer or new investor is going to relax. Uncertainty is what they discount. Investors and buyers look at uncertainty like there’s a problem, and it’s either a really small ding or a huge ding, but either way, you are going to lose money upon your exit.
Your end goal is to have the maximum multiple. That’s the thing you can brag about at a bar or at the clubhouse. You want the maximum multiple for your business. Predictable revenue lowers perceived risk. It increases the transferability of the business and expands valuation models because future cash flow can be projected with confidence.
If a purchaser, investor, or private equity firm can come in and you can prove that over the last couple of years you’ve had consistent increases, they’re buying a history. You can sometimes demand more for your business based on multiples. Let’s say in your industry the typical multiple is five. The companies they usually buy at five are good, solid companies. But you run an exceptionally tight operation, and you can walk in and say, “I’ve got three years of history proving year-over-year growth at eight, nine, or ten percent, while the industry average is four. Here’s the proof.” Now it becomes a negotiation. Because you paid attention to the numbers and what was going on, you can justify asking for eight instead of five.
Buyers don’t want to buy your best month or your best season. They want the predictable run rate of the year. They want to see the trailing twelve months and ask, “Is this consistent?” That comes down to confidence in intervals, stability, retention, repeatability, and the ability to forecast without heroics. Revenue you can reasonably forecast—based on repeat clients, contracts, renewal patterns, and a consistent pipeline without last-minute saves—is proof that you deserve to get paid.
I’ve seen companies that know they’re going to sell, but instead of preparing five, four, three, two years in advance, they try to do everything on the fly. It gets tricky. They may not remember everything they did, and they may not be able to replicate the numbers. That makes investors, private equity groups, and buyers start asking, “What’s going on here? Why can’t we get this figured out?”
I have a belief, and it’s not 100%, so don’t take it as absolute truth, but it’s something to think about: wherever there’s chaos, there may be deception. Not always—but it’s worth asking the question. Volatility forces buyers to assume downside scenarios.
In almost every large company, private equity firm, or family office, there’s a sharp MBA analyst whose only job is to crunch numbers. Each department has one. They calculate ratios, bring them together, and determine the magic number they’re willing to pay. It’s a mathematical equation. Uncertainty and risk lower that multiple and take money out of your pocket.
If you don’t capture that value, someone else will. If you sell and think, “I don’t want to deal with this,” you may accept less. Then they’ll come in, install management, policies, procedures, and systems, and they’ll benefit from what you didn’t build.
There are engines of predictability: retention and renewals. You want to examine your retention rates, renewal rates, and repeatable acquisitions. Are clients coming through a consistent process? In marketing, this may be called a funnel. Are your funnels proven? Is your sales process proven? Can you consistently say you close at a 50% or 60% rate? Can you say your marketing models reliably generate 20, 30, or 100 new clients per week?
Buyers look for proof—cohorts, retention trends, renewal rates, churn reasons, backlog, pipeline, conversion history, referrals—and the consistency behind them.
Inside an organization, you’ll see recurring revenue and repeatable revenue. Recurring revenue might mean credit cards, debit cards, or ACH payments automatically hitting your account at the beginning of the month. Repeatable revenue means you know, through your marketing and sales funnels, that you’re going to generate revenue consistently. You don’t have to rely on subscriptions or monthly recurring revenue, although it helps. Repeatable projects done over and over are also signs of a healthy business.
Leaks often show up in client concentration—when a small group of clients or even one client accounts for too much revenue. It could also be founder-closed deals, custom one-off work, inconsistent pricing leading to inconsistent profits, or weak handoffs where no one clearly owns the next step. Deals fall apart, or clients don’t achieve the success you promised.
You might discover issues through complaints, net promoter scores, or simply asking clients if they’re happy and whether they refer others. Hearing “no” is tough for a founder or owner, but it’s critical feedback.
To build forecast credibility, define your pipeline stages. Name them and visualize them. Identify where people enter, pause, drop out, exit, or fail. Study historical conversion rates and average cycle length. If you can predict that when someone enters your sales process it takes, for example, 63 days to close—and you can prove it—that’s powerful. If it’s shorter than the industry norm, something special is happening inside your business, and that supports a higher multiple.
Retention is huge because it proves what you’re saying is true. How often do people cancel? How often do they want out? Most people don’t want to start over with a new vendor unless you make it easy for them to leave. Do you have policies, procedures, and KPIs that track where people fall off? Do you know the top three reasons clients leave and their percentages? Fixing fulfillment issues quickly moves you closer to a maximum multiple. Often, the problem isn’t massive—it’s something small that wasn’t being done consistently.
You can map your process with a whiteboard, butcher paper, sticky notes, or index cards. Go step by step and keep asking, “And then? And then? And then?” Identify where the process breaks down.
Standardize predictability. Productize your offers. Tighten scope. Document delivery. Create a clear definition-of-done checklist. How do you know something is complete and ready for sign-off? Assign ownership. Who is responsible for saying, “This is done”? Predictability must be managed, not hoped for.
When I was a corporate sales trainer, we worked to standardize processes across departments so that if someone stepped into a role temporarily or permanently, they knew what needed to be done. It didn’t remove all chaos, but it reduced it and made results more predictable.
In the beginning, some employees may resist. Accountability can feel uncomfortable. That’s normal in a growing organization.
Here’s a simple action framework to build predictability with five moves:
First, track retention.
Second, install clear pipeline definitions.
Third, standardize pricing and scope.
Fourth, document delivery.
Fifth, assign ownership before anything leaves the building or is delivered.
I’m on the advisory board of a company where an employee who handles all pricing is preparing to leave. When I asked whether anyone else could duplicate the pricing, the answer was no. That immediately became a priority. This happens often. Standardized pricing and scope matter. Define maximum discounts, payment terms, and boundaries up front. At first, it requires hands-on management. Eventually, it becomes normalized and managers can run with it.
I appreciate you. This week, choose one lever—retention, pipeline, or standardization—and create a KPI around it.
Predictability isn’t just about better growth. It’s the clearest path to better terms and the maximum multiple.