The degree of visibility will greatly impact your future company valuation
When the day comes you want to sell your business, one of the very first things a potential acquirer will look to understand is what is your team’s visibility is to future revenues? When you build a business model that enables you to have very good visibility to the timing and volume of your future revenues, the exit multiple they will pay will be generally higher. If on the other hand, you are confident in future revenues but not clear on the timing or volume of them, then your exit multiple may be lower.
Companies that build a model where they have very strong future revenue visibility are those that have put customer purchasing agreements in place, support customer programs/platforms where there is known volume needs going forward, or an application that you sell or even a SaaS or DaaS model. These types of business models for some or even just a part of your business can greatly enhance the value of your business in an acquirer’s eyes. If however, your business model is more like a grocery or furniture store or a service business, where you certainly have confidence that customers will purchase but you’re never sure when or how much, then many times the exit multiple will reflect this lower visibility.
Think about your current business model and what visibility it gives you to future revenues. Identify where you might even just have a single product or service that you could move to something more recurring with your customer. Any step you can take to increase the revenue visibility will reward you at time of exit.
