Article Summary
Enterprise value runs on two levers: EBITDA and the multiple buyers pay on it. Most founders only push one — usually chasing more revenue. The faster path is improving margin and reducing owner dependence at the same time, because the two levers multiply. A 30% EBITDA lift paired with a higher multiple can more than double what your business is worth on flat revenue. Bennett Financials runs this exact diagnostic on every client.
The number most founders get wrong about their own business
Your business is probably worth half what you think — or twice. The gap comes down to two numbers, and most founders only ever work on one of them.
Enterprise value is EBITDA times a multiple. That’s it. Two businesses can have identical revenue and identical profit and sell for completely different prices, because one earns a 2.76x multiple and the other earns 6.27x. Same earnings. The difference is risk — how much the business depends on the person who owns it.
Here’s the trap. When a founder decides they want a more valuable business, they go chase revenue. More clients, more headcount, more hustle. Revenue climbs, EBITDA barely moves, and the multiple doesn’t move at all — because a bigger version of an owner-dependent business is still owner-dependent. You worked twice as hard to add almost nothing to the sale price.
I built Bennett Financials around fixing both numbers at once. Bennett Financials is a fractional CFO and tax planning firm that helps service business founders doing $1M–$20M diagnose growth bottlenecks, fix margins, and build businesses worth selling.
Enterprise value has two levers, not one
Think of it like this. EV = EBITDA × Multiple. EBITDA is what the business earns. The multiple is what a buyer will pay for each dollar of those earnings.
Lever one — EBITDA — you control through margin. Lever two — the multiple — you control through risk. Founders obsess over the first and ignore the second, which is backwards, because the multiple has more range. Going from a 50% margin to a 60% margin lifts EBITDA by a fifth. Going from an owner-dependent business to one that runs without you can move the multiple from 2.76x to 6.27x — more than double.
According to Sofer Advisors (2026), service businesses with recurring revenue command 7x–12x EBITDA, while capital-intensive or cyclical ones sit at 3x–6x. The single biggest factor moving you up or down that range isn’t size — it’s whether the business runs on systems or on you.
Lever 1 — Grow EBITDA without growing revenue
You don’t need a single new client to grow EBITDA. You need margin. The fastest EBITDA gains live in the costs you already have.
This is the 60-15-15 standard: 60% gross margin, 15% sales and marketing, 15% G&A — which lands you at a 30% operating margin. Most service businesses doing $1M–$5M run a 45–55% gross margin and a 28–45% G&A load. That’s the gap.
The diagnostic runs in a fixed order — COGS, then S&M, then G&A — and it’s deliberate. You fix where the money bleeds most first.
- COGS / gross margin. Out of every dollar you bring in, how much is left after paying the people doing the work? If it’s under 60 cents, scaling makes you busier, not richer. The lever here is usually pricing, read through close rate: if you’re closing 80% of proposals, your prices are too low — triple them. A 30–40% close rate means pricing is right.
- S&M. Is growth real or bought? If sales and marketing runs over 15% of revenue, you check unit economics before cutting — LTV:CAC of at least 4:1 and CAC payback under six months.
- G&A. Rarely killing the business, always dragging the margin. Owner comp is usually the largest line, and revenue growth from the first two fixes shrinks G&A as a percentage automatically.
For a deeper look at margin and where tax strategy fits as a profitability lever — not a compliance afterthought — that whole engine produces a higher, cleaner EBITDA number for the multiple to act on.
Lever 2 — Raise the multiple (owner dependence)
The multiple is bought with risk reduction, and the largest piece of risk in a service business is you.
In the Bennett Financials growth-readiness score — built on 5,000 benchmarked companies — owner dependence is worth 25 of 100 points, the single biggest category. Score below 50 and you earn a 2.76x multiple. A buyer looks at you and sees a job, not an asset. Score 80+ and you hit 6.27x, because the business keeps running whether you show up or not.
Three traps keep founders dependent: you’re the primary salesperson, you personally deliver the work, or clients only want you. Each one caps the multiple. McKinsey (2023) notes that a credible shift in a company’s growth and structure changes what the market will pay — the multiple reflects trajectory and risk, not just last year’s earnings.
Client concentration is the second risk lever. Sofer Advisors (2026) flags that when a single client is 30%+ of revenue, the multiple compresses. The IBBA Market Pulse Report (2024) found the top quartile of small-business sale prices was driven by recurring contracts and low customer concentration. Across the consulting and professional-services firms I work with, this is the gap between a business that sells and one that sits on the market.
Want to know where your business sits against the 60-15-15 standard? The Scale-Ready Assessment runs your actual numbers, builds a custom tax strategy, and produces a full enterprise value report. Free for US-based service businesses doing $1M–$20M. Book your free Assessment — 15 spots per month.
Why the two levers compound
Here’s the part the listicles miss. The levers don’t add. They multiply.
Picture a $7M IT services firm. EBITDA of $1.85M, a growth-readiness score of 49, so a 2.76x multiple.
- Today: $1.85M × 2.76 = $5.1M
Now run both levers. Fix margin and the EBITDA climbs to roughly $2.4M. Reduce owner dependence and client concentration enough to reach a score of 75+, and the multiple moves to 6.27x.
- After: $2.4M × 6.27 = $15.0M
That’s a $9.9M gap on the same business — same name, same revenue. EBITDA rose about 30%. The multiple roughly doubled. But the enterprise value didn’t grow 30% or 100% — it grew nearly 200%, because the two gains stack on top of each other. That’s why working one lever in isolation leaves most of the money on the table.
What most advisors get wrong here
Most advisors hand you a list of ten “value drivers” and tell you to improve all of them. That’s noise. The order matters, and the order is not what you’d guess.
You fix EBITDA before you chase the multiple — but you de-risk for the multiple while the margin work is still running, not after. Most accountants tell you to grow revenue first and clean up the rest later. That’s exactly backwards: a bigger owner-dependent business is harder to fix and still sells at a discount. And here’s the counterintuitive number most founders resist — you can shrink revenue temporarily, raise prices, lose your worst-fit clients, and increase enterprise value, because the margin and the multiple both improve while the headline revenue dips. Buyers pay for earnings quality and low risk, not top-line bragging rights.
Book a free Scale-Ready Assessment — three deliverables: full 60-15-15 financial diagnostic, a tax plan, and an enterprise value report showing your current multiple and the gap. 15 spots per month.
