Part 1: Building a High-Performance Business Model That Commands Premium Multiples

This article is the first installment in a six-part series designed to help private company owners build company value well before entering a sale process. Each piece in the series highlights practical, actionable steps owners can take to strengthen valuation, reduce risk, and position their company for a more competitive and rewarding sale outcome.

In this first installment, we focus on one of the most influential drivers of valuation, building a strong business model. A company’s business model influences how buyers assess risk, evaluate long-term growth opportunities, and determine valuation. Strong business models produce:

• Top-line Growth

• Stable Margins

• Reliable Cash Generation 

  
  

Owners who begin this work in the years leading up to sale achieve stronger buyer engagement, reduced uncertainty, and higher valuation outcomes.

Strengthening Top-line Growth

Consistent and diversified growth is one of the strongest indicators of a resilient business model. Prospective buyers look beyond the top-line to understand the quality of that growth – specifically, whether it is repeatable, defensible, and supported by a broad foundation. Growth that is driven by a wide customer base, multiple product or service lines, into varied markets demonstrates that the company is sustainable and resilient to changes in economic cycles.

Diversification increases confidence that the company can continue growing even when individual customers, regions or segments experience volatility. It also suggests that the company’s value proposition is compelling across different applications, reinforcing its long-term potential.

Stable Margins Through Predictability and Diversification

Stable margins are closely linked to revenue predictability. Buyers place significant value on companies with recurring or repeatable margins because these models improve visibility into future performance. Long-term agreements, multi-year programs, maintenance cycles, or service arrangements reduce margin volatility and create a more consistent flow of profitable work. Even project-based companies can achieve similar stability when they maintain long-standing customer relationships, strong win rates, and a well-documented pipeline with reliable conversion patterns.

Geographic and sector diversification further strengthens margin stability. Companies that serve more than one region or participate in several end markets are less exposed to fluctuations within any single area. This reduces concentration risk and makes the business less susceptible to the performance of a single customer, industry cycle, or local economic trend. Buyers value this because it shows margins are steady and not dependent on one part of the business.

Reliable Cash Generation Through Working Capital Discipline

Reliable cash generation is essential for demonstrating the health and resilience of a business model. Even strong earnings lose value in the eyes of buyers if they do not consistently convert into cash. Companies with effective working capital discipline create confidence that the business can fund growth, service debt, and maintain stability through market changes.

Improving cash generation often involves tightening billing and collection practices, using milestone-based or progress billing, reducing long periods between work performed and invoices issued, and setting clear expectations for payment terms. Companies that consistently manage receivables, payables, and inventory with discipline show buyers that operational performance is supported by financial strength. This reliability increases valuation because it reduces the risk that earnings will be trapped in the business and not available for reinvestment or returns.

What Actions Can a Private Company Owner Take Now to Improve Valuation?

• Product and Service Mix – Reallocate staff and budget toward growing offerings with the highest contribution margins, and phase out or reprice low-margin work that drags on profitability.

• Customer Concentration– Target underrepresented customer segments or geographic regions with tailored marketing or dedicated sales coverage to reduce concentration risk.

• Converting One-off Work – Convert ad-hoc or one-off work into structured annual programs, maintenance cycles, or retainer-style service packages.

• Sales Funnel Reviews – Implement a formal sales pipeline review cadence (weekly or monthly) to systematically advance sales opportunities. The use of probability scoring, deal aging, and conversion tracking will improve pipeline forecasting accuracy.

• Strengthen Working Capital Management – Introduce milestone-based billing, deposits, or progress payments to reduce working capital strain and accelerate cash collections. Tighten credit policies and collection routines, including earlier invoicing, automated reminders, steps to systematically manage overdue accounts.

The Takeaway

A high-performance business model is one of the most important contributors to valuation. When the essential elements of growth, margin quality and cash conversion are strengthened far in advance of a sale, owners create businesses that buyers view as stable and scalable. This results in stronger valuations and better outcomes. The companies that achieve the best results are those that begin building these attributes early and maintain them consistently.