Revenue grew 18% a year for four years. The offer was four times earnings.

Two businesses with identical revenue and identical profit can be worth very different sums, and the gap has little to do with last year's performance.

By Steve 5 min read
Abstract bridge artwork for Revenue grew 18% a year for four years. The offer was four times earnings.

Consider two businesses with the same revenue, the same gross margin and the same profit. One attracts serious interest at a healthy multiple. The other attracts a lower number, an earn-out, and a lot of questions. The financial statements do not explain the gap. What explains it is the answer to a single question: if the owner stopped selling tomorrow, how much of next year’s revenue would still arrive? This is the part of business value that owners most often discover late, usually in a meeting, usually too late to…

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Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

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