The One Metric That Drives Your Business Valuation

The market has overcomplicated business valuation with jargon and complexity.

Here’s the simple truth: the most objective input to a business valuation is cash flow.

If you want an objectively higher valuation, you need MORE cash flow.

Not just revenue— but cash flow. Let’s fix the confusion ??:?

? The criteria to value any business can be broken down into two categories: subjective & objective.

In a prior content post, we discussed that you should approach selling your business like a go-to-market strategy – which helps you appropriately position your business towards an audience.

That audience’s preferences & acquisition strategy create the subjective valuation of your business.

Selling to a buyer who could use your business as a strategic asset will typically pay higher than someone who views your business as a commodity.

Strategies to influence this will come in later posts, but today we’ll be addressing the objective side.

? The objective aspects of a valuation are your business’s inputs and its productivity with those inputs.

…and since these are “objective” – this is where you as a Seller can come to a hurdle created by the use of technology to value your business.

Let’s face it: technology is both a blessing and a curse in business valuation.

? Technology helps our businesses become more productive, but that productivity can also be applied “against us”, in the form of using rigid formulas & algorithms to assess the value of your business.

On one hand, algorithms and systems make valuations faster and more accessible.?

On the other, they strip away the nuances that make your business unique. They treat cash flow, revenue, and multiples as mere numbers to plug into a formula, ignoring the story behind those numbers.

They can become outdated & impersonal, inhibiting the perception of value that you’ve been able to create with your business.

The game is the game – so our focus today is not just calculating value, but elevating it.?

? By focusing on the simplest yet most impactful lever—your cash flow—you can rewrite the story of your business valuation.

Most valuation systems look at cash flow (SDE or EBITDA) as a starting point, but they don’t help you understand how to increase them or why they matter so much.

Cash flow is the lifeblood of every business. It’s a foundation of value for every valuation.

?? Cash flow reflects your true earning power

?? Cash flow proves consistent, predictable returns

?? Cash flow drives multiples

?? Cash flow is within your control

The multiple applied to your cash flow determines your valuation. Small changes in cash flow can lead to exponential increases in value when multiplied by 3x, 4x, or even 8x.

Unlike market conditions or buyer preferences, cash flow is something you can actively influence. By making strategic adjustments, you can boost it and, in turn, increase your business’s worth.

But how do we create more of it?

? There are two ways to increase your cashflow: INCREASE THE FLOW into it (revenue), and MAKE IT MORE PRODUCTIVE (profitability).

Yes, you can add debt & execute equity raises, but let’s keep it simple.

Many industry experts will promise you that their method to applying lipstick ?? will make your business look good for a sale.

At YourBigBank, we not only show you how to calculate your business’s value – we empower you to boost your cash flow.?

As a result, you objectively increase the value of your business.

?? Step 1: Normalize and Recast Your Financials

We start by analyzing your financial statements to ensure they accurately reflect your business’s true earning capacity.?

This process, called normalization, ensures your numbers tell the best possible story.

This includes:

?? Removing non-recurring expenses.

?? Adding back discretionary owner expenses.

?? Highlighting areas where cash flow can be improved.

?? Step 2: Focus on Strategic Adjustments

Once your financials are recast, we identify key areas where you can make simple changes to boost cash flow, such as:

?? Streamlining operations to reduce unnecessary costs.

?? Optimizing pricing or revenue models for higher margins.

?? Improving receivables and cash management practices.

These adjustments often result in significant improvements with minimal disruption to your business.

?? Step 3: Leverage Realistic Multiples

We don’t just apply a cookie-cutter multiple to your cash flow.?

Instead, we use industry-specific insights and market data to ensure your multiple reflects your business’s true potential.

?? Step 4: Deliver Personalized Valuation Insights

Unlike traditional systems that deliver generic reports, we provide a clear, actionable roadmap for increasing your valuation.?

This includes insights into your specific buyer pool and how to position your business for maximum strategic value.

? You might be thinking, “This sounds great, but how do I know it will work for me?”

?? Proven Financial Principles: Normalizing financials, boosting cash flow, and applying strategic multiples are time-tested methods used by the most successful M&A advisors and appraisers.

?? Tailored to Your Business: Unlike rigid systems, our approach is flexible. We adapt to your unique industry, market, and goals, ensuring your valuation reflects your business’s specific strengths.

?? Designed for Immediate Impact: Many of the adjustments we recommend can be implemented quickly, allowing you to see tangible improvements in your cash flow—and valuation—in a matter of months.

? Our clients consistently see higher valuations, stronger buyer interest, and faster transactions because we prioritize what matters: their cash flow and their story.

Your business is worth more than a number on a spreadsheet. It’s a reflection of your hard work, vision, and potential.

Don’t let outdated systems hold you back any longer. Understand the levers you can pull that puts valuation formulas to work with you — not against you.

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