What Makes a Business Valuable? Three Core Drivers of Premium Valuations
Published by
Brian Breneman
on
When it comes time to sell your business, the factors that attract real buyer interest and higher offers aren’t always obvious. At Breneman Advisors, we’ve helped business owners navigate dozens of transactions across industries. And while every deal has its nuances, businesses that achieve premium valuations usually have three things in common: predictable cash flow, reduced risk, and a clear path for growth.
Buyers aren’t just purchasing what your company is today; they’re buying its ability to keep producing results, without taking on unnecessary risk. That’s why we emphasize three foundational pillars that underpin real, transferable value: historical profitability, capable teams and systems, and actionable growth opportunities.
Let’s walk through what those mean in practice.
Verified, Normalized Profitability
One of the first things buyers evaluate is whether your earnings are sustainable and whether they can rely on the numbers. That means profitability alone isn’t enough. Buyers are looking for normalized financials: earnings adjusted for personal expenses, one-time charges, or other items that don’t reflect ongoing operations.
For example, if your P&L includes personal travel or a one-off equipment write-down, those need to be removed to show the business’s real earning power. But clean adjustments alone aren’t enough. You must substantiate them. That’s where many sellers fall short.
We worked with one client who had solid margins, but their books were loosely kept, and key add-backs weren’t well documented. The buyer discounted the deal by over 20%. Not because the earnings weren’t there, but because the buyer couldn’t verify them.
Buyers pay for clarity. Clean, well-supported financials signal that the business is well run, and reduce the risk premium buyers place on the deal.
Teams and Processes That Reduce Owner Dependence
Here’s a question we ask early in any sale process: Could the business continue operating at a high level if the owner stepped away for three months?
If the answer is no, that’s a problem for buyers. A business that depends heavily on the owner isn’t an asset—it’s a job.
Buyers want a system that runs independently. That means a competent, empowered leadership team and documented processes that guide operations. Together, these elements provide consistency, scalability, and, most importantly, transferability.
In one recent deal, the seller had put in place a general manager and defined job roles across every department. That structure alone boosted buyer confidence and led to multiple offers, all above initial expectations.
Growth Opportunities That Are Already in Motion
Every buyer is looking for growth. But not just theoretical growth. They want evidence that opportunities exist and that the business is capable of executing them.
That’s why the most valuable businesses don’t just talk about potential—they show it. Think of new revenue streams that are already producing early results, geographic expansion that’s underway, or process improvements that are boosting efficiency.
Buyers value growth they can see. Execution reduces perceived risk and signals that the business has the right foundation to scale.
Final Thought: Build with the End in Mind
Whether you plan to sell in a year or a decade, focusing on these three pillars—earnings clarity, operational independence, and demonstrated growth—wil not only increase your business’s value but also make it more resilient and rewarding to own.
At Breneman Advisors, we help business owners position for the strongest possible outcome by focusing on the fundamentals buyers care most about. If you’re wondering what your business is worth or what might be holding back its value, we’re here to help.
Frequently Asked Questions
What do buyers look for when valuing a business?
Buyers focus on three core drivers of value: normalized profitability, operational independence from the owner, and credible, in-progress growth opportunities. These factors reduce risk and increase buyer confidence.
Why are normalized financials important in a sale?
Normalized financials adjust earnings to reflect true business performance—removing personal expenses or one-time events. Buyers rely on these adjustments to assess sustainable earnings, but they must be clearly documented to avoid discounts.
How does owner dependence impact business value?
If a business can’t run smoothly without the owner, buyers see it as risky and harder to transfer. A leadership team and documented processes make the company more scalable and more valuable.
What kind of growth do buyers want to see?
Buyers prefer growth that’s already underway or proven, not just potential. Examples include new revenue streams with early traction, recent market expansion, or efficiency improvements that are delivering results.
When should I start improving my business for a future sale?
Ideally, owners should build with the end in mind, years before a sale. Strengthening profitability, reducing reliance on the owner, and executing visible growth strategies can increase valuation and improve deal outcomes.