Is the business worth more than the income it pays me?
A business that pays you well and a business worth buying are not the same thing. The gap between them is usually visible in the books.
The business is worth more than its income to you when earnings are transferable, add-backs are documented, records are clean and timely, and revenue is neither concentrated nor unpredictable.
The four places to look
A buyer pays for earnings that survive your departure
Income that depends on your relationships, your judgement, or your hours is income a buyer discounts heavily. The question is not what the business earns, but what it would still earn if you were not in it.
Adjusted earnings only count if they are documented
Owner compensation above market, personal expenses run through the business, and genuine one-off costs are all legitimate add-backs. But every one has to be supportable from the records. Undocumented add-backs are not negotiated down in diligence — they are removed.
Clean records change the multiple, not just the process
Books that reconcile, close on schedule, and produce consistent statements shorten diligence and reduce perceived risk. Books that do not invite a discount, a longer earn-out, or a withdrawn offer. This is the most direct link between bookkeeping and enterprise value.
Concentration and predictability are read from the same numbers
Customer concentration, revenue that recurs versus revenue that has to be won again, and margin stability across periods are all assessed straight from your financials. They are visible only if the books are structured to show them.
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