01 Sep 7 Valuation Triggers That Mean It’s Time to Recalculate Your Business Value
Even if your business feels stable, there are certain events and warning signs that mean your valuation, what a buyer would pay you, might be out of date. Recognizing them before a sale, gives you time to make changes and potentially increase the value of your business.
Below are seven valuation triggers that signal you should recalculate what your business is worth.
The 7 Valuation Triggers
1. Revenue or Profit Surges or Drops
Sudden growth or decline in revenue or net profit. If your revenue grows 20–30% in a year, your value likely increases. If you lose major clients, value may shrink fast.
2. Change in Customer Concentration
If one customer makes up more than 20-30% of your revenue, that’s risky. Losing them could cut your valuation sharply.
3. Shift in Recurring vs. Transactional Revenue
Moving into recurring revenue (subscriptions, contracts, renewals, maintenance) improves predictability. Buyers generally reward recurring revenue with higher multiples.
4. Operational Changes or Owner Dependency
If the business relies heavily on the owner for sales, operations, or key relationships, value may be discounted. Shifting knowledge and simplifying roles help increase the value of your business.
5. Industry or Regulatory Changes
New laws, supply chain risks, tariff changes, labor cost changes, and competition. If regulation is tightening or your industry is disrupted, your risk profile goes up.
6. Financial Cleanliness / Audit Trail Issues
Inconsistencies in books, missing tax returns, large one-off expenses, and messy accounting. Clean financials matter and get better, quicker sales.
7. Exit or Retirement Timing
If you are nearing retirement, planning to hand down, or want to liquidity, you should recalculate value to understand how much time remains to improve value and negotiate the best exit.
Why These Triggers Matter
Buyers want projections and stability. If any of these triggers shift, the assumptions used in a prior valuation may no longer hold. For example, if you had mostly recurring revenue but now you have large one-time orders, buyers will see more risk.
Sample Reports That Tell the Story
Here are three reports buyers will ask for after seeing a red flag.
- Profit & Loss Statement (P&L) – showing revenue, cost of goods sold (COGS), and operating expenses over the last 12-36 months.
- Tax Returns – usually the last two years of business (and personal if relevant) that show how your income was reported and if there were adjustments.
- Accounts Receivable Aging Report – which invoices are past due, how much of revenue is tied up in receivables, trend of bad debts, and inventory on hand.
These reports help spot items like revenue decline, customer dependency, or rising uncollectible receivables.
Our U.S. Data
- Q4 2023 report shows that among main-street businesses (valuations under $2 million), valuation multiples remain under pressure from rising interest rates and customer risk. Clean financials help offset these headwinds.
- 5-year data (2020-2024) shows average earnings multiples (based on SDE) across sectors hovering between 2.0× to 3.2×, depending on industry, but lower if financials are messy or owner-dependent.
What to Do When You See These Triggers
- Do a fresh valuation or engage an advisor to estimate updates.
- Correct the issues: clean books, reduce customer concentration, move toward contracts or recurring revenue.
- Document processes so the business runs well without your constant involvement.
- Revisit your value projections annually (or whenever one major trigger hits).
Curious what your business is worth right now after changes? Get a free valuation estimate with MyBizWorth. You’ll see how your value has shifted and what levers you can pull. Start your free valuation estimate today with MyBizWorth