Why Revenue Mix Matters When Selling Your Business

revenue mix Aug 03, 2023

Revenue mix is a critical contributor to the value of your business.

What do we mean by that? It's simple, but it's important to keep in mind as you get closer to putting your business on the market. 

For example, two restoration businesses doing $5 million dollars each can be valued very differently when you look at their revenue mix. And yes, buyers look at your revenue mix!

Buyers perceive one large job or project or a lot of work from a single customer as revenue that's not repeatable on a yearly basis. They'll discount your revenue accordingly. An optimum revenue mix would have no single job comprising more than 6-8% of your total revenue. 

There's another important factor, and that's the percentage of your revenue from construction versus mitigation. The more mitigation you have, the bigger the value because mitigation margins are historically higher. At least 30% mitigation is optimum. 

Is one restoration business a better run business because it generates 35% of its revenue from mitigation jobs or it only has two jobs that account for more than 8% of total revenue? No, not better, BUT it is worth more when you go to sell it.

Perhaps the bigger message is, as you get within 3-ish years of wanting to sell your business, you need to start thinking differently about how you manage your business. We're happy to help you understand what that looks like when you're ready.






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About Gokul Padmanabhan

Gokul has spent his entire career as a small business owner like you. He learned a lot throughout the process of starting, growing, and selling several businesses. One important lesson: most business brokers didn't add much value to the process of selling his businesses because they didn't understand them.

So, he became a business broker and immediately learned another important lesson:Ā to really understand the businesses you sell you need to specialize in a single market.

So, he specialized in selling restoration businesses, and so was born Restoration Brokers of America.

After more than 15 yearsĀ  of evaluating and selling restoration businesses, RBA has learned another important lesson: most businesses we see can be worth hundreds of thousands of dollars and, sometimes millions, more if the owner will manage his or her business a bit differently as they prepare to sell.

We call this Managing for Value. It's not complicated. It's not difficult. It's just different.


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