Valuation is about more than revenue — buyers dig deep into performance metrics. Here’s how to track and improve the KPIs that matter most in M&A.

While top-line revenue and EBITDA are critical, sophisticated buyers evaluate a broader set of Key Performance Indicators (KPIs) to assess stability and growth potential. If you understand which KPIs matter in your industry and actively manage them, you’ll be better positioned for both higher offers and smoother due diligence.

Common small-business KPIs include:

• Gross Margin % – The higher and more stable, the better.
• Customer Concentration – If one customer is more than 20% of sales, it’s a risk. Diversify before selling.
• Recurring Revenue % – Predictable, subscription-style revenue is valued more highly.
• Employee Turnover Rate – High turnover can spook buyers, especially in skilled-labor businesses.
• Inventory Turnover – Shows efficiency in managing working capital.

Improving KPIs takes time — which is why you should start at least 12–18 months before selling. For example, you might renegotiate supplier contracts to improve gross margins or introduce maintenance contracts to boost recurring revenue. Tracking KPIs monthly also helps you identify trends and address weaknesses before a buyer sees them.

By identifying, tracking, and improving the KPIs buyers value most, you increase both your company’s attractiveness and its potential selling price.  If you are interested in learning more, please reach out.