The Multiplier That Doesn’t Appear on the Balance Sheet
In M&A, we talk a lot about multiples, EBITDA, and market ranges. But what truly separates a company that sells “at market” from one that sells at the high end of the range is rarely found solely in the income statement.
Today, it is Felipe Polo to write, who publishes here.
Felipe founded GuideSmiths in 2014, scaled it to 120 people across three countries, and sold it in 2021. He did so with something many founders aim for but few achieve: the ability to exit the day after closing, without long earn-outs or operational dependency.
In this article, he shares from real experience what truly drives a company’s valuation beyond EBITDA—especially relevant for those building service, software, or B2B businesses, where the team and systems matter as much as the numbers.
Because two companies with the same EBITDA can be worth millions more—or less.
And the difference usually lies in what doesn’t appear in the Excel sheet.
Lessons Learned from Selling GuideSmiths
When I sold GuideSmiths in 2021—a software consultancy we had grown to 120 engineers across three countries—I learned something I wish I’d known much earlier: what truly moves a company’s valuation is not what appears on the income statement.
It took me seven years to understand this—and plenty of mistakes along the way.
I was fortunate to exit the day after the sale without anything breaking. Today, the company that acquired us has over 300 employees—which says more about the team we built than any individual decision I made.
This experience left me with several lessons on valuation that I believe are useful, especially if you’re building a company and haven’t seriously considered what makes it more—or less—valuable in the eyes of a buyer.
The Complicated Question
Do you know how much your company is worth today?
Not in abstract terms. Not “it’s worth a lot because we have good revenue.” A number, with explicit assumptions.
Most founders don’t know. And those who think they do are often using the wrong metric.
Valuing a company is assigning a number to what it is worth today—or what it could be worth tomorrow if certain expectations are met. It’s an estimate full of assumptions—but a necessary one, because without it, you cannot make strategic decisions about your own business.
The Formula That Simplifies Everything
The most widely used method for companies of our profile is relatively simple:
VALUATION = EBITDA × MULTIPLE
EBITDA reflects your operational capacity to generate profits.
The multiple reflects how the market perceives you: your industry position, growth potential, and risk profile.
Most founders devote all their energy to improving EBITDA. This makes sense—it’s the variable you can control directly: more sales, better margins, tighter costs.
But there’s a problem: EBITDA grows linearly. Each additional euro requires proportional effort.
The multiple, on the other hand, can jump. And what moves the multiple isn’t what appears in the income statement.
What Everyone Looks At (But Doesn’t Differentiate)
Tangible assets get most of the attention:
These are important. But they are also relatively easy to replicate among companies in the same sector. If your competitor has similar financials, the tangibles don’t differentiate you.
It’s time to play with what you can’t see.
The Real Multipliers: Intangibles
There are four types of intangible capital that can push your multiple to the upper end of the market range:
1. Human Capital
A talented and committed team is not just a cost—it’s an asset. Buyers know this. A company with high turnover is risky. A company where talent wants to stay is a company with a future.
2. Customer Capital
A diversified portfolio, predictable revenue, long-term relationships. If 40% of your revenue comes from a single client, your multiple drops. If you have 50 clients on recurring contracts, it rises.
3. Structural Capital
Documented processes, scalable systems, operations that don’t rely on key individuals. This was the capital I worked hardest on at GuideSmiths. It allowed me to leave the day after selling without anything breaking.
4. Social Capital
Market reputation, network, employer brand. It’s not vanity—it’s an asset that opens doors money alone cannot.
The Valuation Range
Within every industry, there is a range of multiples. Not all companies with the same EBITDA are worth the same. What determines where you fall in that range:
But above all: intangibles are what move you from the lower end to the higher end of the range. They are the levers a sophisticated buyer knows how to read and pay for.
Linear vs. Exponential
EBITDA grows linearly. Each improvement costs effort.
Intangibles, on the other hand, generate exponential growth in valuation. They improve the multiple without proportional increases in cost.
Combining both—the linear growth of EBITDA with the exponential potential of intangibles—is what truly skyrockets a company’s value.
Two Companies, Same Numbers, Different Value
Imagine two digital service consultancies. Both with 7 years in operation, €5M revenue, €1M EBITDA.
Company A: Revenue depends on three key people. Processes exist in the heads of senior staff. High turnover. Founder handles everything.
Company B: Documented processes. Autonomous management team. Empowered employees with clear growth paths. Founder could take a month off without anything stopping.
The numbers are identical. But Company B achieves a significantly higher multiple. Lower perceived risk, higher growth potential, less reliance on individuals.
The valuation difference could be millions—for the same €5M revenue.
This isn’t theory. It’s exactly what I experienced with my company.
Six Levers to Move Your Multiple
If I had to condense what I learned into six actionable areas:
Each lever improves your multiple. All six together can dramatically increase your valuation.
The Short Answer
If you ask me how to increase your company’s value, the short answer is one word: systematize.
The long answer:
Each of these actions builds intangible capital. And intangible capital is what moves the multiple.
Three Questions to Conclude
The difference between the two could be worth millions.
By Joshua Novick, Partner at Bondo Advisors
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