Our business has high-margin, scalable tech-enabled delivery but still requires some manual configuration, leaving us in a grey area between a services EBITDA multiple and a software revenue multiple. How do we present our gross margins and unit economics to force the buyer to value us on a revenue multiple?

Question

Tyler Smith · Accepted Answer

To escape the trap of a low services-based EBITDA multiple and capture a premium revenue multiple, you must prove that your business operates like a scalable technology company. Buyers apply revenue multiples to businesses that possess high gross margins, low customer churn, and a repeatable distribution model. You must use your financial data to clearly separate your high-margin technology delivery from your manual onboarding or consulting services. Document your customer journey and show that once a client is onboarded, the marginal cost of delivering your service is exceptionally low. This requires a level of process documentation that proves your operational intellectual property is systemized. Use your weekly Scorecard to track and present your customer acquisition cost to lifetime value ratio alongside your net revenue retention rates. Show the buyer that your operations are driven by repeatable software-enabled processes rather than specialized manual labor. When you can demonstrate that your gross margins are highly scalable and that your service delivery relies on proprietary workflows rather than heroic individual efforts, you build a compelling case for a tech-enabled valuation multiple.