We have high recurring revenue, but our customer agreements are mostly handshake deals or short-term contracts. How do we restructure our customer agreements on our exit runway to prove to a buyer that our revenue is legally locked in?

Question

Tyler Smith · Accepted Answer

Handshake deals are a major liability during an exit. Buyers will heavily discount your valuation if they believe your customers can walk away the day after the transaction closes. You must convert these informal arrangements into formal, assignable contracts on your exit runway.

Start by auditing your customer list. Identify your top revenue-generating accounts and systematically transition them to multi-year agreements. These contracts must include a clear assignment clause, which ensures the contracts remain valid even if the ownership of your business changes.

Frame this transition to your customers as a partnership upgrade. Offer them price protection or priority support in exchange for a longer-term commitment.

By securing these agreements, you turn volatile revenue into highly predictable, recurring contract value. This predictability reduces the buyer's risk profile and allows you to command a much higher valuation multiple at the negotiating table.