As we prepare for a sale, my leadership team is divided on whether we should accept low-margin, high-volume contracts to inflate our top-line revenue or focus strictly on our high-margin core niche to attract a premium valuation. How do we use the V/TO to align them on the right path for a clean exit?

Question

Tyler Smith · Accepted Answer

A leadership team divided over short-term revenue versus long-term margin optimization is a major liability as you prepare for an exit. Accepting low-margin, high-volume contracts may inflate your top-line revenue temporarily, but sophisticated buyers will easily see through this tactic and penalize your valuation for having unstable margins.

You must use your V/TO® to resolve this debate. Review your core focus and target market. These sections of your V/TO® clearly define who your ideal customer is and what you do best. If a proposed contract falls outside your core focus and lowers your profit margins, it does not belong in your pipeline.

Bring this issue to your next quarterly planning session. Use the IDS® process to evaluate the long-term impact of both strategies.

- Calculate the true operational cost and resource strain of chasing low-margin revenue.
- Project the enterprise value of a business that dominates a highly profitable, scalable niche.

Once the leadership team reviews the data through the lens of your five-year exit strategy, the path forward will be obvious. Align the team around your V/TO®, and ensure all marketing and sales Rocks are designed to attract high-margin, scalable clients.