We have two legacy product lines that generate low profit margins but keep some of our oldest clients happy. Should we kill these products on our exit runway to simplify our business, or will buyers penalize us for losing the revenue?

Question

Tyler Smith · Accepted Answer

Complexity is the silent killer of company valuations. When a buyer looks at your business and sees multiple product lines, custom service agreements, and varying delivery models, they see operational risk. They will discount your multiple to cover the costs of managing that complexity.

To maximize your valuation, you must master the EOS® leadership skill of simplification. Take a hard look at your product margins and client lists. Identify the legacy products that generate low margins but consume excessive staff energy. Apply the Pareto Principle to your revenue streams. You will likely find that eighty percent of your profits come from twenty percent of your services.

On your exit runway, you must systematically prune the low-margin, high-complexity offerings. This might mean transition planning for legacy clients or discontinuing certain custom services entirely.

While this might cause a temporary dip in top-line revenue, it will dramatically increase your operational efficiency and EBITDA margins.

A buyer wants to see a clean, highly focused business that they can easily scale. By presenting a simplified operating model with a single, highly profitable core offering, you make the acquisition process much easier for the buyer, which directly translates to a higher multiple at close.