What Buyers Pay a Premium For (And What They Discount)

Founders often ask, “What multiple can I get?”

But buyers don’t start with a multiple. They start with a question:

“How confident am I that this performance will continue, without surprises, after I buy it?”

That’s why two companies with similar revenue can sell for very different outcomes. Buyers price durability, transferability, and risk. Premiums come from what reduces risk and increases upside. Discounts come from what creates uncertainty.

Here’s what that looks like in real deals.

What buyers pay a premium for

1) Durable revenue (it stays)

Buyers love businesses with predictable future revenue.

• Strong retention/repeat usage

• Contractual visibility (clear terms, renewals, pricing)

• Diversified customer base

• Low churn and high “stickiness”

Why it matters: predictable cashflows reduce risk, which increases price.

2) Repeatable growth (it scales)

Buyers pay more when growth is not dependent on heroic founder effort.

• Clear positioning and ideal customer profile (ICP)

• Consistent pipeline generation

• Repeatable sales motion and conversion metrics

• Evidence that the business can grow with more resources

Why it matters: buyers pay premiums for growth they believe they can accelerate.

3) Strong unit economics and margins (it earns)

Buyers want profits that are real and defendable.

• Healthy gross margin

• Stable EBITDA margin (or a credible path to it)

• Strong cash conversion

• Clear cost drivers and operating leverage

Why it matters: margins are the “quality signal” behind the revenue.

4) A business that runs without the founder (it transfers)

This is one of the biggest valuation levers.

• Leadership bench beyond the founder

• Documented processes

• Team-led delivery and customer management

• Customer relationships owned by the company, not a single person

Why it matters: if the founder is the engine, the buyer is buying a person, not a company.

5) Clean reporting and clean data (it survives diligence)

Premium outcomes often go to the company that is simply “easier to buy.”

• Consistent monthly reporting

• Clear segmentation (products, regions, customers)

• Believable add-backs

• Well-organised data room

Why it matters: clarity builds confidence. Confidence increases price and speed.

6) Low concentration risk (it doesn’t break easily)

Even good businesses get discounted when one thing can break the model.

• No single customer dominates revenue

• No single supplier is mission-critical

• Diversified channels and markets

Why it matters: buyers price in the downside if one relationship can hurt the business.

7) Strategic fit (it’s worth more to this buyer)

Strategic buyers pay up when they see synergies they can actually capture.

• Cross-sell into their customer base

• Product gap filled immediately

• Faster geographic expansion

• Capability they can’t build quickly

• Competitive removal

Why it matters: the same company can have very different values to different buyers.

What buyers discount (and why)

1) Customer concentration

If one or two customers can materially affect performance, buyers may reduce the price or add protections.

How it shows up: lower multiple, earnout, escrow, or “wait-and-see” structure.

2) Founder dependency / key-person risk

If the founder is central to sales, delivery, product, or customer retention, buyers worry about the transferability of the founder's role.

How it shows up: retention packages, longer earnouts, heavy transition requirements, or price haircut.

3) Unclear or unreliable numbers

Messy books don’t just slow diligence — they create distrust.

• inconsistent reporting

• weak controls

• “We’ll explain later” adjustments

• unclear segmentation

How it shows up: conservative valuation, more holdback, longer diligence, and deal fatigue.

4) Low revenue quality

Buyers discount revenue that is:

• One-off, project-based, without repeatability

• Dependent on a few relationships

• Driven by discounting or unsustainable pricing

• Exposed to churn without clear reasons

How it shows up: lower multiple and heavier structure (earnouts, performance hurdles).

5) Weak margins or unstable cash flow

Even growing companies get discounted if their cash behaviour is unpredictable.

How it shows up: valuation anchored to a downside case, reduced debt capacity, tighter terms.

6) Legal and diligence landmines

These don’t just kill deals, they reduce price.

• Messy contracts

• IP ownership unclear

• Compliance gaps

• Unresolved disputes

• Change-of-control clauses

How it shows up: price reduction, indemnities, escrow, delayed closing, or deal termination.

7) “Story doesn’t match the data”

If the narrative is exciting but the numbers don’t back it up, buyers will discount hard.

How it shows up: “nice story, show me proof” — and price is based on current reality, not future potential.

Premium vs discount isn’t just price, it’s deal certainty

Founders focus on headline valuation. Buyers also focus on risk allocation.

Even with the same headline number, outcomes differ based on:

• Cash at close vs Earnout

• Escrow/holdback size

• Working capital adjustments

• Seller notes

• Conditions and warranties

• Length of founder transition

A “premium deal” is usually one with high certainty and clean terms, not just a high multiple.

The Founder Links approach: build value by removing discounts

If you want to improve valuation, don’t start by chasing a higher multiple.

Start by removing what causes discounts:

1. Reduce concentration and key-person risk

2. Strengthen reporting and data readiness

3. Improve revenue durability and margins

4. Clarify the growth engine and the story

5. Run a process that creates competitive interest

That’s how founders create leverage, and leverage is what drives premium outcomes.