How To Increase Your Business Valuation By 50% in 18 Months

Posted on by Jon Arentz

Let me start with a simple truth:

Most business owners don’t have a revenue problem.
They have a valuation problem.

You can grind your way to more sales. You can hustle your way to a bigger top line. But if your business is still dependent on you, unpredictable, or operationally messy, the market will discount it—hard.

I’ve seen companies doing $1M–$5M in revenue valued like lifestyle businesses… because that’s exactly what they were.

The good news? A 50% increase in valuation over 18 months is not only possible—it’s predictable if you focus on the right levers.

This isn’t theory from a whiteboard. It’s grounded in the principles popularized by Michael E. Gerber in The E-Myth, refined by strategic thinkers like Peter Drucker, and reinforced by what private equity firms and acquirers actually pay for.

Let’s break this down the right way.

First: Understand What Actually Drives Valuation

Valuation is typically based on a multiple of earnings (EBITDA or SDE, depending on size).

Increase valuation and you have two levers:

  1. Increase earnings
  2. Increase the multiple

Most owners obsess over the first and ignore the second.

But here’s the math:

If your company earns $500,000 and sells at a 4x multiple, it’s worth $2M.

If you improve the business so it earns $600,000 and sells at 6x, now it’s worth $3.6M.

That’s an 80% increase in valuation with only a 20% earnings increase.

The game isn’t just profit.
The game is risk reduction and transferability.

Buyers pay premiums for businesses that are:

  • Predictable
  • Scalable
  • Not dependent on the founder
  • Systemized
  • Recurring in revenue

That’s your blueprint.

1. Remove Yourself as the Operational Bottleneck

If you disappear for 30 days, does revenue stall?

If yes, you don’t own a business. You own a job with overhead.

Buyers discount founder-dependent businesses because they are buying risk.

Your 18-month move:

  • Document every core process.
  • Replace yourself in sales or operations with a trained leader.
  • Install KPIs that are reviewed weekly without you driving them.

This is straight out of Gerber’s philosophy: build systems, not dependency.

When the business runs without you, the multiple expands.

2. Turn Revenue Into Recurring Revenue

Predictability increases valuation faster than almost anything else.

A company with recurring revenue can sell for dramatically higher multiples than one dependent on one-off projects.

Private equity firms pay premiums for predictable cash flow. Just look at the roll-up strategies used by firms like Vista Equity Partners in the software space.

Your 18-month move:

  • Convert one-time customers into retainers.
  • Introduce subscription-based services.
  • Create annual contracts instead of monthly.
  • Offer maintenance, advisory, or performance retainers.

If 70%+ of your revenue becomes recurring, you’ve just reduced buyer risk substantially.

Lower risk = higher multiple.

3. Eliminate Customer Concentration Risk

If 30% of your revenue comes from one client, that’s a red flag.

Buyers fear concentration risk because one departure can cripple cash flow.

Your 18-month move:

  • Diversify your top 5 clients.
  • Cap no single client at more than 15% of revenue.
  • Develop inbound marketing so you aren’t reliant on a few relationships.

This is where brand and lead generation matter.

If you’re building a funnel (which you are doing with Business Freedom Formula), you’re already moving in this direction.

Predictable pipeline increases valuation.

4. Professionalize Financial Reporting

Messy books kill deals.

I’ve seen six-figure valuation hits simply because financials were unclear.

Buyers want clean:

  • Monthly P&Ls
  • Clear add-backs
  • Accurate balance sheets
  • Forecasting models

Follow the discipline championed by leaders like Warren Buffett: clarity drives confidence.

Your 18-month move:

  • Move to accrual accounting.
  • Produce monthly financial statements.
  • Separate personal expenses completely.
  • Build a 3-year forecast model.

The more transparent your numbers, the stronger your negotiating position.

5. Build a Leadership Bench

A business with management in place sells at a premium.

A business where the owner “does everything” sells at a discount.

Your 18-month move:

  • Hire or elevate an operations leader.
  • Develop a sales manager.
  • Create documented role clarity and accountability charts.

Think about how companies structured under the systems mindset of Ray Kroc scaled so rapidly. It wasn’t because Ray flipped burgers. It was because systems and managers did.

The more leadership depth you have, the more transferable your business becomes.

6. Increase Gross Margins Before Revenue

Revenue growth is seductive.

Margin growth is powerful.

A 5–10% margin improvement can significantly increase EBITDA without adding complexity.

Your 18-month move:

  • Eliminate unprofitable offerings.
  • Raise prices 5–10%.
  • Renegotiate vendor contracts.
  • Automate repetitive labor tasks.

Buyers don’t reward revenue for its own sake. They reward profit efficiency.

Clean margins increase both earnings and multiple.

7. Document Intellectual Property & Systems

If your knowledge lives in your head, it has no transferable value.

But documented IP? That’s an asset.

Your 18-month move:

  • Create SOP manuals.
  • Build internal playbooks.
  • Develop proprietary frameworks.
  • Trademark or brand protect core assets where appropriate.

When you can hand a buyer a “Business Operating Manual,” you’ve shifted from personality-driven to system-driven.

That’s where valuation jumps.

8. Create Growth Optionality

Buyers pay more for upside.

If you can demonstrate:

  • New markets available
  • Untapped pricing potential
  • Expandable service lines
  • Geographic scalability

You’ve created what investors call “growth optionality.”

Study how companies acquired by firms like Berkshire Hathaway often have strong existing operations plus clear growth runway.

Show the roadmap.

You don’t need to execute all of it—just prove it’s viable.

The 18-Month Roadmap

Here’s how I would structure it:

Months 1–6:

  • Clean financials
  • Begin system documentation
  • Identify founder dependencies
  • Improve margins

Months 6–12:

  • Install leadership depth
  • Convert revenue to recurring
  • Diversify client base
  • Launch scalable marketing funnel

Months 12–18:

  • Step back from daily operations
  • Strengthen reporting and KPIs
  • Finalize operating manual
  • Demonstrate predictable growth

At the end of 18 months, you don’t just have a more valuable company.

You have a company that doesn’t own you.

The Real Secret

Here’s what most owners miss:

The actions that increase valuation are the same actions that increase freedom.

When you build:

  • Systems
  • Predictability
  • Leadership
  • Clean margins
  • Recurring revenue

You create both leverage and optionality.

And optionality is power.

You may never sell.

But knowing you could—and knowing the market would pay a premium—changes how you operate.

It changes how you think.

It changes how you lead.

And that, more than the multiple itself, is the real 50% increase.