Let me start with something I’ve said often on the Legacy Advisors Podcast and in rooms filled with founders: buyers don’t buy potential—they buy proof.
You can have a world-class product, an inspiring origin story, and a bright future. But if the metrics don’t back it up, your company will fall flat during diligence—or worse, get overlooked altogether.
That’s why, when preparing to exit, the single most powerful thing you can do is tighten up the numbers buyers care about most. Not vanity metrics. Not internal fluff. I’m talking about the foundational KPIs that tell an acquirer, “This business is well-run, high-performing, and low-risk.”
Whether you’re 6 months or 6 years away from a sale, the time to start optimizing these metrics is now.
Why Metrics Matter More Than You Think
Buyers are data-driven. Their deal teams are trained to spot trends, risks, and inconsistencies. In a crowded market full of pitch decks and CIMs, your metrics become your credibility.
Here’s what buyers want to know:
- Is revenue growing—and is that growth sustainable?
- Are margins healthy or eroding?
- Is customer retention strong?
- How dependent is the business on the founder?
- Can the business scale without chaos?
The answers come from your data. The better your metrics, the more compelling your narrative—and the higher your multiple.
So let’s dig into the numbers that matter.
Revenue Growth and Quality
Every buyer wants to see growing top-line revenue—but not all revenue is created equal.
What to Track:
- Year-over-year (YoY) growth: Steady, compounding growth is better than wild swings.
- Monthly recurring revenue (MRR) or annual recurring revenue (ARR): Buyers love predictability.
- Revenue by channel, customer type, and product line: Diversity matters.
What Buyers Want to See:
- Consistent growth (ideally 15–30% YoY for most industries)
- Predictable patterns (contracts, subscriptions, renewals)
- Low seasonality and limited one-off revenue spikes
- Growth not entirely driven by discounts or founder sales effort
If you’re growing fast but it’s all project-based or lumpy, expect skepticism. If you’re growing slower but with strong retention and systems, that’s often more attractive.
EBITDA and Margin Health
You’ve heard the phrase “revenue is vanity, profit is sanity.” In M&A, that’s gospel.
What to Track:
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): Clean, normalized, and consistent.
- Gross margin and net margin: The higher, the better.
- Customer acquisition cost (CAC) and lifetime value (LTV): Efficiency signals health.
- Operating leverage: Can you scale without linearly increasing cost?
What Buyers Want to See:
- 15–25% EBITDA margins for services; 20–40%+ for SaaS
- Clean financials with clearly defined add-backs
- Margin expansion over time, not compression
- Smart spending, not founder-subsidized bloat
Bottom line: a high-margin, cleanly-run company with solid EBITDA will always attract attention—even if it’s not growing like a rocket ship.
Customer Retention and Churn
Buyers don’t want to replace your customers. They want to inherit them—and keep them.
What to Track:
- Churn rate (monthly and annual): Ideally <2% monthly for SaaS, <10% annually for B2B.
- Net revenue retention (NRR): Are you growing within your base?
- Customer lifetime value (CLTV): Indicates long-term revenue per account.
- Repeat purchase rate (for product businesses): Measures stickiness.
What Buyers Want to See:
- Low churn and high retention—both of customers and revenue.
- Upsell and cross-sell trends that increase value per customer.
- Evidence that customers stay because they love the product, not because they’re locked in with penalties.
- Clear processes around onboarding, support, and renewal.
Retention is proof that you’re solving a real problem. It also makes forecasting easier, which buyers love.
Customer Concentration and Revenue Diversity
If one client makes up 40% of your revenue, that’s a major red flag—even if it’s a great client.
What to Track:
- % of revenue from top 5 clients
- % of recurring vs. one-time
- Revenue mix by industry, geography, and channel
What Buyers Want to See:
- No single client representing more than 10–15% of revenue
- Balanced revenue across verticals or customer segments
- A healthy mix of new and legacy clients
- Multiple lead sources and acquisition channels
Diversity means resilience. The more insulated your revenue is from any one client, industry, or channel, the more valuable your business becomes.
Founder Dependence
This one hurts a little, but it’s essential. If you’re still the rainmaker, firefighter, and final decision-maker… you’re not selling a business. You’re selling your job.
What to Track:
- % of sales, ops, or client support tied to you personally
- Leadership team strength and autonomy
- Org chart clarity and succession planning
- Key processes documented and delegated
What Buyers Want to See:
- A leadership team that can run the day-to-day
- Sales, marketing, and service functions that don’t rely on the founder
- SOPs, KPIs, and dashboards that create accountability
- A clean post-close transition plan
Founder independence is one of the most overlooked—but most important—value drivers in lower and mid-market M&A.
Cash Flow and Working Capital
Buyers care about cash—not just profits.
What to Track:
- Free cash flow (FCF)
- Accounts receivable and payable cycles
- Inventory turnover (if applicable)
- Cash conversion cycle
What Buyers Want to See:
- Positive, growing free cash flow
- Clean receivables and payables management
- Limited cash tied up in inventory or slow pay cycles
- Visibility into future cash needs
Cash flow tells the story of operational health. You don’t want buyers worrying about solvency or surprise capital requirements.
Operational Efficiency
A messy business doesn’t sell well. Buyers want to know that your operations can scale.
What to Track:
- Revenue per employee
- Gross margin trends
- Client onboarding time and cost
- % of processes that are manual vs. automated
What Buyers Want to See:
- Lean, productive teams
- Automated systems that reduce error and cost
- A tech stack that scales
- Operational KPIs that drive insight, not guesswork
Operational efficiency often comes down to process documentation, tool integration, and smart delegation. These things are easy to overlook—but powerful during diligence.
Sales Pipeline and Forecasting Accuracy
Growth is only as good as your ability to predict it.
What to Track:
- Sales pipeline coverage
- Close rate by stage
- Forecast vs. actual revenue (quarterly)
- Lead source attribution and conversion rates
What Buyers Want to See:
- A strong pipeline with reliable conversion metrics
- Forecasts that match actual performance
- A scalable sales process—not just founder hustle
- CRM hygiene and data-driven sales management
A clean, predictable sales engine gives buyers confidence that momentum won’t slow post-close.
Industry-Specific Metrics
Every industry has its own KPIs that buyers care about. A few examples:
- SaaS: CAC payback period, usage engagement, logo vs. revenue retention
- eCommerce: Average order value (AOV), cart abandonment, LTV:CAC
- Healthcare: Patient retention, payer mix, revenue per practitioner
- Agencies: Billable utilization, client tenure, revenue per employee
Know your vertical. Learn what matters most to your acquirers. Then build those metrics into your story.
Packaging These Metrics for Buyers
It’s not enough to just track this data—you need to tell the story.
That means:
- Include clear metrics in your Confidential Information Memorandum (CIM)
- Use charts and visuals to show trends, not just snapshots
- Normalize EBITDA and explain add-backs clearly
- Anticipate questions and have backup data ready
- Align metrics with your value proposition
At Legacy Advisors, one of our first steps with clients is building a data narrative that shows buyers not just what the business is—but what it can become.
Personal Note: What I’ve Learned from My Own Exits
When I sold Pepperjam, I wasn’t just pitching a fast-growing business. I was telling a story rooted in systems, scalability, and metrics.
Yes, we had a powerful brand and solid growth. But what made the deal attractive—what earned buyer confidence—was our grip on the numbers.
We knew our LTV. We tracked every dollar of revenue and every lever of margin. We had dashboards for performance and accountability across the team.
Buyers don’t trust potential. They trust preparation.
If you want to exit well, you don’t need to be perfect. You just need to show them you’re running a business—not riding a wave.
Final Thought: Use Metrics as a Mirror
If you’re serious about selling one day, start using your metrics as a mirror—not a scoreboard.
Look at them weekly. Share them with your team. Fix what’s broken. Sharpen what’s soft. Improve what’s flat.
Because one day soon, a buyer is going to look at those same numbers—and decide what your life’s work is worth.
Let’s make sure they see what you’ve built clearly—and pay you accordingly.
Frequently Asked Questions: Key Metrics That Make Your Business Attractive to Buyers
What are the most important financial metrics buyers care about in an acquisition?
Buyers consistently focus on a few foundational financial metrics to gauge a business’s health and value. These include revenue growth (especially recurring and predictable), EBITDA and EBITDA margins, free cash flow, and gross profit margins. They’ll also look closely at the consistency of those metrics over time—buyers want to see trends, not spikes. Clean, normalized financials with clearly documented add-backs help accelerate due diligence and build trust. A business that’s profitable, with healthy margins and growing cash flow, immediately becomes more attractive. It signals that your operations are efficient, scalable, and don’t require a buyer to “fix” anything post-acquisition.
How important is customer retention and churn when evaluating a business for sale?
Customer retention is a powerful signal of long-term value and buyer confidence. High retention means your product or service is delivering consistent value, and buyers can count on stable revenue going forward. Low churn reduces acquisition pressure post-deal and protects the buyer’s investment. In contrast, high churn signals volatility and raises red flags. Buyers look for metrics like net revenue retention (NRR), customer lifetime value (LTV), and repeat purchase behavior. If your business keeps customers for years—and grows revenue within your base through upsells or renewals—you’re showing buyers that your foundation is not only solid, but scalable.
Does customer concentration impact my company’s attractiveness to buyers?
Absolutely. One of the fastest ways to raise a red flag in diligence is having one or two clients responsible for a disproportionate share of revenue. Buyers fear losing that key customer post-close, which puts your business—and their investment—at risk. Ideally, no single customer should account for more than 10–15% of revenue. If you’re above that threshold, you’ll likely face valuation pressure or limited buyer interest. Diversifying your client base across industries, geographies, or verticals reduces this risk. Building a more balanced revenue mix helps buyers see your company as resilient—not overly reliant on one relationship.
How do operational and sales metrics play into overall buyer interest?
While financial metrics tell the story of your bottom line, operational and sales metrics tell buyers how well your business functions day-to-day—and whether it can scale. Revenue per employee, client onboarding time, customer support efficiency, and forecast accuracy all matter. Buyers also look at your sales pipeline: how predictable it is, where leads come from, your close rate, and whether the sales process is dependent on the founder. If your ops and sales machines run smoothly without you, buyers gain confidence that the business will maintain momentum post-sale. These efficiency metrics are often the quiet force behind higher valuations.
When should I start tracking and improving these key metrics before selling?
The earlier, the better—ideally 18 to 36 months before you plan to go to market. Buyers want to see trends, not one-off wins. That means your revenue, margins, customer retention, and operational efficiency should be consistently tracked and improving over time. Waiting until you’re a few months out from an exit doesn’t give you enough runway to clean up financials, reduce founder dependence, or build a compelling performance narrative. Start now. Track KPIs weekly. Build dashboards. And use those insights to make better decisions today—because the data you show buyers in the future starts with the discipline you build right now.