“There is no single thing you could do to increase valuation more than implementing EOS.”
That’s not me talking. That’s Barry Fay, who is both a professional EOS Implementer and holds the CEPA (Certified Exit Planning Advisor) designation. Barry has a unique vantage point: he helps business owners run better companies through EOS, and he helps them plan successful exits. And his observation is striking.
For those unfamiliar, EOS (Entrepreneurial Operating System) is a straightforward way to run your business. It is a practical management system that helps businesses achieve their vision through six key components: Vision, People, Data, Issues, Process, and Traction. In other words, it helps you get everyone on the same page, make sure the right people are doing the right jobs, and create systems so things run smoothly without the owner having to be involved in everything.
EOS wasn’t created for exit planning. But here’s what’s fascinating: the practices that make businesses run better also happen to make them more valuable to buyers.
The Multiple Expansion Opportunity
Most business owners focus on EBITDA[1] when thinking about valuation. And yes, profitability matters. But here’s what many miss: your business value isn’t just EBITDA. It’s EBITDA times a multiple.
As Barry puts it: “Moving along the multiple chain is easier to do, and often more impactful, than increasing your EBITDA.”
Consider this example:
- Company A: $5m EBITDA × 4× multiple = $20m valuation
- Company B: $5m EBITDA × 6× multiple = $30m valuation
Same profitability. 50% higher valuation. The difference? Company B scores higher on the factors that drive multiples: things like reduced owner dependency, documented systems, strong leadership team, and consistent processes.
Sound familiar? These are exactly what EOS helps build.
Why Multiples Matter More Than You Think
In the M&A market, the value of a business often come down to just two levers:
- EBITDA
- The multiple applied to that EBITDA
Significantly increasing EBITDA is hard. It typically requires a substantial increase in revenue, cutting costs dramatically, or some combination that takes years to achieve.
But moving your multiple from 4× to 6×? That’s often about improving the quality and transferability of your business. Things EOS directly addresses.
The Importance of Intangible Capital
Barry shares another key insight: “So much of a company’s value is based on intangible capitals. Two businesses with the same EBITDA can be valued wildly differently because of these factors.“
Buyers don’t just buy cash flow: they buy confidence. Confidence that the business will continue performing after the owner exits. Confidence in the team, the systems, the customer relationships, and the scalability.
This is where EOS creates unexpected value. Through its focus on vision, people, data, issues, process, and traction, EOS naturally builds four types of intangible capital that drive higher multiples:
- Human Capital: Engaged employees, strong culture, clear core values
- Structural Capital: Documented processes, data-driven decisions, scalable operations
- Customer Capital: Strong relationships, recurring revenue, clear marketing strategy
- Social Capital: Reputation and community standing
We’ll explore these in detail in upcoming posts, but the key point is this: EOS wasn’t designed to check these boxes for exit planning. It just happens to do so remarkably well. While no business management system is perfect, nor is there a system that suits all types of businesses or circumstances. That said, most small businesses with 10-500 employees can benefit from the practical approach EOS brings.
What’s Coming
Over this series, we’ll explore:
- How EOS reduces owner dependency (the #1 valuation killer)
- The four intangible capitals and how EOS builds these
- Why PE firms should consider running their platform company on EOS
Next in this series: How EOS Reduces Owner Dependency—And Why Buyers Care
#EOS #ExitPlanning #BusinessValuation #EntrepreneurialOperatingSystem #MergersAndAcquisitions #FractionalCFO
[1] Earnings Before Interest Taxes Depreciation and Amortization. It is a measure of a company’s operating performance that shows profitability before accounting for financing decisions, tax environments, and non-cash expenses, and is often viewed as a proxy for operating cash flow.
