A sponsor is not buying your business. They are buying the confidence that it keeps working after they own it. Everything on the checklist below follows from that, which is why so little of it concerns your growth rate. We see the same ten items tested, in roughly the same order, on nearly every process we run.
1. Recurring revenue. Money that renews on its own is worth considerably more than money you have to win again every year. The share of revenue that renews without a fresh sale is the first number a sponsor isolates.
2. Retention. If customers stay, the forward numbers become believable, and believable is what gets underwritten. Retention split by cohort is more persuasive than any forecast you can write.
3. Margins and cash conversion. Not profit on paper, but how much of it becomes cash. A sponsor is thinking about what services the debt on the deal, so a business that converts earnings to cash cleanly prices better than one that does not.
4. Clean financials. Adjusted earnings that survive the data room. Below-market owner pay normalised, personal costs stripped out, one-offs added back, and no surprises waiting to be found.
5. Customer concentration. One client at forty percent of revenue is a discount, however good that client is. Concentration is priced as risk regardless of the relationship behind it.
6. Management depth. A business that runs without its founder is an asset. One that leans on them is a risk to be priced, and the day you step back is the day a buyer learns which one they bought.
7. Repeatable growth. A sales motion that works twice, rather than one good year that flattered the numbers. Sponsors are looking for a machine they can fund, not a result they cannot explain.
8. Market position. Whether the business wins because of what it is, or because nobody has come for it yet. The second is a much shorter story.
9. Clean ownership. Owned code, transferable contracts, a tidy cap table, no dependency on a provider the buyer cannot replace. An asset is only an asset if it transfers.
10. Headroom. A credible plan the next owner can execute. A sponsor is buying what happens next, so the case for the following five years matters as much as the last three.
Most founders we speak to can tick six of these today. The gap between six and nine is often the gap between a good offer and a great one, and nearly all of it is addressable in the year before a sale. Fixed early, these become reasons a buyer pays more. Left for diligence to uncover, each becomes a reason to chip the price down.