I spent three hours staring at my phone, certain I had just made the dumbest decision of my career. We were low on revenue. We had bills. And I had just told a franchise brand, on the verge of signing a deal worth roughly $100,000, that we would not do the work. My heart was racing. A voice in my head kept repeating the same thing: you idiot, you should have just said yes.

Here is how I got there, and why that phone call ended up being one of the best things that has happened to my company.

Values are free until the day they cost you something

We had been working toward this deal for a while. The franchisor wanted its stories told, and telling real stories is the whole reason Franchise Filming exists. We have not used AI to fabricate a single video since we started in 2020. We use it to enhance our work, never to manufacture it. No fake people, no invented testimonials.

Then, at the last second, the brand called with a change. Its board had met. It had decided that its franchisees and customers would not want to make time to be filmed. So instead of real people, it wanted us to use actors and AI-generated faces to tell the story. Sign the proposal, and we were good to go.

I sat with it. I could have said yes. We needed the money, and yes was the easy, rational, pay-the-bills answer. But we run our company on a short list of values, and we do not treat them as suggestions:

• Be authentic
• Be confident
• Be on time
• Be a creative, passionate storyteller
• Learn, coach and continuously grow
• Use AI to be more productive, never to fake the story

Those are not posters in the lobby. We hire against them, we retain people and clients who live them, and we fire the ones who do not. If I signed this deal, I would be breaking at least three of my own values for one check, and asking my team to do the same.

That is the moment most founders never plan for. Values are easy to print on a wall. They are free right up until the day honoring them costs you a deal. And if you do not actually make decisions around your values, you do not have values. You have words on a wall.

The trust gap is the whole business case

People are using AI everywhere, and trusting it less as they do. The most comprehensive global study on the subject, conducted by the University of Melbourne with KPMG, involving more than 48,000 people across 47 countries, found that while 66% of people now use AI regularly, fewer than half are willing to trust it. Trust has gone down as adoption has gone up.

It shows up in how people consume content, too. In a 2025 consumer survey reported by Search Engine Land, more than 80% of consumers said they want AI-generated content labeled, and the demand was highest for video at 91%. Gartner found that 53% of consumers distrust AI-powered search results.

Read that as an operator. Your audience can feel fake, and when they suspect it, they pull back. So when a client asks you to fake the thing your reputation is built on, the question is not only “is this right?” It is “is this even going to work?” Faking the story to save time is how you spend trust you cannot easily earn back.

AI belongs in the workflow, not in the story

I want to be clear, because this gets flattened into “AI bad.” We are not anti-AI. One of our values is to use it to be more productive. We use it to move faster, organize footage, draft and plan. The line we hold is simple. AI can support how we make the work. It does not get to invent the human at the center of it.

A real story has things you cannot prompt into existence. The pause before someone tears up. The laugh that was not scripted. An actor reading lines about a franchisee’s first location is not that. It is a commercial pretending to be a testimonial, and people can tell. AI can create content. It cannot create a connection.

The practical takeaway for any operator: separate the two uses out loud. Decide where AI makes you faster, and draw a bright line at the place where it would make you fake. Write that line down before a client offers you money to cross it.

Saying no is a filter, not a loss

So I called the brand back. I told it that if it needed actors and fake people, we were not the right partner, and I could not break our values to win the deal. I braced for the person on the other end to be upset. Instead, the line went quiet, and the board would have to be consulted.

Then came the three hours. I doubted everything. We have bills, I kept thinking. I should have just done it.

The phone rang. The board, I was told, loved that we were the only vendor who held the line on our values. It signed.

I do not tell that story because it always ends with the check. Sometimes you walk and the deal is just gone. I tell it because your values are a filter, and you have to actually use them on both sides of the business. You hire, fire and retain your team by them. You take and turn away clients by them. That is the only thing that makes them real, and it is exactly what the right partners are looking for proof of.

Hold your line, especially when you cannot afford to. Tell your real story over and over until the people who want a real partner can find you in the noise. The check is not the reward. The reputation is. Go define your line before someone offers to buy it.

I spent three hours staring at my phone, certain I had just made the dumbest decision of my career. We were low on revenue. We had bills. And I had just told a franchise brand, on the verge of signing a deal worth roughly $100,000, that we would not do the work. My heart was racing. A voice in my head kept repeating the same thing: you idiot, you should have just said yes.

Here is how I got there, and why that phone call ended up being one of the best things that has happened to my company.

Values are free until the day they cost you something

We had been working toward this deal for a while. The franchisor wanted its stories told, and telling real stories is the whole reason Franchise Filming exists. We have not used AI to fabricate a single video since we started in 2020. We use it to enhance our work, never to manufacture it. No fake people, no invented testimonials.

This as-told-to story is based on a conversation with 27-year-old Evelin Herrera, founder and CEO of EHVM Apps Capital, an M&A firm working exclusively with mobile app businesses. Founded in 2025, EHVM Apps Capital closes up to 25 mobile app M&A deals a month. Currently, the firm manages about $500 million in active deal value. The piece has been edited for length and clarity.

I worked in apps for five years, doing both marketing and business development, so I got to know different players in the industry by attending conferences and talking with companies nonstop. Also, I never had a home base; I had an Excel sheet of all the companies that I wanted to meet on Earth, about 30,000. I wanted to travel and meet as many as possible. Eventually, that led to meeting very high net worth individuals. One of them asked me if I could get him some companies to buy in the mobile app industry because he didn’t know anyone. That’s how my business started.

M&A: The chance to become a millionaire faster

With M&A, from day one, it was a different connection with founders — because it’s giving them the chance to become millionaires or multi-millionaires. It’s different from raising VC, where maybe you can achieve success 10 years from now. In M&A, you can close the chapter and materialize your success tomorrow or six months from now. M&A for consumer tech wasn’t as well-known. Everyone saw consumer tech more like You can only achieve a big exit if you’re Spotify. But actually, if you’re a small music app, you can also secure a really good exit. 

The business is fully bootstrapped. I had some savings from my previous full-time job, and that was it. We have two full-time employees in addition to freelancers and consultants. 

Through talking about this on social media, I built two funnels. One was for buyers from LinkedIn, so more corporate. And then from X, it was more founder-to-founder. Like, “Hey, I’m building this company. Today I saw this. Today I spoke with this founder. We are doing a founder’s dinner.” So it was community building on X.

Our focus on mobile app companies only is an advantage. We don’t do commerce, SaaS. We don’t try to do it all and accept any client. Just apps. Also, it’s not simple enough to be an app; you must have good metrics and not be a copy of another app.

Managing half a billion dollars in active deal value

EHVM Apps Capital is managing half a billion dollars in active deal value. I’ve unlocked that milestone by focusing on the firm’s service and results — because people talk. Particularly in smaller industries, everyone knows each other. So for us, every time we close one deal, we get five to 10 referrals. Roughly 60% to 70% of our deals are through referrals, and then the rest through inbound. 

Another valuable strategy is meeting people in person. Right now, we’re touring 22 cities in four to five weeks, and I’ll be meeting 50 CEOs many other industry players haven’t met before. An additional secret is, if I’m at a table of five, I want to have at least one or two people who already work with me, either on the buy or sell side, who can advocate for my services. 

Making a case to major players as a young founder

One of the biggest challenges is when we talk with investors in different Fortune 500 companies and public companies and try to convince them that this industry is worth their time and investment. You might get a music app that wants to be sold to Spotify. But Spotify might see it as, “Oh, this is a very small business. Nothing new for me.” 

Also, I’m 27 years old, and my team members are 25, 26, so sometimes people see us and make judgments on age and gender or how we talk, because I don’t speak as formally as a typical corporate leader. 

Educating founders on the mobile app industry

Another challenge is educating founders. Now with social media, so many people post YouTube videos claiming they became millionaires overnight. Maybe, but you also paid 50% of that in taxes. There are so many details people leave out. Also, the App Store takes 30% of your revenue. So right away you have a 30% tax. If you’re just starting, they have some small business programs that take 15%, but as soon as you get big, they charge 30%. 

AI is making the market more competitive too. For an app that has one use case, like you take a picture of your food and get the nutrients, that’s so easy to develop. To create a business 15 years ago, you needed to provide much more value than today. Now, you have influencers selling an ebook that they created with AI for $150. And then you have apps that have one functionality charging $29 per month on subscription.

M&A is a finance business that hinges on relationships

EHVM Apps Capital relies more on automations than AI. For instance, when we get an NDA signed it notifies the team, or when we sign a new agreement it prepares a potential list of buyers, and so on. But AI itself for us, I only see that it decreases value. If I create an AI summary and send it to my team, they don’t read it. They give it to their AI to give them a summary. And then it’s just communication through AIs. I need my team to use their brains. 

M&A is a finance business, but it’s also a relationship business. If I send you an AI document that I didn’t clean up first myself, I’m putting the work on you to go through AI slop. I don’t like to run our process based on AI. I run it based on knowing who’s on the buy side and what they want to see. We also customize material depending on the reader, and so on. 

Why every Fortune 500 company should have a mobile app

Looking ahead, I want every single Fortune 500 company, public company to have their own mobile app business because it makes so much sense. If you’re any business that doesn’t have an app, you’re not interacting with your users daily. An app is the only way of interacting daily because everyone uses their phone for hours every single day. It doesn’t matter if you’re retail, experiences, pretty much anything — it’s the only opportunity that you have to have daily touch points. And that’s so crazy valuable. It’s the only way to become part of people’s lifestyle. 

The industry is only getting bigger, and entrepreneurs interested in breaking into it should talk to people who have been doing this for five years. Then decide if you want to be a seven-figure, eight-figure or nine-figure business, because it’s a totally different path, and there are only a few apps that hit the $1 billion range. Deciding that upfront can help you come up with your vision as a founder. Maybe you want to build a portfolio company and have 10 apps in health and fitness, or maybe you bet on one to become a $200 million company. That’s very important. The execution is completely different depending on your goal: the team, the vision, the audience. 

This as-told-to story is based on a conversation with 27-year-old Evelin Herrera, founder and CEO of EHVM Apps Capital, an M&A firm working exclusively with mobile app businesses. Founded in 2025, EHVM Apps Capital closes up to 25 mobile app M&A deals a month. Currently, the firm manages about $500 million in active deal value. The piece has been edited for length and clarity.

I worked in apps for five years, doing both marketing and business development, so I got to know different players in the industry by attending conferences and talking with companies nonstop. Also, I never had a home base; I had an Excel sheet of all the companies that I wanted to meet on Earth, about 30,000. I wanted to travel and meet as many as possible. Eventually, that led to meeting very high net worth individuals. One of them asked me if I could get him some companies to buy in the mobile app industry because he didn’t know anyone. That’s how my business started.

M&A: The chance to become a millionaire faster

With M&A, from day one, it was a different connection with founders — because it’s giving them the chance to become millionaires or multi-millionaires. It’s different from raising VC, where maybe you can achieve success 10 years from now. In M&A, you can close the chapter and materialize your success tomorrow or six months from now. M&A for consumer tech wasn’t as well-known. Everyone saw consumer tech more like You can only achieve a big exit if you’re Spotify. But actually, if you’re a small music app, you can also secure a really good exit. 

China’s Alibaba on Sunday launched a HK$80-billion ($10.2 billion) share placement to fund artificial intelligence-related development.

A deal by the Chinese e-commerce and cloud computing giant would mark the largest-ever primary follow-on offering by a Hong Kong-listed company.

It would rank as the world’s third-largest primary follow-on share sale this year after offerings from Alphabet and Intel.

The company said it intends to use 100% of the net proceeds from the placement to invest in its “full stack” AI capabilities, a category that includes chips, infrastructure and the development and deployment of AI models.

A term sheet reviewed by Reuters showed Alibaba planned to sell 710 million ordinary shares at HK$112.70 a share. That represented a 3.6% discount to its most recent closing price.

In its announcement for the $10.2 billion share placement, Alibaba did not disclose additional details on its investment plans by category of its planned AI-related investment.

It did not comment beyond its regulatory disclosure.

Last week, Alibaba reported its results for the April-to-June quarter, saying it had already spent nearly half of its three-year capex investment plan. It said its expected payback on AI-related investments was on track to fall to 2.5 years from three years, driven by surging demand.

Alibaba’s net profit for the quarter fell 75% from a year earlier as it ramped up its AI-related capital expenditures.

“In order to be able to capture that future growth, we first need to make these ​capex investments to build out the necessary compute capacity,” CEO Eddie Wu said on an earnings call.

The company’s share offering has been met with strong demand from investors, including sovereign wealth funds, two people familiar with the deal told Reuters. They could not be named because the information was not public.

Alibaba increased the size of the offering after the deal was oversubscribed, the people familiar with the matter said.

Morgan Stanley, HSBC, UBS and CICC are serving as joint bookrunners of the Alibaba offering, said one of the sources and a third person with knowledge of the matter. The banks did not immediately respond to a Reuters request for comment.

The share placement was not registered under US securities laws as an offshore transaction, meaning American investors were not eligible to participate, Alibaba said.

Since 2022, the global AI boom has fueled staggering capital outlays on infrastructure and data centers, including in the U.S. and China.

The four major U.S. hyperscalers – Microsoft, Amazon, Alphabet and Meta – together are expected to spend roughly $725 billion in capital expenditures in 2026, much of it tied to AI data centers, chips and cloud infrastructure.

A tenant in a downtown high-rise reports a broken HVAC unit at 6:45 a.m. Before the property manager’s office opens, the tenant has already asked an AI assistant which local vendors handle emergency repairs and messaged one of them. The building’s own contractor never came up. That’s the new customer journey: compressed, automated, often over before anyone on the business side knows it started.

The old model, awareness leading to consideration leading to conversion, assumed people moved through a funnel at human pace. Today, ChatGPT, Google’s AI Overviews and voice assistants collapse that sequence into one exchange.

Businesses aren’t just competing for search rankings anymore. They are competing to be the answer an algorithm decides to give — a shift that’s already reshaping how companies think about visibility.

The shift in discovery: From search engines to AI interfaces

Property managers, contractors and infrastructure firms used to win business by ranking on page one. Now users ask a question and get a synthesized answer with no list of links to scroll through. Fewer clicks reach any single website, even the one whose data trained the response.

Being cited now counts more than being ranked. Organic click-through rates have dropped sharply wherever AI Overviews appear on a search page, meaning visibility without citation is close to invisible.

Understanding how AI systems choose citations is becoming as important for a facilities contractor or a real estate brokerage as domain authority once was for SEO.

Visibility alone is no longer enough

Getting mentioned by an AI system doesn’t guarantee a closed deal. Traffic still doesn’t equal conversion.

• Slow response times or clunky contact forms push prospects toward the next name on the AI-generated list.
• Customers expect answers around the clock, not just during a leasing office’s posted hours.
• Roughly 80% of consumers now rely on AI-generated answers for a large share of their research, and unprepared businesses see significant traffic and revenue erosion.

A property developer can win the citation and still lose the client if intake stalls.

The new bottleneck: Lead response and conversion speed

Once discovery happens, speed decides the outcome. A prospective tenant, a homeowner needing an electrician, or a commercial buyer evaluating a grid-upgrade contractor typically contacts more than one provider at once.

Contacting a prospect within minutes rather than hours dramatically increases the odds of qualifying them, and most companies still respond far too slowly to compete. A missed call during a power outage or a delayed reply to a maintenance request doesn’t just cost one job. It signals that a competitor answers faster, which shapes future recommendations as well.

AI-powered conversion: Turning attention into action

This is where automation earns its keep. AI answering systems, chat interfaces, and voice agents now handle the first touch instantly, day or night, across shift changes that used to leave phones unanswered.

The shift is already visible as businesses move from chatbots to full agentic workflows that qualify and route leads without waiting on staff availability. Legal and professional service firms are among the fastest adopters. Many are turning to AI-powered client intake systems so no inquiry sits unanswered after hours — a lesson that applies just as directly to leasing offices and infrastructure contractors fielding urgent requests.

The AI-powered funnel: Discovery + conversion integrated

Treating discovery and conversion as separate problems is the mistake. The two now function as one system. A prospect asks a question, gets an answer that includes a business, and expects the next step (scheduling, pricing, or a callback) to happen just as fast.

A grid-repair contractor cited by an AI assistant but slow to schedule a site visit loses the job to a rival with a faster intake process, regardless of who ranked higher.

Who wins in this new model?

Some sectors feel this shift first because their customers already expect real-time answers.

Service businesses like legal, healthcare and home services depend on intake speed as much as reputation. At T-Mobile, AI now handles half of customer calls, freeing staff for complex cases.

Ecommerce benefits from AI recommendations paired with instant checkout support, shortening the path from question to purchase.

Local and infrastructure-adjacent businesses, from HVAC repair to power-grid contractors, gain most from voice and AI discovery because customers search in moments of urgency.

What businesses should do now

Founders and developers don’t need to overhaul everything at once, but a few priorities separate businesses gaining ground from the ones losing it.

• Optimize content and data structure for AI systems, not just Google rankings.
• Cut response time with automation, even though some chatbot deployments still frustrate customers when companies prioritize deflection over resolution.
• Align marketing claims with operational capacity, since a promise of 24/7 service only helps if the backend can deliver it.
• Build around user intent rather than keyword lists, especially for urgent, location-specific requests common in real estate and infrastructure services.

The Future: Real-time, AI-driven customer journeys

Predictive engagement is coming next. Systems will anticipate a maintenance request before a tenant files one, based on equipment age or usage patterns, and route it automatically.

Personalized AI responses will replace generic scripts, and fully automated funnels will handle both the question and the transaction, with AI agents managing discovery and conversion as one continuous process rather than two separate departments.

The new competitive advantage

Visibility gets a business noticed. Speed converts the customer who noticed it. Neither works well without the other, and AI is now the connective layer between them, deciding who gets mentioned and how fast that mention turns into action.

For founders and operators managing physical infrastructure where delay carries real cost, the task ahead is straightforward: Treat discovery and response as one pipeline, measured on the same clock. The businesses that own both ends, not just the ones that rank well, will set the pace for the next decade.

A tenant in a downtown high-rise reports a broken HVAC unit at 6:45 a.m. Before the property manager’s office opens, the tenant has already asked an AI assistant which local vendors handle emergency repairs and messaged one of them. The building’s own contractor never came up. That’s the new customer journey: compressed, automated, often over before anyone on the business side knows it started.

The old model, awareness leading to consideration leading to conversion, assumed people moved through a funnel at human pace. Today, ChatGPT, Google’s AI Overviews and voice assistants collapse that sequence into one exchange.

Businesses aren’t just competing for search rankings anymore. They are competing to be the answer an algorithm decides to give — a shift that’s already reshaping how companies think about visibility.

Almost every dealership owner right now is hearing the same warning: get on AI or get left behind. So they move fast. A chatbot on the website. A scheduling assistant in service. Another tool for sales. One for texting. Another for marketing.

On their own, most AI solutions do exactly what they’re supposed to do. The problem is that these tools rarely share context with each other, so they usually don’t know what the others already know. That’s where customer experience starts to break down.

Every new AI tool creates another customer touchpoint.

If those touchpoints don’t work together, customers feel it.

Whether you sell cars or software, the goal isn’t simply to add AI. It’s to create a customer experience that feels connected from beginning to end. Here are five ways to get there.

Shop your own business

Before you think about adding another AI tool, become your own customer. Visit your own website, fill out the form, ask your bot the question a nervous first-time buyer would ask. You’ll quickly discover whether the experience feels seamless or stitched together. Maybe the chatbot asks for information the customer has already entered. Maybe the follow-up email arrives hours later, or the salesperson has no idea which vehicle the customer was looking at.

Individually, these moments seem minor. Together, they shape how customers judge your business.

Shop your own store like a stranger, and do it often, not once. Whatever you sell, spending one hour as your own customer will answer half your AI questions before you spend a dime.

You’ll learn more from one hour as your own customer than from a month of vendor demos.

Build accountability before you build automation

AI should make good decisions, not every decision. That starts with clear ownership and accountability.

Every AI tool should have an owner.

Too often, businesses buy AI, turn it on and expect it to run itself. But AI isn’t a “set it and forget it” technology.

Someone should be responsible for making sure the information it’s using is accurate, that promotions are current, that pricing changes are reflected and that responses still match how the business wants to communicate with customers.

Just as you coach employees, AI needs oversight. It should be reviewed, tested and updated regularly.

That also means checking how it performs over time. Are customers getting the answers they need? Is it escalating conversations appropriately? Is it reflecting changes to inventory, pricing and promotions? Like any member of your team, AI performs better when someone is responsible for it.

Pick one story and stick to it

One of the fastest ways to lose trust is conflicting information.

A promotion on your homepage doesn’t match what’s in a text message. The chatbot quotes something different than your sales team. Service has no idea what happened online.

Every AI tool becomes another voice speaking on behalf of your business. Before adding another one, make sure they’re telling the same story. Customers don’t know which system generated the message. They only know your dealership gave them conflicting information.

Trust is difficult to earn and easy to lose. If customers have to stop and wonder which message is correct, they’ll start questioning the overall experience.

Think beyond the feature you’re buying

It’s easy to evaluate AI one feature at a time.

Will this answer chats?

Will this schedule appointments?

Will this write emails?

Those are important questions. But the more important question is what happens after the tool does its job.

Before buying another AI tool, ask a different question: What happens after this tool does its job? Does the information flow into your CRM? Can sales, service and marketing all see it? Or have you simply created another silo? The feature may work exactly as advertised, but if it can’t share context with the rest of your business, you’ve created another disconnect.

Design for continuity

Nobody wants to introduce themselves twice. Customers shouldn’t have to start over simply because they moved from your website to a text conversation, or from sales to service.

The goal isn’t to give every department its own AI.

The goal is to create one customer experience, even if multiple systems are working behind the scenes.

The best AI is almost invisible. Customers shouldn’t have to think about which tool they’re interacting with or whether they’re talking to a bot or a person. They should simply feel like your business remembers who they are and picks up where the last conversation left off. That’s what great customer experience has always been about.

AI will continue getting better. New tools will keep arriving. But at the end of the day, customers don’t walk away asking for your AI strategy. They leave remembering whether it was easy or difficult to do business with you. That’s the question every AI investment should answer.

Almost every dealership owner right now is hearing the same warning: get on AI or get left behind. So they move fast. A chatbot on the website. A scheduling assistant in service. Another tool for sales. One for texting. Another for marketing.

On their own, most AI solutions do exactly what they’re supposed to do. The problem is that these tools rarely share context with each other, so they usually don’t know what the others already know. That’s where customer experience starts to break down.

Every new AI tool creates another customer touchpoint.

Every owner enjoys seeing a profitable year. It validates years of hard work, reassures stakeholders and creates confidence that the business is moving in the right direction. Yet one of the biggest surprises I see in private markets is how often profitable companies struggle to attract premium valuations.

The assumption is understandable. If profits are growing, surely the business must be worth more. Unfortunately, buyers, lenders and institutional investors rarely see it that way.

Profit explains what happened last year. Value reflects what someone believes can happen after ownership changes. That difference is where many businesses unintentionally leave money on the table.

Profit is an accounting outcome. Value is an underwriting decision.

A company’s income statement may show healthy margins, consistent EBITDA and year-over-year growth. Those numbers matter, but they are only the beginning of the conversation.

Acquirers spend far more time asking a different question: “How confident are we that these earnings will continue after closing?” That single question changes the entire discussion.

A business earning $15 million of EBITDA may receive dramatically different offers depending on how buyers assess the quality of those earnings. The headline number is identical. The perceived risk is not.

Value is ultimately a judgment about future cash flows, not a reward for historical profitability.

Buyers don’t purchase yesterday’s earnings

Owners naturally focus on what they have achieved. Buyers focus on what they are inheriting. That distinction sounds subtle until a transaction begins.

During diligence, profitability is dissected from every angle. Revenue concentration, customer retention, supplier relationships, pricing power, recurring demand, working capital needs, management depth, reporting quality and capital expenditure requirements all become part of the underwriting process.

Suddenly, the conversation shifts away from “How profitable is the company?” toward “How dependable are these profits?”

Those are very different questions.

It’s a little like buying a rental property. The current rent matters, but so does the condition of the building, the quality of the tenants and whether the income is likely to continue after the keys change hands. Businesses are no different.

What creates enterprise value beyond profit?

Several characteristics consistently separate companies that merely report profits from those that command premium valuations.

Cash conversion:

Accounting profits are important, but lenders and investors ultimately finance cash generation.

If EBITDA consistently turns into operating cash flow, confidence increases. If cash is perpetually tied up in receivables, inventory or unexpected capital expenditures, profitability becomes less convincing. Healthy cash conversion demonstrates operational discipline rather than accounting success.

Earnings durability:

One exceptional year rarely defines enterprise value. Institutional buyers want confidence that earnings can withstand changing market conditions.

They examine customer contracts, retention rates, pricing flexibility, backlog, recurring revenue and competitive positioning.

The real asset is not last year’s earnings. It is the likelihood of earning them again.

Management depth:

One uncomfortable truth appears repeatedly in privately held businesses: The more indispensable the owner becomes, the less transferable the business often is.

If every major customer relationship, hiring decision, pricing negotiation and strategic choice depends on one individual, buyers inherit dependency rather than infrastructure.

Ironically, the owner who built the business can unintentionally become its biggest valuation discount.

Financial visibility:

Sophisticated buyers dislike surprises more than imperfect performance. Reliable monthly reporting, realistic forecasting, clear KPIs and disciplined financial controls reduce uncertainty. Uncertainty almost always carries a financial cost.

One investment banker once joked that every missing report eventually finds its way into a lower purchase price. While perhaps an exaggeration, the principle is difficult to argue with.

The hidden cost of looking better than you are

Many businesses spend significant effort making profitability appear stronger. Adjustments are reasonable when they reflect genuine one-time events. But there is a fine line between explaining earnings and stretching them.

Every seller believes the add-backs are perfectly reasonable. Buyers have an impressive ability to become forensic accountants the moment those adjustments appear.

The issue is not whether adjustments exist. The issue is whether they improve credibility or reduce it. Trust is difficult to rebuild once buyers begin questioning the financial story.

A better question for owners

Owners often ask: “How can I increase my valuation?”

I think a better question is: “What would make a sophisticated buyer more confident in the sustainability of my earnings?”

That shift changes management priorities.

Instead of chasing short-term accounting improvements, businesses begin strengthening the characteristics that institutional capital actually rewards.

That may include reducing customer concentration, strengthening reporting systems, building management depth, improving working capital discipline or documenting repeatable operating processes.

These initiatives rarely create overnight profits. They often create something more valuable: confidence.

A practical framework

Before assuming profitability will translate into value, management teams should ask themselves five questions:

1. Would earnings remain stable if the owner stepped away for six months?
2. Does EBITDA consistently convert into operating cash flow?
3. Are customers diversified enough that losing one account would not materially change the business?
4. Can management explain the monthly financial performance without relying on informal knowledge?
5. Would an outside investor understand how the business creates sustainable cash flow within a few weeks of diligence?

If several answers are uncertain, the business may be profitable without yet being fully institutionalized. That distinction matters.

Profitability earns attention. Business quality earns confidence. Confidence earns premium valuations.

The companies that attract the strongest buyers are not always the ones reporting the highest earnings. More often, they are the ones whose earnings appear understandable, repeatable, transferable and capable of surviving well beyond the current ownership team.

Profit tells the story of the past. Value reflects how believable the future looks. For owners considering growth, outside capital or an eventual exit, that difference is more than semantics. It is often measured in the price the market is ultimately willing to pay.

Every owner enjoys seeing a profitable year. It validates years of hard work, reassures stakeholders and creates confidence that the business is moving in the right direction. Yet one of the biggest surprises I see in private markets is how often profitable companies struggle to attract premium valuations.

The assumption is understandable. If profits are growing, surely the business must be worth more. Unfortunately, buyers, lenders and institutional investors rarely see it that way.

Profit explains what happened last year. Value reflects what someone believes can happen after ownership changes. That difference is where many businesses unintentionally leave money on the table.