The 5 Financial Drivers That Make or Break Your Valuation

By Dr. Aaron Mahl, EVP Business Development, iTValuations

At ITValuations, we often say that financials tell a story. Not a fictional one—but a story rooted in operational truth. And when that story is unclear, disorganized, or incomplete, it significantly diminishes a company’s perceived value in the eyes of a buyer.

During our latest webinar in the Value Driver Series, I sat down with Greg Northrop, our Director of Tax and Finance, and Brandi Bonds, CFO and Partner at Next Level Now, to walk through five critical financial drivers that directly impact valuation.

Here’s a quick rundown of what we covered—and why these metrics should be on every MSP leader’s radar.

1. AP Aging: How You Pay Tells a Story

Your Accounts Payable aging doesn’t just reflect operational habits—it signals financial discipline. Buyers interpret late vendor payments as potential signs of cash flow issues or poor vendor relationships. Brandi stressed the importance of consistency: if you’re going to change habits, you need 3-6 months of clean data to show progress. Pro tip: aim to pay within 60 days or whatever terms you’ve agreed to—don’t eat up cash by paying too early, but don’t let AP become a liability either.

2. Cash Conversion Cycle: Synchronize Your Inflows and Outflows

Think of this as the flip side of AP aging—it’s how fast you collect what you’re owed. The goal? A cash conversion cycle that matches receivables to payables so that cash is in hand before expenses hit. Greg pointed out that companies with good cash conversion often show higher financial discipline across the board—greater attention to pricing, costs, and EBITDA. Start here, and you’ll likely see a ripple effect across your entire P&L.

3. Financial Rigor: Accuracy, Consistency, and Locking Periods

If your books aren’t closed monthly, your periods aren’t locked, and you’re still operating on a cash basis, it’s time to level up. As Brandi shared, financial rigor isn’t just about how you close the books—it’s how well you understand what’s driving your profitability. Poor expense classification, missing cost of goods sold, and messy segmentation are red flags. Clean books help tell a story that earns trust—and valuation.

4. EBITDA Volatility: Predictability Drives Premiums

Volatility in earnings signals risk. Whether it’s due to seasonality or one-time events, buyers want to see consistency. Brandi explained how GAAP-based financials normalize performance by removing the noise of irregular cash flows. And if seasonality is part of your business, show the trend—don’t hide it. Use EBITDA trends as a diagnostic tool to ask better questions and explain deviations clearly.

5. Rule of 40: The Gold Standard for Growth and Profitability

This simple formula—revenue growth % + EBITDA %—is shorthand for operational maturity. Top-performing MSPs hit or exceed the Rule of 40, but very few do it consistently. As Greg noted, it’s not just about growth at all costs. Scaling businesses grow revenue and margin. The most successful companies track this metric monthly, using it as an early signal that something in the business may be off-track.

Why This Matters Now

For MSPs exploring a future sale—or just looking to become more financially mature—these five drivers are a solid foundation. As Brandi put it, “We don’t go into business just to say we’re a $10 million company. We go into business to say, ‘We made an impact—and we were profitable doing it.’”

Whether you’re looking for a valuation today or planning ahead for tomorrow, focusing on these areas will help you tell a more compelling, fact-based financial story. And when it comes time to go to market, that story is what buyers are really investing in.

 Want to dig deeper?

• Schedule a walkthrough of our Valuations-as-a-Service (VaaS) tool here.
• Check out our upcoming webinars here.

Let’s make your business more valuable—starting with your financials.