Run Your Business Like an Investor, Not Just an Operator
Turning every decision into a multiple upgrade and a tax-efficient exit
The first time I sat with a founder who had “done everything right” yet still sold for only 2.4× trailing cash flow, it was painfully clear: most owners treat their companies like salaries with overhead, not like assets with equity value. The market punishes that myopia every single quarter. In Q2 2025 alone, BizBuySell’s live listing feed shows median asking-price-to-cash-flow multiples orbiting 3.1× across America’s top metros—but individual deals swing from barely 2× to well over 6× based almost entirely on whether management behaves like investors or operators. (BizBuySell)
Why does the spread matter?
Because each additional “turn” of multiple is pure leverage on your net worth. If a $1 million EBITDA business commands 4× instead of 3×, that’s an instant $1 million delta in enterprise value—roughly the amount a high-earning W-2 employee would need five or six years to bank after taxes. Private-equity buyers have known this since the 1980s, and the data still confirms it today: sub-$1 billion buyouts close at a median 12.8 times EV/EBITDA, versus 15.5 times for larger platforms, creating a significant spread for roll-ups that professional investors capitalize on every day. (PitchBook)
But multiples only tell half the story.
The other half is the after-tax story.
The IRS left the top ordinary bracket at 37 percent for tax year 2025, while the top long-term capital-gains rate, even after the 3.8 percent NIIT, caps out near 23.8 percent. (IRS, IRS) Swap “salary” dollars taxed at 37 percent for exit dollars taxed at 23.8 percent, and your effective return jumps by 21 percent without lifting a finger in operations. Layer in the 20 percent Qualified Business Income (QBI) deduction—still alive but scheduled to sunset after December 31, 2025—and the spread widens further for pass-through entities. (IRS)
Astute owners are also leaning on state-level pass-through entity taxes (PTETs). Thirty-six states now allow an S-corp or partnership to pay its owners’ state tax at the entity level, thereby dodging the $ 10,000 SALT cap that still limits Schedule A. PTET adoption alone often recovers two to four percentage points of margin—enough to nudge valuation models up another quarter-turn. (Tax Foundation)
Then there is Section 1202, the sleeper clause that can zero out up to the greater of $10 million or 10 times the basis in gain on qualified small-business stock. Congress is considering reducing the holding period from five to three years, but the 100 percent exclusion has survived the latest round of markups intact. (Congress.gov) Combine 1202 with an S-to-C toggle three years before exit, and suddenly, the same founder who used to bleed at 37 percent sells for an effective rate approaching single digits.
Estate planners are equally busy. The annual gift-tax exclusion has increased again—to $19,000 per donee in 2025, with a lifetime exemption of $13.99 million and a legislated bump to $15 million (indexed), rather than the previously slated halving for 2026. (Kiplinger) Gift a sliver of non-voting shares today, freeze future appreciation outside your estate, and those incremental valuation “turns” compound tax-free for heirs.
A Tale of Two Owners. Ella vs. Marcus
On a humid Thursday in Austin, two founders with virtually identical SaaS companies grabbed coffee across the street from each other—and unwittingly charted opposite financial destinies.
Ella, laptop open, toggled between customer-support chat and code commits, proud of the grind that kept revenue climbing toward $3 million. She paid herself handsomely, expensed a Tesla, and figured a future acquirer would “see the hustle.” However, when a strategic buyer finally approached, they valued her $600,000 EBITDA at 3.2 times. Because the deal was an asset sale, the IRS treated the bulk of the proceeds as ordinary income. After federal, state, NIIT, and broker fees, Ella wired her bank account roughly $1.2 million—just enough to cover the house she wanted but not the freedom she’d imagined.