FinanceValuation
The 7× Decision
Also known as: Multiple-weighted decision, exit-year operating decision
Every recurring operating cost in the years before a sale gets multiplied by the deal multiple. A $26K annual savings is worth $182K at 7×. Founders do one-year math. Buyers pay seven-year prices.
WHY IT MATTERS
Operating founders evaluate decisions on a one-year frame: revenue this year, expenses this year, cash this year. A $26K vendor savings feels small. Buyers evaluate businesses on a multiple of EBITDA. At 7×, the buyer pays for seven years of current earnings at closing. Every dollar of recurring savings that shows up in trailing-12-month EBITDA gets multiplied seven times. Every dollar of recurring cost that could have been eliminated also costs seven times. The 7× Decision applies across the entire operating cost structure: vendor pricing unbid for five years, insurance premiums on auto-renewal, overlapping SaaS subscriptions, above-market rent on a relationship lease. None feel significant individually. All recur. All get multiplied. The improvements need at least 12 months to show up in run-rate EBITDA, which means the margin enhancement review needs to start 2–3 years before exit. A corporate finance analyst would call it a margin enhancement review. Founders should call it the most leveraged project they'll ever run.