The 7× Decision

Ed's supplier is a man named Dave Brzezinski who runs a mechanical equipment distributor out of a warehouse in Solon. Ed has bought equipment from Dave for 22 years. Dave was at Ed's 50th birthday party. Ed was at Dave's daughter's wedding.

Dave's markup to Meridian is above market. Ed knows this because Dave told him years ago, on a handshake. The markup is fair for what Dave provides — emergency inventory, 3 a.m. response on hospital chillers, an invoice walked over when accounts payable has a question.

In 2023 a national distributor opened in Independence, 20 minutes away. Their quoted markup would save Meridian $26K a year, with a service level somewhere between adequate and nonexistent.

Ed ran the math. $26K. He looked at the number, thought about Dave, and stayed.

That decision was defensible in 2023. In 2025, the year Ed sells, the same decision shows up on the buyer's deduction list.

The 7× Decision

Operating founders evaluate decisions on a 1-year frame. Revenue this year, expenses this year, cash this year. A decision that costs $26K but delivers real value — a relationship, a service level, a handshake — is a decision the founder can explain to themselves.

Buyers evaluate businesses on a multiple of EBITDA. At 7×, the buyer is paying for 7 years of what the business currently produces. Every dollar of recurring earnings in the trailing 12 months gets paid for 7 times at closing.

Every dollar of missing earnings also costs 7 times at closing.

Call it The 7× Decision. Every operating choice in the run-up to a sale is not a 1-year decision. It's a 7-year decision. The multiple is the conversion rate.

The reason founders miss it is that nothing in their daily operating life trains them to think in multiples. Multiples are a capital-markets concept. Operators live in cash flow.

Where it hides

Dave's markup is one item. The pattern shows up across the operating cost structure of most founder-owned businesses.

Vendor pricing. Any long-term vendor relationship that hasn't been bid out in 5 or more years almost certainly has room. Equipment, supplies, contract labor, subcontractors, specialty services.

Insurance. GL, workers' comp, health, cyber, professional liability. Brokers don't volunteer that you've been paying above market for 3 renewals. A competitive quote costs a phone call.

Software stack. Multiple overlapping SaaS subscriptions accumulated over a decade, each small enough to ignore, each with automatic renewals. A software audit 2 years before exit will usually identify 10% to 20% that can be cut.

Rent. Owner-occupied space often drifts above market because the landlord relationship doesn't force a reset. The buyer's facilities team will have that conversation within 90 days of close.

Each is a small number. None feel like they matter. All of them recur. All of them get multiplied.

What Ready Looks Like

A founder thinking about exit 2 to 3 years out should run what a corporate finance analyst would call a margin enhancement review. The review identifies every material operating cost, benchmarks it against market comps, and flags items above market. For each, there's a plan: renegotiate, rebid, consolidate, or accept. Accepting is a real option — but the decision is explicit, not default.

The improvements need to show up in the trailing-12-month EBITDA the buyer evaluates. That means they need to be in place at least a year before diligence starts. This is why The 7× Decision is a 2-to-3-year project. Multiples apply to run-rate performance. Run-rate performance needs time to demonstrate itself.

For Meridian, none of these were true.

The Ed Moment

6 months after closing, Ed is still in the office under a transition-services agreement. The new ownership has been running its 100-day plan. Today, the procurement lead — a woman named Karen, hired by the buyer in week 3 — walks past Ed's office on her way to a meeting.

Ed knows where she's going. The bid packet went out 3 weeks ago. 3 distributors responded. Today is the decision.

He stops her in the hallway. "Dave's been with us 22 years," Ed says. "He's never let us down."

Karen looks at him. "I know," she says. "That's not what we're deciding."

By Friday, Dave is out.

What this cost Ed: $185K.

The buyer's margin review didn't stop at Dave. Insurance premiums unbid for four renewals. A software stack with three overlapping subscriptions. A facilities lease 8% above comparable space.

None of these showed up as named deductions. The buyer has no incentive to flag above-market costs — that's value they'll capture post-close. Dave was out by month three.

What the cost structure did affect was the working capital peg. A business that hasn't benchmarked its operating costs in a decade signals to the buyer that working capital needs are likely understated. Vendor terms may tighten under new ownership. Deferred maintenance on systems and contracts will need cash. The buyer's finance team moved the working capital peg $185K in their favor — not for any single cost, but because a business running on handshake economics needs more cash in the system than the trailing numbers suggest.

Ed had done the math on Dave. He had never considered what Dave's markup said about everything else.

Don't be Ed.