The Overlooked Driver Behind Premium Valuations

When owners begin planning to sell their company, the conversation often starts with financial metrics — revenue, margins, and profit growth. These are essential markers of business health and do influence valuation. However, there’s another critical component that can significantly impact the sale price but is often overlooked: intangible capital.
While intangible assets don’t appear on the balance sheet, they can represent as much as 80% of a business’s value…  especially in premium, best-in-class companies. Recognizing and developing these assets early in the planning process can give business owners a powerful edge at the time of exit.

Understanding the Hidden Multiplier

Valuations typically start with earnings and apply a multiple based on market conditions and industry benchmarks. But why do some companies in the same sector sell for a much higher multiple than others?
The answer often lies in the strength of the company’s intangible capital — the internal and external assets that make the business scalable, resilient, and desirable to buyers.

The Four Cs of Intangible Capital

Business owners who want to increase their company’s value (or simply run a more efficient, rewarding business) should focus on developing four key forms of intangible capital:

• Human Capital
  This refers to the talent, leadership, and capabilities within the organization. Buyers look closely at who is in place to run the company when the owner steps away.
  A strong management team, supported by rising talent, creates confidence that the company will continue to perform. If the business runs smoothly without daily owner involvement, it’s more scalable and more valuable.
• Structural Capital
  These are the systems, processes, technologies, and documented workflows that keep the business running.
  When a company is dependent on unwritten knowledge or ad-hoc practices, it introduces risk. But when operations are repeatable and well-documented, buyers see stability and potential for growth.
• Customer Capital
  This includes customer relationships, loyalty, and retention. It’s not just about having a roster of clients… it’s about being indispensable.
  If your company provides something critical that clients can’t easily replace, and you’ve built long-term agreements or partnerships, it signals high value. Additionally, businesses that know which products or clients are most profitable can sharpen their focus and improve margins.
• Social Capital
  This represents company culture, reputation, and brand presence. Buyers consider the internal cohesion of your team and the external perception of your brand.
  A strong culture helps retain talent, while a trusted brand helps attract customers. Both increase long-term value

Why Intangible Capital Matters to Buyers
Intangible capital directly affects buyer confidence. If a buyer sees that the business is heavily reliant on the owner, or lacks depth in its team or systems, they’ll discount the valuation or walk away.

But if the company shows it can operate and grow independently of the owner, buyers see a lower-risk, higher-reward investment. In competitive sale environments, this can lead to higher offers and better deal terms.

Real-World Example

One of the most common issues buyers raise is leadership succession. If an owner plans to exit soon, the first question is: “Who will run the company?”
By having a strong second-in-command or a leadership team in place, sellers can proactively address this concern — and often, drive higher value in the process.

Conclusion

If you want to command a premium when you exit your business, focus not just on profits but on the intangible value that supports those profits. Build a team that can lead, systems that scale, client relationships that stick, and a culture that attracts and retains talent.

These are the assets that make your business more than a paycheck — they make it a marketable, transferable company that works without you. And that’s what buyers are ultimately looking for.

Certain Members of Osage Advisors are Registered Representatives of and conduct securities transactions through StillPoint Capital, LLC, Tampa, FL. Osage and StillPoint are not affiliated.

Osage Advisors provides a lot of guidance in the M&A market here on our blog and on our YouTube channel and Podcast.