In this episode of Shoot the Moon, we're unpacking deal multiples in M&A transactions for tech-enabled services companies and what a seller can do to be in the higher range for these multiples.
This is a must listen for buyers and sellers!
What’s the difference between 3X and 9X in a deal?
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SUMMARY KEYWORDS
revenue, deal, growth, specialization, concentration, firms, business, multiple, buyer, enterprise, market, higher, customer, oftentimes, companies, services, growing, year, growth rate, ebit
SPEAKERS
Mike Harvath, Ryan Barnett, Matt Lockhart
Mike Harvath 00:05
Hello and welcome to this week's Shoot the Moon podcast, broadcasting live and direct from Revenue Rocket world headquarters in Bloomington, Minnesota. As you know, if you tune into Revenue Rocket's podcast, Revenue Rocket is the world's premier growth strategy and M&A advisor for tech enabled services companies. With me today are Ryan Barnett and Matt Lockhart, my partners to unpack and discuss more interesting and relevant topics to our market. And welcome Ryan and Matt.
Matt Lockhart 00:38
And good to be here it is here in the great white north in Minnesota. It's a very important time of year, because the state high school hockey tournament is literally right around the corner. And many of you out there probably are like state high school hockey, who cares? But here in Minnesota, it's a tradition. And it's one of the most exciting high school events in the country. I think, Ryan, what's going on? What are we talking about today?
Ryan Barnett 01:14
Absolutely. Yeah, the topic at hand is something we've been hearing a lot lately at Revenue Rocket when it comes to both buy side and sell side transactions for IT services companies. And that is really looking at deal multiples in M&A transactions. And I'll set the stage that typically most deals have a a valuation and a deal structure that is tied to a multiple of EBITDA and in that range, it can greatly depend but from a very, very wide standpoint, fee could be as low as 30 times EBITDA, and we've had seen deals that can be in the high teens for the button. But traditionally, if you're a, let's say, a managed service provider, and you are a kind of a normal operating company, it's pretty common to hear a range of three to nine times EBITDA. And one of the questions that we get is what makes it that I could be the nine times EBITDA compared to three? And I love to unpack that with both of you here today. And understand what are some things that can help a seller be on the higher range of these multiples? And what can buyers do to, to come to a deal that makes sense for everyone? So, Mike, why don't you get started just, what are one or two things that are what's one thing that heavily influences, whether in 3x or 9x.
Mike Harvath 02:52
While there's a bunch of stuff, Ryan, and you know, but certainly size matters, when it comes to getting an enhanced EBITDA. And profit matters, particularly as a percentage of revenue, to optimize your value, you really need to be in the top quartile your peers, and, you know, for most services firms that's kind of above 15%, even higher better. We think most firms don't really operate in that very rarefied air of low 20s. But it can be done kind of in the 20 to 23% range, particularly at scale. You know, it's a bunch of stuff here, growth matters, year over year growth, consistency and profitability, percentage of reoccurring revenue, you know, obviously, more is better, but you know, how sticky that revenue is, and, you know, how, what percentage is more subscription based or recurring? All those impacts are where the multiple goes and what people are willing to pay an enhanced multiple.
Ryan Barnett 03:58
So Mike, let's, uh, let's narrow that down a little bit. And let's focus just on size. And, Matt, feel free to hop in here. It feels like sometimes just size matters. And hear that a higher multiple is often to go with an absolute higher value. Can you break down some of the ranges that you might have seen in size?
Matt Lockhart 04:20
Well at the low end, I think that, you know, a good target is to be over a million dollars in EBITDA. Right? That's a that's that first barrier, right? And I think from there, you start to see an inflection over $3 million of EBITDA over $5 million. That'd be a bit over $8 million. It'd be but then then and then go forward. And, you know, I think that people go well, okay, well, profits profit, why does it matter? Right. And I think that important to think about is is that The greater the scale, the more demonstrated history of producing profits is there. In addition, you know, it's just less risky, it's seen as less risky. Many of the foundational land or infrastructural pieces for continued profit realization and, and an overall revenue realization are in place. The larger that, that that EBITDA sizes.
Ryan Barnett 05:36
Okay, that helps. So if I repeat that back 1 million on you, but it kind of starts in that upper mid range of the, or it helps, if you're below it, I think you get a discount. I think that's one way to say it as well. So it's not uncommon for a firm that has substantially less than $1 million in EBITDA to have a much lower range, when it starts, I think that's very important for sellers to understand that scale, here is something that that does matter. And you start to see some major jumps off, the higher that you get. It's easy for us to say that and it's I think, a lot harder for companies to execute, unless you have a measured approach and you know, organic growth, as well as organic growth to come up with and increase those numbers to get to those higher to hire multiples. But yeah, great job on size. And I think that matters a lot with both revenue and EBITDA. Ah, Mike, you you started jumping in and on profit, and you'd mentioned top quartile growth, can help you get to the higher and have those multiples. Is it simply just a matter of top quartile growth? Or top quartile performance? And EBITA? What does that mean? What is top quartile performance and EBITDA?
Mike Harvath 07:03
Well, top quartile is really, you know, versus your peers, are you in the top 25% whether that be in top line growth or improper realization. And, and, you know, the closer you get to the top of the pile, the more people are attracted to the business. And so, you know, we talk a lot about this rule of 45, where you, you know, add your, your EBITDA as a percentage to your revenue growth year over year as a percentage, and, you know, the closer you can get that number to fortify, the better, because there are some theoretical growth limits and services companies where you just can't, you know, profitably grow them all that fast, once they're over, you know, some of the threshold limits of 5 million in revenue as an example. And so, you know, if you're running your business efficiently, and you add EBITDA, to revenue growth, and you know, you're hovering around 45%, year after year, you're probably running the business pretty well, you may give up a little bit of profit to accelerate growth in some years and other years, you may grow a little slower, and it should result in an enhanced profitability picture. And that combination, you know, is a winning combination, most people will look at it and say, wow, you know, you're doing a great job growing the business 30% year over year, you're operating at 15% EBITDA, or say you're even grown at 25% and you got 20% EBITDA, you know, that's a very, very healthy business, and one that's very, very attractive to buyers. If you're too far from that rule of 45 Peg, you know, let's say you're down in the 30% or 20%, there's room for improvement. And I think most buyers are would look at you would see that, it means that, you know, your multiple likely will come will be discounted. And because there's investment that's going to need to be made post transaction. And so you know, to unpack that further, certainly we have some content on our website of revenuerocket.com Or feel free to drop us a note at info@revenuerocket.com and we'd be happy to add some color in your particular case there.
Ryan Barnett 09:17
That's, I think, helps outline both growth and, and profit percentages. I will say that another thing that gets looked at quite heavily is gross profit. And if you look at your gross profit and you're able to keep that consistent, higher rates, that starts to matter, and part of that comes into this types of services that you're offering. And the ability to to execute at the highest levels will help that gross and net profit at the end of the day. impermanent which I mentioned making that rule 45 is growth rates and part of multiples come into a few forecasted growth rates, Matt, you've done a lot of work with deals where the future growth of the company comes into that larger percentage in the deal. And we'll get ahead of ourselves a little bit. Some of this may come into deal terms. But typically, how does growth rates in the forecast help change where you sit in that EBITDA multiple?
Matt Lockhart 10:25
Yeah, and yet another example, Ryan of it, it's somewhat depends upon the the type of revenue that we're talking about subscription revenue, you know, recurring revenue, project based revenue and, and the like, so let's keep that in mind. But in any and all cases, right. A higher demonstrated growth rate than what would be considered kind of average or in the market is is more valuable, right. And now important, you know, that, that it is demonstrated, and that there's a history behind it, and, and that there's a method for forecasting that growth, that is predictable, that can be trusted. And yeah, right. It's just simply said, a faster growing company is more valuable than a less fast growing company, to your point, how to realize that value, then can very well get into some of the term structure within a deal, be it in an earn out, be it in rolling equity, be it in the I know, a variety of means. And again, you know, just gotta stress that it has to be demonstrated. And there has to, there has to be data supporting it, because a buyer is going to have to believe in it, you know, to pay for it. And then again, and this is, this is the role that we play that Mike talked about suffering, profit for growth, that a higher growth rate is something that needs to be taken into consideration, as it pertains to how the market is going to, is going to look at the value of an opportunity.
Ryan Barnett 12:38
The forecast really can impact the enterprise value. And I would note that if you have really aggressive growth targets, they may likely be tied to something in a an earn out that keeps you honest on those growth targets. So it can get you to the higher end of the multiple, but it comes with a cost do you have to deliver. And that's a fair risk scenario for for really, for all providers. You mentioned the you know, the specialization in the type of firm is a big deal. And in our space, we typically look at types of firms as things like a managed service provider or cloud service provider, or even an employee implementation partner, you're going to see different ranges if you're a NetSuite provider compared partner compared to let's say, a Microsoft partner. Mike, where does the role of technology specialization within tech services? How does that influence the range that a seller should expect?
Mike Harvath 13:53
Well, it's it's a great question, right? I mean, I think, well, we define it as specialization. And there's a lot of perception about specialization. We think of it as your technical specialization. That's probably the easiest way to think about it. There's verticalization, as well and has an impact. But we can unpack that more later. But from a technical specification, a lot of it has to do with, you know, is there a rapid consolidation in your area of the technical world? Is there demand from buyers? Is there a scarcity of inventory of companies to buy? You know, there's multiples that get paid in various areas of technology specialization, and firms that look a certain way. And so when we begin to talk about your peers, we begin to look through the lens of, of that specialization and then the other sort of secret sauce from a verticalization perspective of my brain, not broadly the marketplace at large. And I think it's why advisors who are focused on IT services and in particular bring a different level of expertise to the conversation, one that can get to the nuance of the technical specialization and, you know, what is the difference between a NetSuite provider or ServiceNow, implementer, or managed service provider, or even accustomed developer digital digital transformation, it's all of those things are very different. And I think your advisor needs to be able to bring that correct expertise to your, to your platform.
Ryan Barnett 15:34
And I'd say, Mike, it seems like this category changes very quickly. A year ago, someone in AI or advanced or generative AI, may have had a radically different valuation than they are seeing today. The same goes with managed security providers, there's ebbs and flows that come with this. So I think we're lucky in that most of the the ranges that we're talking about, we're are already starting higher than let's say, a pure play, play manufacturing kind of thing. But the basic ability to execute in some of these more in demand categories, and the further that you can specialize your business to be in these in demand categories can yield a higher multiple for the for the right buyer. Matt, you've got the other side of the coin a bit here, too. If you focus on an area, sometimes your client expertise in a vertical market can also help bring that value up, as well. Can you see and I know you've had some scenarios where you dealt with this. But why does vertical specialization matter?
Matt Lockhart 16:48
Yeah. I think that it's been somewhat in lockstep with, you know, what Mike talked about in terms of the capabilities specialization. The, what we see with firms that do have this vertical specialization, is they have deeper relationships with their customers, as seen by there's just much less customer churn or customer attrition. They typically have the see the opportunity, where because of that trusted advisor, or deep, you know, sort of customer centricity centric relationship that they have the you see higher opportunities for cross sell opportunities, where they, again, are seen as a, as a trusted source, specifically, because though their clients see them is understanding the clients deeper and more meaningfully, than those generalists. And so for potential buyers, obviously, that consistency, and higher profit of the of those customer relationships is more valued in and of itself. But when you when you also think about the growth that can come within that customer base, by offering other services, add on services, cross sell services, cross sold products, et cetera, et cetera. It is quite, it's just simply seen as a deeper and, and and richer customer base. upon which to, upon which to leverage. And, yeah, we've seen as much as a two point uptick in a valuation specifically related to this sort of verticalized approach verticalized and specialized approach. And so it really can have a real significant uptick to overall enterprise value.
Ryan Barnett 19:23
And it's something that at Revenue Rocket, we we work with firms to help get you into a into the right path of a specialized offering towards a vertical market. It's we find that, well, if we believe that you're going to sell more at the end of the day, you're also going to sell for more at the end of the day to when you can find a combined the right buyer who is looking for your services thought. Great, great point, Mike and Matt on on both of those technical and political specialization. Matt, I'm gonna go back to you again, that is something that we've talked about and had a podcast before a large portion of a deal can be built on the type of revenue that you have, Matt, I mean, what kind of revenue types are you seeing out there that can lead to higher valuations and higher multiples? Yeah,
Matt Lockhart 20:25
well, let's kind of review the different types of revenue right there is what might be seen as in a specifically in the professional services space, or business services space, at the at sort of the lowest end or the what would be seen as more of a commodity is kind of staffing revenue, or staff argumentation, you know, revenue. And going from there, you would see, you know, maybe project based revenue. And, you know, where you get an uptick, because you are managing with the customer, the customer is seeing you as a key to the fulfillment of an important project. But, you know, also, it's something that you have to continually resell, you have to, you know, when the project ends, you gotta find that next project to stay busy and, and to keep growing from their subscription and or, you know, sort of recurring revenue models, is is absolutely seen as a more valuable revenue line. Oftentimes, these are seen in those managed services organizations, and or in larger sort of support and maintenance contract. Those subscription and or recurring revenue models, oftentimes could be seen in multi year contract vehicles, or at a minimum in a yearly contract vehicle with an auto renew provision within them. And those are seen similarly as, as sort of is as SAS revenue would be seen. And, and so you just see this continuum where the more predictable that revenue is, at and the kind of, I guess, combination of predictable revenue, but then also, how important is it? Or how easy is it to be displaced from a customer, those two sort of vectors is what's looked at in in analyzing the sort of just the value of the different revenue streams. And yet no guidance. You can't flip a switch and be 100% recurring revenue, it's a journey. And it's not important to really be in that hot 90 Plus recurring revenue, but demonstrating that you're moving, showing that you've got over, you know, maybe over 30% of your businesses in recurring revenue is a great start, then getting over 50% of recurring revenue is another measure that the market will look at, in terms of just looking at the value equation of the revenue type alone.
Ryan Barnett 23:51
And I think that one thing, I think this goes into projects, a lot of companies will grow mass through cloud service provider agreements, and through hardware and software reselling. And that that definitely, when look through the lens, it almost comes across as a reseller. And those can have lower multiples. So be careful on how you construct your your revenue. And get that as close as those services without kind of reselling software and hardware will will help with those multiples. That was extremely helpful and extremely insightful. If we flip the coin a little bit, we've got in Think about those revenue types of recovery or contract revenue. One of the things that comes up is customer concentration. Now oftentimes, this can be something that moves you down the ladder if you have too much concentration, or you have to find ways to deal with that concentration through deal terms that come with that Because anything more on customer? Or what more on customer concentration should a seller be thinking about? And how can you get to higher multiples, even if you have higher customer concentration?
Mike Harvath 25:15
Yeah, that's a great question, Ryan, you know, I think, depending on sort of your specialization, you know, every firm that has a slightly different technical specialization has a different, typically a different profile for concentration. And what I would mean is that most, you know, for example, managed service providers tend to have a fairly low customer concentration, particularly if they deal with sort of medium sized businesses or smaller, versus enterprise. Companies that do digital transformation, digital engineering, custom software, app implementers, oftentimes, will be sort of off-market from a customer perspective, and as a relatively small business visa vie, that there may be some customer concentration issues. And a matter of fact, over time, you're seeing that firms sort of in those profiles tend to have 50%, or more of their customer base and less than five clients. That's not a typical. And so when you begin to think about concentration, where concentration becomes, sometimes a rub for buyers is, when those numbers start to get above 20%. The risk, there's a perceived risk in acquiring a business that has, you know, higher customer concentration above 20%, any single customer, so you know, your history with that customer, what you're doing for them, the type of contracts you have with customer that have a high degree of concentration, you know, all matter. And, and I think being able to show a consistency with that, those, those probably top five clients, if you have relatively high concentration in them, will be super important. I think if you start to get concentration over 30 40% in one customer, you're going to start to see a lot of pressure on valuation. And it may be in your best interest as you're running the business to look to either grow the business, so you have less concentration with that client, which is the preferred route sort of grow outside of that client relationship, or any of these clients that have a high degree of concentration to kind of de risk the business, but also to be more attractive to a suitor. But then also to make sure that you'd have a four to five relationship, and contracts, certainly with those top five customers, I would say for everyone that should be, you know, for all clients, that should be a rule but but particularly for those that, you know, represent a big percentage of your revenue, you want to be able to de risk so that you can figure that out. Now with all that said, this is a negotiation and in the negotiation and again, putting my plug in for having a competent adviser, you know, a buyer will not be concentrated the minute after they acquire the business right there. They're going to bring it in, hopefully, if they're a strategic buyer or a sponsored, strategic, they're going to bring it into a much bigger customer base. And that reduces their risk overall to that concentration. There may be structure involved if you have a business that has a high degree of concentration, your purchase, you know, may include or tie a certain portion of the renumeration in the transaction to that customer retention and or an urn out that's tied to that retention. That's not uncommon. And I think if you've had a multi year relationship, which many, many of our clients have added many firms have with companies that have a high concentration of their revenue, you know, making sure that there's clarity and and that relationship and fortifying it so that it lasts through the transition is super important.
Ryan Barnett 29:15
No, well, well well summarized by I think that's, that's a love the some of the statues, They're massive. I said, turn this over to you. And let's say we've got our concentration risk addressed, and we've got our contracts addressed, and we're in the right market. A lot of this comes down to are you as a seller in the deal terms that you have. So deal terms and wide field terms? I mean, Matt, I'll let you dive in what are deal terms and why and how can you get to a higher enterprise value using some of those terms?
Matt Lockhart 29:52
Well, let's just talk about the major ones, because there's a there's a lot of different ways to slice the pie. There's the cash at close, right? So maybe backup, if we think about overall enterprise value, when you're selling your business, it is incorrectly oftentimes thought of as just what are you getting at, at the close of the sale? Right. And that's, that's kind of not the right way to think about it. Overall enterprise value is what you will receive, at the end of the day for, for, for what you know, for the sale of your business. And so, you know, let's think about that. Okay, so there is the cash at close. And that's obviously very important, very important to most sellers, right. And we work with a lot of founder led businesses. And this is the result of their life's work. And in many cases, it's their, their number one investment, right and or retirement strategy. And so, quote, unquote, de risking by increasing the amount of cash at close is oftentimes very important. However, in other cases, sellers can increase their overall enterprise value. By accepting and negotiating term structures within the deal. The two most important ones to think about is an earn out, and or what we oftentimes term gain share arrangement, going back to that high growth company, that wants to ensure that they're paid on the future value of that growth, and negotiating the appropriate earn out, related to that top line revenue growth is a means of increasing the overall enterprise value that a seller would receive. And, you know, oftentimes, people go, Oh, I don't want any internet, right? I mean, I don't want to be on the hook for anything. And that's understandable. And that's a, that's a fair way to look at things. In other cases, you're you're sort of leaving opportunity on the table and leaving money on the table. Going back to what Mike just said, work with a competent advisor, that understands the space really well, and, and how to how to set up those earnout provisions in order to in the maximize the value. Another one to think about is, is rolling equity. And we have been able to work with our clients and who have again, sort of looked at that opportunity of rolling equity and been like, oh, man, and then I'm betting on somebody else. And I'm not just that none myself, and you know, what is what is that mean? And you know, sort of a bit of trepidation around that. It's an investment strategy. And you're not just, you know, just not betting upon yourself anymore, you're betting upon what you've created. And you're betting upon the team that you're leaving behind, in addition to teaming up with what I characterize as smart money. And that investment strategy, and the result of that investment strategy can have, in some cases, the most dramatic effect on the overall enterprise value that a seller can receive. And, you know, we've seen quite honestly, we've seen scenarios where the expected multiple, if you will, the EBITA, at the time of sale was say, you know, seven times including the value of the equity role that was put into place. And then what happened when they realized the value of that equity that they rolled, is they saw an enterprise value that would be equating to a low teens of of a multiple and so just because they bought into the ongoing investment, and teamed appropriately, they were able to see considerably higher or higher overall value for the sale your business
Ryan Barnett 35:00
Yeah, to reiterate your point that this has a massive impact if you're selling and, and you can bring deal terms with that. And you have an I'll segue into the next topic here and pass over to you like the right buyer. And that can make a huge difference. Mike, how does that the right buyer help drive up the right multiple?
Mike Harvath 35:27
Well, I think, you know, all deals should hopefully align to the right buyer and the right seller coming together at the right time, it's part of what I don't want to make this sound like a perpetual commercial for advisors. But, you know, advisors do that work pretty well, their objective, they can help you find the right buyer seller, they give you choices, they help that those companies, and we help to negotiate an optimized deal on your behalf, which is kind of hard to do, as an individual, right. I mean, there are very specific experiences and roles that are needed in order to do that day in and day out. And it's just not something that, you know, most business owners or small businesses, regardless of their industry, in particular, and tech at busy and as fast changing as it is, have. So you know, assuming that you find the right partner to do an acquisition or to buyer or sell accordingly, you know, you really need to focus on how do you get to a place together that you can't get apart, and how that creates value. Right. And that means there's good alignment around strategy and and culture and, and finance. And our experience, you've heard us say this before, you know, in strategy and culture line up, the finance stuff tends to take care of itself. And there's some very, very interesting opportunities that come out of those deals, we're working on a deal right now, where, you know, we're representing a buyer, but the seller, in this case will be rolling some equity. And when they do it, we'll put the combined company out a notch up on EBITDA, that's going to enhance the multiple post transaction to the point where that sellers equity, the day after the deal is done, will go up by about 35%. Just based on the value of the roll and kind of what's happening and the nuance of that particular deal. That's found value in one day, that would be very hard to find any other way. And so, you know, that part of why that particular deal is special and they share with you is because it is one that has a one plus one equals kind of three, four or five, one that will be super valuable to each of the parties will be able to allow both of those companies to go to a place together that they can't go apart. And those deals create a lot of economic prosperity and opportunity that oftentimes isn't clearly aligned to the just the individual merits of the deal. And I would certainly recommend that people look at it, of course,
Ryan Barnett 38:24
You're right, and that no deal gets done without a willing buyer and a willing seller. And the more willing that buyer is to understand how you're the seller can change your business, more than a multiple can go up. And we've seen it, we've seen it time and time again. And part of that math, I think is something that you're really well versed in more competition to the deal. And the more buyers at the table, it tends to lead to higher sale prices.
Matt Lockhart 38:54
Yeah, I mean, it's just a natural, right? The, the higher the competition, and it's part of our role, but it's also just simply part of the attractiveness of an opportunity, right. And the more attractive a firm is, because of all of the things that we talked about, the more suitors there are going to be and the more suitors they're going to be. They recognize that that they're going to need to be competitive in in their offers, and it just tends to have a natural impact on increasing the overall enterprise value. And so part of it is is the work that we put in and certainly the more important part is the value that you all are creating day in and day out in growing and maturing your business.
Ryan Barnett 40:00
And that one last category. And then I'll summarize it up here what I've heard, but the market in when you go to market can matter. I think we're we're buffered a bit in the IT services world as the needs for IT services are, are continuously needed. But the overall economic condition or the overall market environment can help can impact deals. Matt, Mike, anything else you want to add there?
Mike Harvath 40:33
Well, I would add that, you know, certain segments, sub segments of specialization are growing at different rates. And, you know, we know that, for example, MSPs are growing at about 12%. This year, which is pretty good clip, are expected to grow in 24, to about 12% year over year growth rate. We have other sort of, you know, areas of digital transformation, and AI and cloud services and app implementation. Some are growing faster, some are growing slower. But I think what's important to note is that, you know, as a company who's in one of those markets, you should know what your base growth rate, you know, market expansion growth opportunity is and certainly be targeting to beat that. Because a firm that's growing in the case of an MSP at 4% per year is just keeping up with the overall market growth. And it's easy to sometimes convince yourself that, hey, we're doing great, we're growing 12 or 15%, year over year, they're really standing still. And and I think to be proactive about architecting, you know, profitable growth ahead of your baseline market expansion rate will be super accretive to value and help you get a higher multiple, the suitors in this space know, the baseline growth rates. They know you know, whether your firm is a standout or not based on that, and they will measure it accordingly. And I think as you look in the mirror, you need to really ask yourself, you know, do I need a partner now to help me continue to meet or beat the baseline growth rates on hand profitability or go to a place that with that partner that I can't get on my own. And, you know, when is the right time to do that.
Ryan Barnett 42:18
And this is, this is a longer podcast, but I think both buyers and sellers are, this is a must listen to. And if I had to summarize what I've heard, you're a bit. If we're thinking most deals are trading on a multiple of EBITA. And if you listen back for just recorded podcast on, you know, there is definitely a difference between evaluation and a deal. But to look at what gets you to the higher end of those deals, part of it is size, and we start to see firms at over a million and EBITDA getting more preference towards the higher end of that EBITDA range. We see firms that are faster growing and targeting the rule of 45 will help get to that higher and even. We see companies with large growth rates and forecasts can lead to larger enterprise deals. Now that might tie you to an earn out if your forecasts are too aggressive. But ultimately, you can earn more together by betting on your future and getting to those higher enterprise value. I heard that both specialization in technology and in demand categories can yield higher multiples, as well as having deep expertise in a deep client relationship in vertical market can really resonate with buyers who are also in those niche markets. I've heard a lot about recurring and subscription revenue, which can lead to higher multiples, as well as addressing your customer concentration risks, and showing that that long history with your clients all the matters. The other part that we've heard on deal structure is a large factor. And the more you're willing to bet in that future that could be an equity roll or an earn out could lead to a higher multiples. And with the right buyer and the right competition and the right market competent mark right market conditions out there. You can expect your deal to trade on a higher multiple as well. That's what I heard Matt anything else you want to add?
Matt Lockhart 44:31
Well, great summary and and for those who are still with us, thank you a little bit longer podcast, but it's super important topic. And you know, one thing is, is it's actually a good time to sell right now. And to your point, you know, some times are better than others. And we're feeling pretty darn good about 2024 After quite honestly, what was a little bit rougher a year in 2023. So, the skies are blue and looking up. Over to you, Mike.
Mike Harvath 45:10
Thanks, Matt. I'll echo that. You know, we've got a very interesting environment right now it's always hard to time the market but you know, timing of right now. Expect that'll continue through the end of the year at least. And who knows, maybe even the next year depending on what happens with this crazy world we live in. So with that, we will tie a ribbon on it for this week, Shoot the Moon podcast. Thanks for tuning in. I encourage all of you guys that tune in next week when we unpack additional topics of relevance to tech enabled services with companies around growth and m&a. With that, make it a great week. Thanks so much for tuning in.