“Real Growth Isn’t Revenue: It’s Valuation”

As accountants, we’re often asked:

“How can I grow my business?”

Most people expect us to talk about profit and loss, maybe some tax-saving strategies.

But here’s the truth:
Real business growth isn’t about revenue. And it’s definitely not just about net profit.

If your goal is to build something that’s genuinely valuable (something you could one day sell, step back from, or pass on), you need to stop looking at just your numbers…
…and start looking at what drives your valuation.

At Rule29, we work with clients to shift their focus from short-term gains to long-term value.

In this blog, I’ll explain:

• Why traditional growth metrics can be misleading

• How valuation multiples work (and how to influence them)

• And why understanding SDE or EBITDA is essential if you ever want to turn your business into an asset, not just a job with overheads

Let’s unpack what real growth actually looks like, and how to measure it properly.

1. Growth Isn’t What You Think It Is.

Let me start with something that might rattle a few cages: Most business owners don’t actually know what growth looks like. They think they do. But when I ask, “How do you measure your growth?” I usually get one of three answers:

• “We’ve grown turnover year-on-year.”
• “Our profits are up.”
• “We’re taking on more clients than ever before.”

And sure, on the surface, all three sound like signs of progress.

But here’s the problem: None of them tells you whether your business is actually worth more. And that’s the only kind of growth that really matters.

Real story:

I once worked with a digital agency owner who proudly told me they’d doubled their net profit in two years. They were paying less tax, had trimmed overheads, and even renegotiated a few supplier deals. On paper, things looked great. But when we ran a valuation? The number barely moved. Why?

Because:

• The founder was still the rainmaker (no sales team).
• All the key client relationships depended on her.
• There were no documented systems, no recurring revenue, and no clear handover plan.

She had a profitable job, not a scalable business. And that doesn’t fetch a premium when it’s time to sell or even step back.

The shift in thinking.

That’s when I started saying something that’s now become part of my regular mentoring sessions: If your growth doesn’t increase your business valuation, it’s not real growth.

• More revenue? Great, but what did it cost to get there?
• Higher net profit? Good, but is it sustainable, or did you just delay hiring someone you needed?
• New clients? Excellent, but are they profitable, loyal, and aligned with your future?

This blog is about drawing a clear line in the sand.

I’m going to show you why SDE (Seller’s Discretionary Earnings) and EBITDA are the only two numbers that matter when it comes to tracking real business growth and why everything else is noise unless it increases your multiple or exit potential.

Because if you want freedom, wealth, or even just a business that runs without you…you don’t need more sales. You need more value.

2. The Illusion of Growth Through Net Profit.

Let me tell you something I see all the time: A business owner proudly says,

“We grew profit by 25% last year.”

On the face of it, that sounds like a win. But then I ask:

• “Did you reinvest in the business?”
• “Did you finally pay yourself a proper salary?”
• “Are you still running everything yourself?”

And more often than not, the answer is no. What they’ve really done is tighten the screws to make the bottom line look good.  But they haven’t actually built anything more valuable.

Profit ≠ Value

Net profit is a useful figure, but only up to a point.

Why?

Because it’s:

• Easily manipulated
• Doesn’t reflect owner input
• Doesn’t account for sustainability

Let me break that down.

2.1. Easily manipulated.

Want to boost your net profit this year?

Here’s how:

• Don’t hire the person you need
• Stop investing in marketing
• Delay paying suppliers until January
• Put off training, software upgrades, or maintenance

Boom, profit goes up. But so does risk. And from a valuation perspective? It’s meaningless. Because any buyer will look at that and say:

“You’ve just starved your business to make the books look good.”

2.2. Doesn’t reflect owner involvement.

If you’re working 60 hours a week, doing sales, ops, accounts, and customer service…and still showing a decent net profit? You’re not profitable. You’re overworked and underpriced. A buyer won’t value your net profit; they’ll subtract the cost of replacing you, which is exactly what SDE is designed to measure.

I once had a client showing £80k profit on paper. But they were doing three roles, all of which would cost £90k+ to replace. So, guess what the business was worth? Almost nothing.

2.3. Doesn’t show sustainability.

Let’s say you land a one-off deal for £50k. It boosts your net profit for the year, and you feel like you’ve made a leap forward. But is that growth? No. It’s a spike. Buyers and smart business owners care about recurring, systemised, predictable income. And net profit doesn’t always show that.

So what does this all mean?

If you’re chasing net profit as your growth metric, you might:

• Make short-term decisions that hurt long-term value
• Underpay yourself and call it success
• Miss the chance to build a scalable, sellable asset

It’s the illusion of progress but the reality of fragility.

3. The Right Way: Growth = Increased Business Valuation.

Let’s cut through the noise. The only growth that matters is growth in the value of your business.

• Not how many clients you signed.
• Not how much turnover you added.
• Not even how “busy” you’ve been.

Those things are only useful if they translate into a higher valuation, meaning your business is worth more today than it was 12 months ago. And that brings us to the key point:

You don’t just run a business to earn. You run it to build.

Imagine this:

Two businesses, same turnover, same net profit:

• Business A relies on the owner for sales, delivery, and key relationships.
• Business B has systems, a delivery team, repeatable processes, and recurring revenue.

Which one’s worth more?

Exactly. Business B gets a higher multiple, even if both make the same on paper. Because buyers (or investors) pay for what they can trust, transfer, and scale.

Your true north = What would someone pay for it?

This is how I reframe growth for all my clients: “If you wanted to sell your business tomorrow, what would someone realistically pay for it?” That figure (your valuation) is the clearest reflection of all your efforts.

And it forces better questions:

• Is my profit sustainable?
• Could the business run without me?
• Are our systems solid or scrappy?
• Is there recurring, predictable revenue?

The two valuation metrics that matter:

Depending on the size and stage of your business, you’ll likely use one of the following:

SDE (Seller’s Discretionary Earnings):

• Used for owner-operated or lifestyle businesses.
• Strips out non-operating expenses and adds back owner compensation, personal expenses, and one-offs.
• Focuses on what the owner actually gets from the business, before salary.

EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation):

• Used for more systemised, scalable, or investor-ready businesses.
• More relevant when the business has a management team in place.
• Focuses on pure operational profit, regardless of financing or ownership.

Why this matters:

You might think you’re growing, but unless your SDE or EBITDA is growing, and your valuation multiple is improving, you’re not actually building anything. You’re just staying busy. And busy doesn’t pay well when it’s time to exit, raise investment, or step back.

Real client example:

I worked with a freelancer-turned-agency owner who was chasing £200k profit. She got close, but her entire client base was project-based; there was no team, and every new deal depended on her pitching it.

Her SDE was decent. But the valuation multiple? Low, because the risk was high.

When we shifted focus to:

• Building recurring revenue
• Delegating delivery
• Documenting core processes

Her valuation nearly doubled in 18 months, without even increasing profit. Because she built a business, not just income.

4. Why SDE and EBITDA Are True Measures of Business Strength.

If you want to know how strong your business really is, not just how busy you are or how profitable you feel, you need to strip out the noise. That’s exactly what SDE and EBITDA do. They give you a clear, apples-to-apples view of what your business is worth to a buyer, an investor, or even to you, the owner, looking to step back. Let’s break them down.

SDE – Seller’s Discretionary Earnings.

SDE is perfect for small, owner-managed businesses, which include most of the people I work with. It takes your net profit and then adds back:

• Your salary (or drawings)
• Any one-off or personal expenses (e.g. your car lease, travel, your accountant’s kid’s cricket club sponsorship…)
• Interest, tax, depreciation
• Any unusual or non-recurring costs

Why?

Because buyers want to know how much cash this business really produces for one working owner. That’s your SDE.

Example:

Let’s say your net profit is £40k. But you also:

• Pay yourself £30k
• Run £10k of personal expenses through the business
• Have £5k of one-off legal costs from a trademark dispute

Your SDE is actually £85k.

That’s what a buyer sees as the true earning power of the business, assuming they’re stepping into your shoes.

EBITDA – Earnings Before Interest, Tax, Depreciation, and Amortisation.

EBITDA is what we use for more systemised, scalable, investor-attractive businesses, those that are no longer just “owner + support.” It strips out:

• Financing decisions (interest)
• Tax structure
• Accounting rules (depreciation and amortisation)

EBITDA shows the raw operational performance of the business. It’s cleaner. Sharper. And it’s what professional buyers, private equity firms, and strategic acquirers care about.

Example:

A business generates £120k in net profit. Add back:

• £20k interest on a loan (the buyer may not need it)
• £10k depreciation (non-cash)
• £15k amortisation of software IP

That puts EBITDA at £165k, which could be valued at a 3x, 4x, or even 6x multiple depending on the business model, systems, and growth potential.

So why are SDE and EBITDA so important?

Because both:

• Remove the personal distortion of how you choose to run the business
• Let you compare businesses more fairly
• Show the true earning power of your business, not just what’s left in the bank after your accountant plays with the figures

Most importantly, buyers and investors trust these numbers.

• They don’t trust “profit after your accountant’s magic.”
• They don’t care how hard you work.
• They care what the business will make with or without you.

Which should you use?

Use SDE if:

• You’re a solo founder or owner-operator
• You wear multiple hats
• You’re still deeply involved in day-to-day operations

Use EBITDA if:

• You’ve built a team and systems
• You’re removing yourself from operations
• You’re gearing up for scale or investment

Final thought: 

Net profit tells a story. SDE and EBITDA tell the truth.

5. Understanding Multiples: How Your Industry and Involvement Affect What Your Business Is Worth.

Once you know your SDE or EBITDA, there’s one more number that determines your valuation: Your multiple. It’s what transforms a year’s earnings into a sale price.

If you’ve got £100k in SDE, and your business earns a 2.5x multiple, that’s a £250k valuation. Same earnings, different multiple? Entirely different outcome. And this is where most business owners get blindsided.

Because they think: “My profit is up, so my business must be worth more.” But if you haven’t improved your multiple, your value might be flat. Or worse, falling.

What Drives Your Multiple?

There are two main forces:

1. Your Industry / Sector.

Some sectors attract higher multiples than others due to demand, predictability, and buyer interest. Here’s a rough guide (based on real-world averages used in our valuation calculators):

Sector Type	Typical Multiple (EBITDA or SDE)
SaaS / Tech	4.0x – 6.0x (EBITDA)
Professional Services (with recurring revenue)	2.5x – 3.5x (SDE or EBITDA)
Digital Agencies	2.0x – 3.0x
Trades / Construction	1.5x – 2.5x
eCommerce	2.0x – 3.5x
Owner-reliant Services	1.0x – 2.0x (SDE)

Note: These are typical ranges. Your business could be higher or lower depending on other risk factors, especially owner involvement.

2. Your Level of Owner Involvement.

This is the silent killer of valuation. The more your business depends on you, the lower the multiple. Let’s break it down using SDE-based multiples for owner-managed businesses:

Owner Role	Typical SDE Multiple
Solo operator, no systems or team	1.0x – 1.5x
Partially systemised, some team	1.5x – 2.5x
Fully systemised, minimal involvement	2.5x – 3.5x

And for more scalable businesses (using EBITDA):

Operational Setup	Typical EBITDA Multiple
Owner-led with team support	2.0x – 3.0x
Team-led, strong processes, recurring revenue	3.0x – 5.0x
Investor-ready, scale potential	5.0x – 6.0x+

What This Means in Practice:

• Two businesses with identical profits can have valuations that differ by 2–3x, purely based on their structure and risk profile.
• If you are still the engine, you’re capping your valuation.
• The more your business runs without you, using systems, team, and repeatable processes, the more valuable it becomes.

Final Thought:

Multiples aren’t fixed. You earn your multiple by removing risk and adding structure.

If you’re not actively working to increase your multiple, you’re leaving money on the table, sometimes hundreds of thousands.

6. The Growth Traps That Destroy Value.

Let me give it to you straight: Not all growth is good. In fact, some growth strategies actually reduce the value of your business, even while your revenue climbs and your top-line metrics look impressive.

I call these the Growth Traps. They’re easy to fall into, seductive on the surface, but deadly when you’re trying to build something worth selling. Let’s walk through the most common ones I see with small business owners:

6.1. Revenue Without Margin.

This one’s a classic.

You chase turnover, sign bigger contracts, take on more clients, and increase your order volume. But the margins shrink. The cost to deliver increases. Your team is stretched. Quality dips. Clients complain. You work longer hours just to stand still.

More money in → more money out → same (or lower) profit.

Worse still, buyers don’t care about your turnover. They care about what’s left after delivery, your SDE or EBITDA. 

I’ve seen businesses doing £1M+ in revenue with a valuation smaller than a focused, niche consultancy doing £300k because the former was a busy mess, and the latter was a profit machine.

6.2. Owner Bottlenecks.

Here’s where ego gets in the way. You’re the expert. The rainmaker. The one clients trust. But if every deal, every decision, every escalation needs you, you haven’t built a business. You’ve built a cage. You might be growing, but you’re also becoming less sellable.

Dependency = Risk. And risk kills multiples.

If a buyer needs to clone you just to keep the doors open, your valuation tanks, no matter how high your revenue is.

6.3. Growth Without Systems.

Sales up. Team expanding. New locations. More products…Exciting, right? Sure, until the cracks start showing:

• Client onboarding is inconsistent
• Delivery quality varies
• Cash flow gets unpredictable
• You lose track of who’s doing what

Scaling without systems creates chaos, and chaos is expensive. Buyers will walk away from a “high-growth” business if they can’t see how it all runs.

6.4. New Clients, Wrong Clients.

Not all clients are created equal. Taking on the wrong clients, the ones who:

• Haggle on price
• Drain your team
• Don’t value your expertise
• Leave after one project

…might boost revenue temporarily. But they destroy margin, morale, and focus. And worse, they make your business look fragile from the outside. Buyers and investors want stability, not chaos. They look at client retention, revenue predictability, and margin quality, not just volume.

6.5. One-Off Wins Masquerading as Momentum.

You land a big contract. A one-off deal. A big project. It feels like a leap forward. But is it repeatable? If not, you’ve spiked your numbers without actually growing. One-time wins can be great for cash flow. But they rarely move the needle on valuation unless they lead to systems, clients, or contracts that continue to generate income over time.

The Golden Rule:

Real growth is repeatable, transferable, and profitable.

If it doesn’t tick those three boxes, it might actually be a liability, not an asset. The smart move? Use every growth phase as a chance to tighten your systems, reduce owner dependence, and build in recurring value.

7. Real Growth = Freedom, Optionality, and Transferable Value

Let’s stop talking about vanity metrics and ego-driven goals for a second. What’s the real point of growing your business? For me (and for the business owners I coach), it comes down to three things:

• Freedom (you don’t have to do it all)
• Optionality (you could sell, scale, or step back)
• Transferable value (someone else would actually want to buy it)

If your growth doesn’t give you at least one of these, ideally all three, you’re just making yourself busier, not wealthier. Let’s break them down.

Freedom: Less Reliance on You.

Here’s what real growth looks like:

• You take a holiday, and the business doesn’t miss a beat.
• Clients are served, invoices go out, and delivery happens, without your fingerprints on everything.
• You work on strategy, not emergencies.

That’s freedom. And it only comes from building:

• Clear systems
• Empowered people
• Repeatable processes

I’ve worked with business owners who doubled revenue, but were more trapped than ever. They didn’t grow freedom. They grew dependence.

Optionality: More Strategic Choices.

A healthy business gives you options:

• Sell it
• Step back and keep the income
• Raise capital to grow faster
• Merge or acquire
• Pass it on to your kids
• Or just keep running it your way, but on your terms

All of these require a business that can operate without you, that has clean financials, and that buyers or investors can understand and value. That’s what we’re building, not just income, but an asset.

Transferable Value: A Business Someone Else Wants.

This is the ultimate test of real growth:

Would someone pay good money for what you’ve built?

If the answer is no, or not much, then it’s time to face facts. You haven’t built a business. You’ve built a job with overheads. Real growth increases SDE or EBITDA, and improves your multiple by reducing:

• Risk
• Complexity
• Owner dependency

That’s what buyers want. That’s what investors look for. That’s what gives you leverage even if you never sell. Because when your business has transferable value, it’s finally working for you, not the other way around.

Final Word on Real Growth.

• More sales don’t mean more value.
• More staff doesn’t mean more freedom.
• A bigger business isn’t necessarily a better one.

Real growth is strategic. Measured. Repeatable. Transferable. And it shows up in one place: your valuation.

8. How to Start Measuring What Really Matters.

You can’t grow what you don’t track. Yet most small business owners are tracking all the wrong things:

• Revenue, but not margins
• Profit, but not valuation
• Sales, but not systems
• Activity, but not outcomes

It’s not that these numbers are useless; it’s that they’re incomplete. What really matters is this:

Are you building a business that’s worth more each year with less effort from you?

That’s the game. That’s the goal. And it starts by measuring the right things.

Step 1: Know Your Valuation Baseline.

You can’t improve your business value if you don’t know what it’s worth today. So run the numbers:

• If you’re a solo operator, use SDE
• If you’ve got a team and systems, use EBITDA
• Apply a realistic multiple based on your sector and structure

If you’re not sure, use our [valuation tools] or request a quick 1-2-1. I’ll help you get clear.

Once you’ve got the number, ask:

• What would it take to double this?
• Where is my valuation most at risk?
• What’s holding my multiple back?

This isn’t about fantasy exits. It’s about clarity. So you can make decisions that move the dial.

Step 2: Track Value Drivers, Not Vanity Metrics.

Every quarter, look at:

• SDE or EBITDA
• Recurring vs. one-off revenue
• Customer concentration risk
• Team dependency
• Systemisation progress
• Owner involvement

If those things are improving, your valuation is improving even if your top-line growth is flat. And here’s the kicker:

A £300k business with strong systems and recurring revenue might sell for more than a chaotic £1M business with no structure.

Step 3: Make Every Project a Value Project.

Whatever you’re doing this quarter, whether it’s:

• Hiring someone new
• Updating your website
• Launching a product
• Running a campaign

Ask yourself: “Will this improve the value of my business?”

If the answer’s no, or worse, if it increases complexity or dependence, rethink it. You don’t have time to chase distractions. You’re building an asset.

Final Word

Most business owners don’t measure value. They measure noise. You’re better than that. Start tracking what really matters, and you’ll stop wasting time on things that don’t.