Exit Readiness & ValuationAugust 3, 20263 min read
How Technical Debt Discounts Your Multiple
Technical debt does not reduce revenue. It reduces the confidence a buyer has in the revenue continuing at the same cost.
The mechanism is simple. A buyer models the engineering investment required in the first eighteen months post-close, and funds it out of the price they were prepared to pay.
How the number is built
- Engineering months required for remediation, at buyer cost
- Delay to the first planned product initiative
- Risk premium applied to anything that cannot be sized
The third line is where sellers lose the most. Uncertainty is always priced higher than a known, scoped problem with a plan attached to it.
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