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Value Builder

How to Use the
Value Builder

Track the ten factors buyers and lenders evaluate when they look at your GovCon business profile—and monitor how the profile evolves over time as contracts are added, revenue shifts, and the portfolio changes.

12 min read Platform Guide

Before You Start

!

This module is a diagnostic tool, not a valuation. The factors below reflect attributes that buyers and lenders commonly evaluate in GovCon transactions. They do not operate independently—they interact with each other and with market conditions, deal structure, buyer motivation, and timing in ways no model fully captures. If you are considering a transaction, engage a qualified investment banker who can account for the full picture.

Step 1—Navigate to Value Builder

From the main navigation, select Operations, then Value Builder. The module opens on the Assessment tab.

TabPurpose
AssessmentCurrent ten-factor diagnostic, composite score, and goal tracking
HistoryFactor scores over time, captured automatically at each close and on each new contract addition
ValuationImplied EBITDA multiple range and scale modifier—CEO-only by default

The composite score at the top of the Assessment tab is a weighted average of all ten factors, scored 1–5. A higher score reflects a more broadly attractive business profile. Click Recompute at any time to refresh the assessment against the latest data.

Step 2—Read the Ten Factor Scores

Each factor card shows a score, the underlying metric, and a diagnostic narrative explaining what the data means in the context of a buyer or lender evaluation. The factors are scored as follows:

5
Excellent
This attribute is a strength. It is unlikely to be a point of concern in diligence or affect deal structure negatively.
4
Good
Solid. May come up in conversation but will not drive deal terms or constrain the buyer pool.
3
Caution
Worth monitoring. A buyer or lender will ask about this. The narrative explains the specific dynamic at play.
2
Needs Attention
This attribute is likely to affect deal structure, pricing, or the addressable buyer pool. The narrative explains why.
1
Critical
A material constraint. Buyers will diligence this heavily, and it may limit the viable transaction paths available.

Step 3—Understand What Each Factor Measures

FactorWhat It MeasuresData Source
Set-Aside ConcentrationThe composition of your contract portfolio by award type—Full & Open, Small Business, WOSB/SDVOSB, and 8(a)—weighted by the change-of-control implications of each typeContracts table, set_aside_type field
Recompete RiskPercentage of TTM revenue in contracts recompeting within 18 months. A normal portfolio recompetes approximately 25% of revenue annually on a 4-year average contract duration—the score reflects deviation from that baselineContracts table, recompete flag and PoP end dates
Prime / Sub MixPercentage of TTM revenue earned as prime contractor. Sub-position revenue does not transfer relationships or vehicle access to an acquirerContracts table, performing role
Contract ConcentrationLargest single contract as a percentage of TTM revenue. Above 25%, lenders and acquirers begin asking what happens to the business if that contract is lost, defunded, or recompeted awayContract actuals, TTM revenue by contract
Customer DesirabilityRevenue-weighted agency tier across the portfolio—coveted, neutral, or less in demand—reflecting the buyer community's relative interest in different agency relationshipsAgency tier lookup table, weighted by TTM revenue
Capability PremiumRevenue-weighted service value tier across the portfolio—high-value technical, professional, or operational support—reflecting the multiple premium that different types of work commandLLM classification per contract, cached and human-overridable
Revenue TrajectoryYear-over-year TTM revenue growth rate. Buyers acquire going concerns—trajectory direction shapes the deal narrative as much as the absolute revenue levelP&L actuals, TTM vs. prior TTM
EBITDA MarginTrailing 12-month adjusted EBITDA margin. In GovCon, margin is absorbed into the multiple rather than driving it—but very low margins narrow deal structure optionsFinancial calcs engine, adjusted EBITDA including recurring projected addbacks
Addback QualityTotal addbacks as a percentage of reported (pre-addback) EBITDA. Quality-of-earnings diligence scrutinizes each addback—a high ratio extends the diligence cycle and shapes how much of the adjusted figure a buyer underwrites at face valueEBITDA adjustments table
Management DepthSelf-assessment of key-person diversification across business development, operations, and finance. Buyers price escrows, earnouts, and employment agreements against this signalCEO self-assessment, five yes/no questions

Two standalone warnings appear above the factor grid when triggered—OCI/SETA exposure and 8(a) concentration. These operate independently of the composite score and are never suppressed by strong scores elsewhere. If either is active, read the narrative carefully—both have structural implications for the buyer pool that the composite score does not fully capture.

Step 4—Understand Set-Aside Concentration in Detail

This factor deserves specific attention because it is the most consequential attribute in the GovCon M&A market and the most frequently misunderstood.

A change of control does not terminate SB, WOSB, or SDVOSB contracts—performance continues and revenue transfers to the buyer. The structural issue is what happens at recompete. The buyer may be ineligible to compete as a set-aside prime. Converting a set-aside to Full & Open competition requires contracting officer agreement, and contracting offices have socioeconomic goals they are measured against—there is little incentive to move work to Full & Open when a qualifying small business exists. The more likely outcome is that the buyer negotiates a subcontract position at reduced workshare.

8(a) contracts carry different and more immediate risk. SBA regulations require termination within 30 days of change of control unless a waiver is submitted. Waivers are often neither accepted nor rejected in a timely way—they may sit unresolved while performance continues—but material terminations have occurred.

Subcontract revenue is classified as Full & Open in the assessment regardless of the prime's set-aside designation. The set-aside status belongs to the prime—you as a subcontractor inherit none of it. This is consistent with how investment banks treat revenue mix in GovCon diligence.

Step 5—Complete the Management Depth Self-Assessment

The Management Depth factor requires a one-time self-assessment. It appears as a card at the bottom of the Assessment tab. Answer five yes/no questions:

  1. Is there a named leader other than the CEO responsible for business development and pipeline?
  2. Is there a named operations leader (COO or equivalent) who can run day-to-day without the CEO?
  3. Is there a named finance leader (CFO or controller) with GovCon cost accounting experience?
  4. Has the firm won new business in the past 12 months that was not personally led by the CEO?
  5. Would the business continue to operate effectively if the CEO were unavailable for 90 days?

Five yes answers scores a 5. The score updates immediately. Arcvue will prompt you to revisit this assessment annually—the questions remain the same, but the answers may not.

Step 6—Set Goals for Metrics You Want to Track

Any factor can be tracked as a goal. Click Set a goal for this metric on any factor card to open the goal modal. Enter a target score and an optional date and note.

FieldWhat to Enter
Target Score1–5—the score you want to reach on this factor
Target DateOptional—when you want to reach it
NoteOptional—context for why this goal exists (banker feedback, board objective, etc.)

Goals track automatically against live data. There is no manual check-in. The goal status updates at every monthly close and whenever a new contract is added to the system. Progress is displayed directly on the factor card.

Goals are useful for translating banker feedback, lender requirements, or internal strategic objectives into something the platform tracks continuously. If an advisor tells you your set-aside concentration is a problem, set a goal to track the mix as it shifts—rather than trying to remember where you started.

Step 7—Review the History Tab

The History tab shows how your composite score and individual factor scores have moved over time. On first load, the platform runs a retroactive assessment at quarterly intervals going back up to two years, using only data that existed at each historical point in time. Contracts not yet active, revenue not yet earned, and forecasts not yet submitted are excluded from each historical period.

The composite line chart shows the overall trajectory. Below it, a table shows each snapshot's individual factor scores—color-coded—so you can see which factors drove changes in the composite.

The History tab updates at every monthly close and every time a new contract is added. You do not need to take any action—snapshots accumulate automatically as the business runs.

Step 8—Understand the Implied Valuation Range

The Valuation tab shows an implied EBITDA multiple range based on your business profile. This range is directional—it reflects how the GovCon M&A market generally responds to portfolios with similar characteristics, not what your business will sell for or whether it is saleable at all. The tab is gated to CEO-only by default; an admin can grant additional roles access via Admin › Permissions.

M&A is not a science. Transaction outcomes are shaped by buyer motivation, deal structure, timing, competitive process dynamics, and the specific strategic fit between buyer and seller—none of which any model captures. A business with a profile that looks challenged on paper may command a strong outcome because it has something a specific buyer needs urgently and cannot get elsewhere. A business with a strong profile may trade below expectations because the process was poorly run or the market was wrong.

What the implied range does tell you is how your composite score positions you relative to the general patterns observed across the GovCon M&A market. A higher composite score—driven by stronger factor performance across set-aside mix, contract concentration, revenue trajectory, and the other dimensions—correlates with a wider and more competitive buyer pool, which tends to produce better outcomes. A lower score reflects a profile that more buyers will find complicated, which tends to narrow the field and compress what competitive tension the process can generate.

A scale modifier also applies. The size of the business shapes the buyer universe independently of profile quality. Smaller firms are typically acquired through private arrangements between parties rather than formal M&A processes. As revenue scale increases, institutional buyer interest grows, and the range of viable transaction structures expands. Very large firms—those with $100M or more in revenue—represent scarce inventory in the GovCon market, and scarcity itself commands a premium that the composite score alone does not capture.

!

The implied range is a diagnostic indicator built from generally accepted market attributes. It is not a valuation, a fairness opinion, or a prediction of what your business will sell for. No two transactions are alike. If you are considering a sale or recapitalization, engage a qualified investment banker who can account for the full picture—including the factors this tool does not measure.

The implied range is stored on every historical snapshot—so as you review the History tab, you can see not just how your composite score has moved over time, but how your market positioning has shifted as the business profile evolved.

What the Factors Do Not Tell You

No single factor defines the value of a business, and neither does the composite. A small business with a coveted agency relationship, a cleared workforce, and a contract vehicle the buyer cannot otherwise access may trade at a strong outcome despite a low set-aside score. A larger business with a critical recompete on the horizon and a single breadwinner CEO may trade well below what its revenue level implies.

The factors interact with each other and with things the platform cannot measure—buyer motivation, competitive process dynamics, the specific strategic fit between buyer and seller, and the quality of the transaction advisor running the process. The assessment tells you how your profile looks against generally accepted benchmarks. The story a skilled investment banker builds around that profile is what drives outcomes.


The Operator's View

After eleven years in GovCon sell-side investment banking and four years in GovCon private equity, a common pattern in businesses became apparent. The ones that commanded strong outcomes were not the ones that had optimized every factor on a list. They had built real businesses with genuine competitive positions—and the M&A market recognized it.

I also saw businesses that had read the playbook and tried to run every optimization at once. They pulled out of set-aside work to improve their Full & Open mix, cut costs to improve margins, changed their leadership team to reduce key-person risk—and in doing so, destabilized what was working. The business looked different on paper. It felt weaker in practice. Buyers noticed.

The most common mistake I see with the set-aside factor specifically: a CEO learns that set-aside concentration is a concern for buyers and decides to stop bidding set-aside work. That is the wrong takeaway. The right move is to use the cash flow and customer stability of existing set-aside work to fund selective full-and-open bids where you have a real competitive position—and build the profile incrementally, on top of a business that is still operating and growing.

Harvey Penick—one of the greatest golf instructors who ever lived—put it best:

"Golf tips are like aspirin. One may do you good, but if you swallow the whole bottle you will be lucky to survive."

— Harvey Penick

Use this module to understand where you are and track where you are going. Improve the business. The profile will follow.

See it in the live demo

Open Value Builder against a live $15M GovCon firm — https://demo.arcvue.ai/value-builder →

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