Exit Planning in Lenexa

As part of our comprehensive exit planning services across the Kansas City metro, we work with Lenexa tech services and B2B business owners facing a specific revenue model challenge. You built an excellent business providing IT services, custom software development, managed services, or B2B technology solutions. Strong client relationships. Good margins. Predictable project pipeline.

But it's all project-based revenue. And project-based revenue trades at massive discounts compared to recurring revenue.

I've lived in this metro for 30 years. Lenexa's City Center development created Johnson County's tech business hub. The I-435 corridor houses IT services firms, software development shops, managed service providers, and B2B technology companies. These are sophisticated businesses serving corporate clients, not lifestyle operations serving local consumers.

The technical work is excellent. The client satisfaction is high. The margins are solid, typically 20% to 35% on projects. The pipeline looks healthy three to six months out. From an operational perspective, these businesses run well.

From a valuation perspective, they're leaving massive money on the table.

A Lenexa IT services firm generates $2.1 million in annual revenue with $630,000 in EBITDA. All project-based work: implementations, custom development, one-time consulting engagements. Excellent client relationships, 70% repeat business, but no contractual recurring revenue. This business trades at 2 to 2.5 times EBITDA because buyers discount project-based revenue heavily. That's $1.26 million to $1.58 million in enterprise value.

The same business with 60% recurring revenue from managed services contracts, software subscriptions, or retainer agreements trades at 4 to 5 times EBITDA. That's $2.52 million to $3.15 million. Exact same technical capabilities, same client relationships, same margins. Different revenue structure, double the value.

That $1.26 million to $1.57 million difference is the recurring revenue transition premium. Most Lenexa tech founders don't realize how much value their project-based model is destroying until they try to exit or get an acquisition approach.

The transition from project-based to recurring isn't quick or easy. It takes 24 to 36 months to restructure client relationships, build the recurring offerings, and get to 50% or higher recurring revenue. But the value creation makes it worth every difficult client conversation.

This is the Lenexa tech services challenge: excellent operations with the wrong revenue model for premium exit value.

The project-based revenue trap feels sustainable for years. You have a strong pipeline. Clients keep coming back with new projects. You're billing $150 to $250 per hour for technical work. The business generates solid cash flow. Why change what works?

Then something shifts your perspective. A competitor gets acquired at a multiple that shocks you. You run the math on their revenue and realize they sold for 4 times EBITDA when your business would only fetch 2 to 2.5 times. You ask around and discover the difference: they had 65% recurring revenue from managed services contracts. You have 5% recurring from a few small retainers.

Or you get an acquisition approach from a larger firm looking to roll up tech services companies. They're interested in your client relationships and technical capabilities. Then they see your revenue structure and the offer drops 40% because you're project-based. They explain that integrating project-based firms is risky because there's no contractual revenue to rely on post-acquisition.

This is the prison you built. You optimized for project margins and technical excellence instead of revenue predictability. You took the work clients wanted to buy (projects) instead of selling them what creates value (recurring relationships). You built a consulting model instead of a service model.

Here's what this looks like in financial detail. A Lenexa software development shop generates $1.8 million in annual revenue. Mix of custom development projects, system integrations, and consulting engagements. Average project size $45,000 to $120,000. Strong client relationships with Fortune 500 companies and mid-market firms. Excellent technical reputation.

Zero recurring revenue. Every dollar has to be sold every quarter. The sales pipeline requires constant feeding. One bad quarter of sales means revenue drops immediately. Client relationships are strong but not contractual. They come back for projects, but they're not obligated to come back.

A strategic buyer values this at 2.2 times EBITDA on $540,000 in EBITDA. That's $1.19 million. The founder is disappointed. They thought strong client relationships and excellent reputation would command premium multiples. The buyer explains: relationship value without contractual commitments is worth less than contractual value even with weaker relationships.

The same business transformed over three years to add managed application services, monthly retainers, and subscription-based offerings gets to 55% recurring revenue. Revenue stays roughly flat at $1.9 million, EBITDA actually improves slightly to $570,000 because recurring revenue has better margins. But now it trades at 4.2 times EBITDA. That's $2.39 million, exactly double the project-based valuation.

The technical work is the same. The clients are the same. The team capabilities are the same. The revenue structure determines everything.

Most Lenexa tech founders resist this transition because it's uncomfortable. Existing clients are happy with project relationships. Selling recurring services requires different conversations. The transition period is messy with both models running simultaneously. Revenue might dip slightly during the shift.

But the value creation is undeniable. You're not changing what you do. You're changing how you package and sell it.

Every Lenexa tech services owner facing this reality has two paths. You can transition to recurring revenue and keep the business (Love It), or you can transition to recurring revenue and prepare for exit (List It). Both paths require the same work: restructuring your revenue model over 24 to 36 months.

The Love It path means you keep the business but transform the economics. You systematically move clients from project relationships to recurring relationships. You develop managed service offerings, retainer packages, and subscription models that provide ongoing value. You build a business with predictable revenue that scales beyond your personal delivery capacity.

When you do this right, the business becomes more valuable AND more profitable. Recurring revenue has better margins than project work because you're not constantly reselling. Client lifetime value increases dramatically. The business can plan and invest with confidence because revenue is contractual, not hoped-for.

The List It path means you're preparing for exit in three to five years. You're building the same recurring revenue model, but your goal is commanding premium multiples from buyers. Tech services acquirers pay 4 to 6 times EBITDA for businesses with 60% plus recurring revenue and strong retention metrics. They pay 2 to 3 times EBITDA for project-based businesses regardless of client strength.

Both paths require uncomfortable client conversations. You're asking existing project clients to commit to recurring relationships. Some will resist. You might lose 10% to 15% of clients during the transition. But the clients who commit become far more valuable than the occasional project clients you lose.

The math works overwhelmingly in favor of recurring. A Lenexa managed services provider with $2 million in revenue and 70% recurring at $600,000 EBITDA is worth $2.4 million to $3.6 million. The same provider with $2.2 million revenue but all project-based at $660,000 EBITDA is worth $1.32 million to $1.98 million. You make more revenue in the project model and it's worth significantly less.

Revenue structure determines value. Build the right structure.

We start with the Reality Check, a $499 complete assessment using the Value Builder System. For Lenexa tech services businesses, this immediately identifies recurring revenue as the critical value driver you're missing.

You'll see your scores across all 8 Drivers. You'll understand exactly why your excellent tech business trades at 2 to 2.5 times EBITDA instead of 4 to 5 times. The difference is recurring revenue structure, and building that takes 24 to 36 months.

Then you decide: Love It or List It. Build recurring and keep it, or build recurring and exit.

Three paths forward:

Founder HQ is our free community for tech services founders learning about recurring revenue transitions. Weekly calls, peer support, frameworks for moving clients from projects to retainers.

Founder HQ Masters ($997 per month) is group coaching for founders committed to the recurring revenue transition. Monthly cohort calls, specialized playbooks on packaging recurring offers, transitioning existing clients, and building subscription models that actually work.

One-on-One Bootcamps ($2,500 to $10,000 per month) are custom implementation for tech businesses that need dedicated support building recurring revenue models. We help you design the offers, script the client conversations, build the delivery model, and guide the complete transition.

The difference between us and tech business brokers is timing. Brokers list businesses that are ready to sell. Most Lenexa tech firms aren't ready because they're project-based. We build the recurring revenue model first. Then you decide whether to keep it or list it with a broker.