A software business on the pitch deck.
A services business in the P&L.
Published
And the market prices it exactly that way. In private M&A, software that runs like a services business sells for around 1–2.6x revenue. SaaS sells for 3–3.8x. (Aventis, 2024–Q1 2026).
How does the bloat happen? The account director who says "yes" to a custom feature looks like a hero. The product manager who insists on a standard discovery cycle looks like a roadblock. The services shape wins by default because, in the short run, it works.
The true cost stays invisible for years. By the time it shows, it isn't just a process problem. It is architectural.
Ironically, the companies that suffer most are the ones with the strongest moats.
Deep industry embedding makes custom work feel necessary. But the moat isn't what causes the valuation gap. The broken delivery model underneath it is.
First published on LinkedIn on 6 October 2026. The original post.
The full mechanism — how absorbed custom work prices as a services business, and how the shape is resolved — is in the report →
Where this note leads: the papers behind it, in reading order.