Most owners get one chance to exit their company. The work that makes that one chance go well rarely begins in the year of the transaction; it begins two to three years earlier, while the business still feels like a going concern rather than a deal.
When an owner tells us they are starting to think about an exit — even tentatively — our first conversation is almost always about what they should stop doing, not what they should start. The closer to a transaction a company gets, the less optionality the owner has. The further out, the more.
What changes at the 36-month mark
Once the time horizon is defined, four operating questions move from “general business hygiene” to “transaction-critical”:
- What is the defensible EBITDA? Not the highest EBITDA. The defensible one — the figure that survives a buyer-paid quality-of-earnings review with minimal adjustment.
- What is the transferable customer base? Customer concentration over twenty percent invites discount; over forty percent invites contingent consideration. Both are addressable, but only with time.
- What is the documented operating system? A buyer pays for a business that runs without the owner. The work of building that distance — playbooks, named successors, recurring meetings that do not require the owner’s presence — takes years, not months.
- What is the after-tax outcome? Entity structure, owner compensation, basis, and state of residence each materially affect what the seller actually receives. These are levers the owner can usually only move two or three years in advance.
What we do in the first ninety days
A typical pre-sale engagement begins with a written baseline — what the business would sell for today, on terms that today’s buyers will pay, with the team and the systems that today exist. The baseline is rarely flattering. It is, however, the only honest starting point.
From the baseline we work backward to a small number of value-driver projects — usually three to five — that the company can realistically execute in twelve months. Discipline matters: a long list of improvements is a long list of distractions. The handful of projects that move the multiple are the only ones worth named ownership.
What not to do
A short list of common mistakes we see at the 24-to-36-month mark:
- Hiring an investment banker before the financials are clean. Bankers can do many things, but they cannot fix the books, and a process launched with messy financials gets fewer and worse offers.
- Pursuing one-time revenue spikes in the year of sale. Sophisticated buyers strip them out of the multiple, and the credibility cost lingers.
- Deferring difficult personnel decisions. A buyer pays for the team they inherit; an owner sells with the team they have allowed.
- Skipping the wealth-side conversation. The exit is a liquidity event for the owner, not just a transaction for the company. The two need to be planned together.
For a confidential conversation about an exit horizon, email andrew@denniscapital.net. Initial conversations carry no obligation and no charge.