Most founders start preparing for a sale when a buyer calls. By then, most of the price is already set.
When I say I work with founders three years before they sell, the usual reaction is: why so early? The deal is years away. The business is growing. There’s nothing to negotiate yet.
That’s the point. Almost everything a buyer pays for is decided long before anyone negotiates. And almost all of it takes time to change.
What a buyer actually pays for
A buyer isn’t paying for last year’s profit. They’re paying for how confident they are that the profit will keep coming once you’ve gone. Every doubt becomes a discount, a holdback, or an earnout.
Here is what creates those doubts, and why none of them can be fixed in six months.
Customer concentration takes years to dilute.
If one customer is a third of your revenue, a buyer sees a business that could lose a third of its value with one phone call. You can’t fix that by cutting the customer loose. You fix it by growing everything else, and that takes several sales cycles.
A business that depends on you is worth less without you.
If the key relationships, decisions and know-how sit with the founder, the buyer is buying something that walks out the door at closing. Building a team that runs the business is one step. Proving it, with a year or more of results while you step back, is the step buyers pay for.
Clean numbers need a track record.
Buyers look at your trailing years, not just the current one. Cleaning up the books today only helps the years that follow. If your accounting, revenue recognition or add-backs won’t stand up to a quality-of-earnings review, the time to fix them is before the years a buyer will examine.
Recurring revenue has to recur.
Moving customers from one-off projects to contracts or subscriptions is one of the best ways to raise what a buyer will pay. But a contract signed last month proves nothing. Renewals do.
Contracts and paperwork often need someone else’s signature.
Change-of-control clauses, leases, contractor IP assignments, key customer agreements. Each is a small fix on its own. Many need a counterparty to agree, and none of them should be discovered for the first time in a buyer’s data room.
The best time to sell is on the way up.
Buyers pay for trajectory. A business that is still climbing commands a better price than one that has leveled off. If you wait until you’re ready to stop, you may be selling at the plateau.
Time is the one thing the buyer can’t take from you
There’s a second reason to start early, and it matters as much as the first.
A seller who has to close will close on the buyer’s terms.
Experienced buyers know this. The manufactured walk-away, the late retrade, the price that drops after exclusivity: these plays work on sellers who are out of time. A founder with a clean business and no deadline can say no. A founder who needs the deal can’t.
Three years gives you the one position no buyer can negotiate away: the ability to walk.
How to use the three years
I plan backwards from the day you want to close, so each year has one job:
Year one, starting now: see your business the way a buyer will.
Find what a buyer will find, before they do. Size each issue by what it would cost you at the table, and decide which ones are worth fixing.
Year two: fix what moves the price.
Spread the revenue. Build the team. Clean the numbers. Sign the contracts. Not everything, just the things that change what a buyer will pay.
Year three: run it clean and pick your moment.
By now the fixes are showing up in the results. You know your story, your numbers and your walk-away point, and you go to market when it suits you, not when a buyer calls.
Starting late is not fatal. It’s just expensive.
If a sale is closer than three years, there is still plenty you can do. But every month you start earlier is one more month of results a buyer can see, and one less thing they can use against you.
If a sale is anywhere in your next three years, the cheapest time to find out what a buyer will see is now.
The first meeting is 45 minutes and costs nothing. Start here.
