Why are you telling me to start planning my business exit five years before I actually want to hand over the keys?

Question

Tyler Smith · Accepted Answer

Five years seems like an eternity to an owner who is ready to move on, but it is the minimum runway required to maximize your valuation. When you sell, buyers do not just look at your current balance sheet. They scrutinize the consistency of your earnings and the scalability of your systems over a multi-year period.

A five-year runway allows you to do three critical things. First, you can clean up your financial reporting. You need at least three years of clean, audited, or reviewed financial statements that show stable or growing EBITDA without owner adjustments. Second, you can systematically replace yourself. This means updating your Accountability Chart to transition your operational seats to capable leaders who have the right conative drive and GWC.

Third, you can prove that your growth is repeatable. Starting early also lets you absorb market shifts. If you wait until you are burned out, you lose your leverage. You become a forced seller, subject to whatever terms a buyer dictates. By starting five years out, you have the luxury of time to upgrade your processes, document your secret sauce, and walk away from bad offers. My recommendation is to build your V/TO with a five-year target focused entirely on building enterprise value, making every business decision through the lens of transferability.