If we are targeting an exit five years from now, what operational and structural priorities should we tackle in years one and two before even considering an investment banker?

Question

Tyler Smith · Accepted Answer

A five-year runway gives you an enormous strategic advantage, but only if you spend the first twenty-four months building your foundation rather than shopping for M&A brokers. Years one and two must be dedicated to de-risking your core architecture across four dimensions: financial integrity, credit health, industry benchmarking, and operational independence.

Begin with the Accountability Chart. Clarify every seat on the leadership team and ensure every person in a seat has the capacity to Get It, Want It, and the Capacity to do it (GWC). Your primary job in year one is replacing yourself in any operational or sales functions. If you still close major accounts or oversee technical delivery, you do not have a company to sell; you have a high-paying job with a heavy overhead burden.

Simultaneously, clean up your financial reporting. Transition your books to accrual accounting under GAAP, eliminate discretionary personal expenses, and establish an audit trail. Work with an outside firm to conduct a Quality of Earnings review early. This reveals historical margin vulnerabilities while you still have three full years to correct them.

Finally, document your core processes and ensure they are followed by all. When your operations, sales, and delivery engines run predictably via documented systems, your EBITDA converts from fragile owner-dependent cash flow into durable, institutional earnings that buyers actively compete to purchase.