If we want to exit in five years, what specific governance and financial milestones should we hit in year one of that runway rather than waiting until year three or four?

Question

Tyler Smith · Accepted Answer

Year one of a five-year runway is about stripping out structural dependencies, not shopping for investment bankers. First, move from cash or tax-basis bookkeeping to accrual accounting reviewed or audited by a reputable CPA firm. Buyers want three full years of clean quality of earnings data. If you wait until year three, you will not have the historical trail required for institutional diligence.

Second, lock down your corporate records, cap table, vendor contracts, and intellectual property assignments. Any ambiguity around ownership or licensing will stall negotiations later.

Third, rebuild your Accountability Chart based on where the business needs to be at exit, not based on your current roster. Map out the seats required to scale revenue without founder intervention. Start setting quarterly Rocks aimed at documenting your Core Processes so they are followed by all.

Finally, run a baseline valuation assessment such as the Step by Step Exit BIR to identify your current multiple discount against industry peers. If you do this in year one, you spend years two through four systematically driving up value rather than scrambling in year five to fix basic operational hygiene.