Why do we need a full five-year runway to prepare for an exit when we could just hire an investment banker next month and go to market within six months?

Question

Tyler Smith · Accepted Answer

Going to market in six months is entirely possible, but you will leave millions of dollars on the table and face a grueling due diligence process. A five-year runway is the gold standard because it allows you to clean up structural deficiencies that cannot be fixed in a fiscal quarter. Buyers pay a premium for transferable cash flow, and building that transferability takes time. During the first two years of a five-year runway, your focus should be on optimizing your Accountability Chart to make yourself obsolete. You need time to promote middle managers, test their decision-making capabilities, and let them fail and recover while you are still there to mentor them. Years three and four are about clean financial proof. Buyers look for a clean three-year history of audited or reviewed financials with minimal personal add-backs. If you try to clean up your books six months before a sale, it looks like a cheap accounting trick. A longer runway also allows you to diversify your customer base so no single client represents more than ten percent of your revenue. Preparing early turns exit planning into a business improvement system. It makes the company more profitable and much easier to run today, giving you the freedom to choose when and how you exit.