The Two-Year Head Start

Ask ten owners what determines the price of a business, and you will hear about markets, multiples, and finding the right buyer. All of it matters. But after two decades of watching private companies change hands, I can tell you the single biggest driver of the outcome is quieter than any of those: it is how much runway the owner gives themselves before going to market. The best exits are not found. They are built — usually over about two years.

The multiple is not fixed

Owners tend to treat their industry's valuation multiple as a law of nature: "businesses like mine sell for five to seven times earnings." What that range actually describes is the gap between prepared companies and unprepared ones. The same business, with the same revenue, can transact near the bottom of its range or above the top of it — depending on what a buyer finds when they look closely. And buyers look very closely.

Three findings reliably pull a price down. First, owner-dependence: if customers, key decisions, and critical relationships all route through you personally, a buyer isn't purchasing a business — they're purchasing the hope that you can be replaced. Second, customer concentration: when a large share of revenue comes from a handful of accounts, buyers discount for the risk that any one departure changes everything. Third, financial opacity: statements that mix personal and business expenses, or that can't withstand a quality-of-earnings review, force buyers to price in uncertainty. None of these is a moral failing — they are the natural shape of a founder-built company. But every one of them is improvable, and none of them is improvable quickly.

What two years actually buys

With a two-year head start, an owner can promote or hire a second layer of management and let it visibly run the business. Long-term customer contracts can be renewed and diversified. Financial reporting can be professionalized, so that diligence confirms your story rather than eroding it. In regulated and licensed businesses, compliance housekeeping belongs on the same list; it is among the first things buyers stress-test. A growth narrative — the part of the company's future a buyer is really paying for — can be documented with evidence instead of asserted with optimism. Each of these changes shifts how a buyer underwrites the company. Together, they routinely change not just the price but the terms: less of the consideration held back in earnouts, fewer conditions, a cleaner close.

Attempted in the final ninety days before a sale, none of this works. Buyers can tell the difference between a company that runs well and a company that has been dressed for the occasion.

The owner has to be ready too

There is a second kind of readiness that gets less attention and derails more deals: the owner's own. A sale is a turning point in a life, not just a transaction in a company. Owners who haven't thought through what the exit is for — what the proceeds need to accomplish, what their days look like afterward, what happens to family members in the business — often hesitate at the worst possible moment, when a strong offer is on the table and conviction is required. The financial preparation and the personal preparation take about the same amount of time. They should happen together.

Where to begin

Begin with an honest reading of where you stand. Not a valuation — earlier than that. If a sophisticated buyer examined your business today, what would they celebrate, and what would they discount? Which of the value drivers above is your strongest, and which is your most expensive weakness? An owner who can answer those questions has already started the two years, whether or not a sale is on the calendar. And owners who never sell at all still end up with a stronger company for having asked.

That is what this publication is for: one useful piece a month on how private businesses are valued, bought, and sold — written for the people who built them.