Gregory Shepard, CEO of Startup Science, has built and sold 12 companies, earning “Deal of the Year” honors for transactions between $250 million and $1 billion. Building a company for an exit means running it every day as if a buyer could walk in tomorrow. You clean up your cap table, cut customer concentration, and track your numbers now, not when a term sheet lands on your desk.
Quick Answer
Building a company for an exit means operating with a deal readiness mindset years before you plan to sell, not scrambling once a buyer shows interest. According to Glenn Gow, host of The Scaling Executive Podcast, the CEOs who get the best acquisition outcomes are the ones who make themselves replaceable, fix customer concentration early, and track their financials with the same discipline a buyer will apply during due diligence. Exit strategy planning is not a task you complete in the final year. It is how you run the company from year one.
Companies Are Bought, Not Sold
Most founders wait. They build the business, hit a wall or a milestone, and then start thinking about an exit strategy for a small business or a large one. Steven Monterroso, CEO of ShareVault, sees this mistake constantly. He told me, “I think the major challenge is that they waited for the event to happen versus operating their business deal and deal readiness mindset, right? So the way I kind of frame it is companies are bought not sold.”
Steven describes how a deal readiness mindset changes day-to-day decisions: “If you’re paying attention to how you’d eventually sell your business early on, it brings things like customer concentration to the forefront. Maybe we don’t want so much customer concentration.”
I tell CEOs the same thing in coaching sessions. The businesses that command the strongest offers are not reacting to a buyer. They already built a company a buyer would want.
The Expendable Founder Increases Your Valuation
If you want to increase business valuation, start with yourself. Karl Hughes, CEO of Draft.dev, has walked founders through this exact problem. He explained the standard path: “The typical pathway you see is that the owner will get themselves out of the production and operational side of the business. And then eventually they get themselves out of sales.”
Karl was blunt about what happens when a founder refuses to let go of client relationships. “You really don’t want to be like the lead strategist for clients if you want to sell your business. Cause that means how am I going to replace you? No way I can replace you as a terrible business to buy, right?”
Karl narrowed the entire question of how to increase company valuation down to two things: “The two big things are cashflow and owner independence. Everything else from there is kind of like checking boxes on like diligence and making sure that there’s not any huge red flags.”
Reverse-Engineer the Outcome You Want
Business valuation for exit strategy purposes starts with the ending, not the beginning. Patrick Brown, CEO of Unity Communications, builds his companies backward from the exit date. He described his method: “So I backwards engineer everything. Let’s say you’re a company that wants to be acquired in five years. What is your EBITDA need to be? What does your margins need to be? And then you backwards engineer from there.”
Patrick also confronted the ego problem that stops most founders from letting this work. “I learned that nobody does the job as well as you. You have to get over that. You have to delegate and let go this sense of doing it yourself because the CEO is not someone who is executing the tasks. There’s someone driving the vision.”
Brett Sharenow, CEO of Broadscope Consulting, starts telegraphing a company’s advantages to acquirers years before a deal happens: “You need to set that up two years in advance of the acquisition. So we’re working today for a two year, three year out acquisition. Who are the potential acquisition companies? How are we telegraphing to them that we’ve got some huge advantages for them?”
Brett also flagged a problem he sees in 90% of the CEOs who come to him for help raising capital. “90% of the CEOs that come to me for help raising capital cannot articulate a compelling case for customers. My first two questions in the email to the CEO are, what is your business in two sentences? And the second question is, what is your compelling case for customers?”
Growth At All Costs Will Cost You the Deal
Business value enhancement does not come from chasing revenue at any price. Omar Sahyoun, CEO and founder of Brand Fx, learned this from his earlier VC-backed ventures. “Some of my earlier ventures were VC backed and it was growth at any cost. Just grow, grow, grow, grow, grow. But what happens when you run out of cash from externals? What happens when those trends die? What happens when there’s less interest in markets to acquire you? Well, then you’re out of money.”
Omar also pointed to the human side of a sale that spreadsheets miss. “Everyone needs to be aligned that we will sell this company. And everyone should benefit from it, whether from a continuance and getting better salaries because a bigger company bought us or being part of the stock option pool.”
Here is how the two approaches compare when a buyer starts looking at your books.
| Approach | What It Prioritizes | Downstream Outcome for the CEO |
| Growth at all costs | Revenue growth, market share, outside funding | Cash dependency, weak margins, deal collapses if funding dries up |
| Deal readiness mindset | EBITDA, owner independence, clean financials | Multiple interested buyers, stronger negotiating position, higher business valuation |
I tell CEOs this table is the whole argument. Buyers pay for a business that runs without you and without a rescue check.
Process Debt Is the Silent Valuation Killer
Mark Wald, CEO of SPRCHRGR, has seen what happens when CEOs take shortcuts during rapid growth. “If you take shortcuts now, those shortcuts may become just like there’s technical debt. There can be operational debt and process debt in the way you build the company.”
Mark’s firm steps in to prepare businesses for a sale or a capital raise, which puts him in the room right when shortcuts get exposed. He said, “We find where the bodies are buried and we have to dig them up and fix them. It costs not only in the labor to just have a more seasoned person unwind what was done incorrectly and redo it the right way, but it costs in terms of reputation and timing, because that might slow down the process that might undermine your enterprise value.”
Mark also explained why segmented data tracking matters long before a buyer asks for it. “If you stratify the activities into different buckets, you can start to gain insights about how each respective channel or product or service is performing. If you don’t track it somewhere, you can’t go back and recreate the truth later.”
Succession Planning Is Part of Your Exit, Not a Separate Project
CEO succession planning and exit planning are the same conversation. Jay Rosenzweig, CEO of Rosenzweig & Company Inc, has watched this failure play out across dozens of founders. “The biggest mistake I see founders making is not giving over the reins at the right time, just stubbornly sticking around because somebody who has the talent to take a business from zero to one is not necessarily the same person who could take the business from one to five.”
Nellie Akalp, CEO of CorpNet, learned a related lesson the hard way about what actually builds a scalable, sellable company. “I thought scaling meant more sales, but what I learned, and I learned it the hard way, was that if your systems and people and processes aren’t built to support that growth, you’ll end up scrambling and it’s a lot harder to scale.”
Customer Concentration Is the Red Flag Buyers Cannot Ignore
A single million-dollar customer can do more damage to your exit than a weak quarter of revenue. Steven Monterroso has watched this scenario sink deals before they start. “You wouldn’t want a million dollar customer that’s going to change our direction,” he told me.
What Acquirers See That Founders Miss
Gregory Shepard has watched founders fail because they only understand their own view of the business. “If you’re sitting there and you’re trying to build a company and you don’t understand the way the world sees your product, the way your customers, your acquirers see your product, but you only understand your view of your product, you will fail.”
Gregory also pointed to when the real damage happens. “The biggest mistake I saw was that you have this 47.1% of founders that fail in the first 18 months. And over the following five years, almost all the ones that fail over the following five years are failing because of things they did or didn’t do in the first 18 months.”
FAQ
What is an exit strategy for a small business?
An exit strategy for a small business is a plan for how the CEO will eventually sell, merge, or transition ownership of the company, built years in advance rather than reacted to when a buyer appears. Glenn Gow coaches CEOs to treat this as an operating discipline, not a document, something you build into daily decisions long before a buyer ever calls.
How do I increase my company’s valuation before selling?
You increase business valuation by removing yourself from the parts of the business a buyer cannot replace. Karl Hughes, CEO of Draft.dev, is direct about what happens when a founder still owns every client relationship: it makes the company, in his words, “a terrible business to buy.” Glenn Gow tells CEOs that fixing this dependency matters more than almost anything else on a due diligence checklist.
When should a CEO start exit planning?
Start exit planning years before you intend to sell. Brett Sharenow, CEO of Broadscope Consulting, builds a financial model and runs it through what he calls “dozens and dozens and dozens” of strategic scenarios well before a deal is on the table, so the business has a credible base case the moment a buyer asks for one. Glenn Gow has seen CEOs lose leverage simply because they started this work too late.
What do buyers look for during due diligence?
Buyers look for clean cashflow, low owner dependence, and no undisclosed operational problems. Steven Monterroso puts it bluntly: “You can’t outwork bad processes, bad systems. And you can’t scale a CEO without having the right people, the right processes and the right systems in place.”
How does customer concentration affect a business sale?
High customer concentration lowers your valuation because it signals that a single client controls your company’s direction. If one customer could redirect your company’s strategy tomorrow, that concentration alone can end a deal before it starts. Steven Monterroso has watched this exact scenario scare off buyers who were otherwise ready to move.
What is CEO succession planning and why does it matter for an exit?
CEO succession planning means building a leadership structure that functions without the founder in the room. Jay Rosenzweig points to founders who “stubbornly stick around” past the point where their skills still match the company’s stage as the single biggest mistake he sees in scaling businesses. Gregory Shepard compares that same instinct to a nervous parent who won’t leave a baby with a babysitter, a pattern he has watched sink otherwise strong companies. Glenn Gow treats this kind of succession readiness as a direct input into acquisition value, not a side project.
Can a company be too dependent on its founder to sell?
Yes. When a founder still runs production, owns every client relationship, and makes every strategic call, a buyer has no way to answer the question of who replaces that person. Karl Hughes tells founders the fix starts with stepping out of production first, then sales, well before they list the company.
How does growth at all costs hurt a company’s exit value?
Growth at all costs burns cash and builds a business that depends on continued outside funding to survive. Omar Sahyoun watched this model fail him directly when market trends shifted and acquisition interest dried up on his earlier VC-backed ventures. Glenn Gow pushes CEOs toward EBITDA-positive operations specifically because that discipline holds up when the market cools.
What is “process debt” and how does it affect a business sale?
Process debt is the accumulation of shortcuts in accounting, operations, and systems that a company takes during rapid growth. Mark Wald’s firm regularly finds these problems while preparing companies for a sale, and unwinding them late in the process slows the deal and can lower the final price. The fix is tracking your numbers before a buyer ever asks to see them, not after.
How long before an acquisition should a CEO start preparing?
Most of the CEOs Glenn Gow talks to on the podcast start real exit strategy planning two to five years before a target sale. Brett Sharenow sets up his two-year telegraphing process specifically so acquirers already see the company’s advantages before formal conversations begin. Omar Sahyoun adds a reminder that gets lost in the spreadsheets: “Companies buy a company for its people.”
What financial metrics matter most to a buyer?
Cashflow and owner independence top the list, according to Karl Hughes. Beyond that, buyers check for consistent EBITDA, clean margins, and financial records that hold up without a specialist unwinding errors first.
How do I make my business more attractive to acquirers?
Make yourself replaceable, fix your customer concentration, and build systems that outlast you. Patrick Brown keeps key people through a sale by offering what he calls an “emotional salary,” things like covering college funds, paying for a surgery, or allowing remote work, which builds loyalty a competitor’s paycheck cannot easily break. Glenn Gow tells CEOs this kind of preparation is the difference between a company that sells and one that stalls at the negotiating table.
How long does it take to sell a business once you decide to exit?
The actual sale usually takes months once buyers are engaged, but the work that makes it possible starts years earlier. Brett Sharenow builds his telegraphing process two to three years before a target acquisition specifically so the deal itself, once buyers are engaged, closes faster and without last-minute renegotiation. Glenn Gow tells CEOs that if they are only counting the months after a term sheet, they are counting the wrong clock.
Should I hire an M&A advisor to help sell my company?
Most CEOs benefit from bringing in an advisor once they are within two to three years of a target sale, not after a buyer has already shown interest. Glenn Gow recommends CEOs treat this the same way they treat legal or accounting help: bring in the expert before you need to react to a problem, not after.
How is a business actually valued for an acquisition?
Buyers value a business primarily on EBITDA, margins, and how well the numbers hold up under scrutiny. Patrick Brown starts with the EBITDA and margin targets a five-year acquisition requires and works backward from there, while Brett Sharenow runs the business through dozens of strategic scenarios to build a credible base case before presenting it to investors.
What You Do Next
If you are running your company reactively and hoping a buyer eventually notices you, stop. Start operating with the deal readiness mindset Steven Monterroso described, fix your customer concentration, and get your financial tracking in order before due diligence forces the issue. I coach CEOs through exactly this kind of exit strategy planning every week, and the pattern is always the same: the earlier you start, the more leverage you have when a buyer finally shows up. Book a call with Glenn Gow to talk through where your company stands today and what it will take to get it exit-ready.
