Exit-Readiness Rubric + 90-Day Plan
Exit value is not set at the closing table. It is set by decisions made two to five years before the transaction. The Exit-Readiness Rubric scores six dimensions, calculates the dollar impact of each gap, and produces the sequenced plan to close them.
The Exit-Readiness Rubric — six dimensions, dollar-quantified
The rubric is applied to a baseline business with $1M in reported EBITDA and a 4x–6x market multiple range (implied value $4M–$6M). Each dimension gap reduces the multiple buyers are willing to pay. The dollar impact column shows what a full score in that dimension is worth at the midpoint ($5M) of the range.
Financials — 3 years accrual, QoE-ready, DSCR positive Full score: buyers accept financials at face value. Gap: QoE retrade risk adds 45–90 days and triggers a 0.25–0.5x multiple reduction — $250K–$500K impact. | 20 / 20 |
Operations — documented SOPs, owner-independent processes Partial score: two processes still require direct owner involvement. Gap estimated at $150K in multiple compression. | 16 / 20 |
Legal — clean cap table, no pending disputes, IP assigned Minor gap: one contractor agreement lacks IP assignment clause. Estimated legal exposure: $50K contingency reserve. | 18 / 20 |
Key-Person Independence — business runs 30 days without the owner Material gap: owner handles three critical vendor relationships personally. Gap: 0.5x multiple discount, $500K impact. | 10 / 20 |
Transferability — customers, contracts, systems, and licenses transfer Two customer contracts lack change-of-control consent provisions. Gap: $200K escrow holdback risk. | 14 / 20 |
Customer Base — no single customer exceeds 15% of revenue Top customer is 22% of revenue. Gap: buyer insists on 12-month earnout for the top-customer revenue tranche, $1.1M deferred. | 12 / 20 |
| Total Score / Exit-Ready Threshold | 70 / 75 |
At a score of 70, this business is 5 points below the exit-ready threshold. The two highest-leverage gaps are Key-Person Independence (−$500K) and Customer Concentration (−$1.1M deferred earnout). Closing those two gaps alone recovers more than $1.5M in transaction value — before any multiple expansion from the improved narrative.
Before and after exit readiness engagement
- ×Buyer QoE surfaces owner add-backs that were not pre-disclosed, triggering retrade
- ×Two key vendor relationships are owner-held and non-transferable
- ×Top customer contract has no change-of-control provision — consent required
- ×Trailing 12-month financials are cash-basis and 90 days stale
- ×No documented SOPs — buyer requires management retention escrow
- ×Owner receives final number 0.75x lower than the letter of intent price
- ✓Sell-side QoE completed before marketing; no retrade surprises at close
- ✓Vendor relationships transferred to operations manager 18 months pre-close
- ✓Customer contracts reviewed and updated; change-of-control provisions added
- ✓Accrual financials current to within 30 days; lender accepts without conditions
- ✓SOPs documented; buyer closes without management retention requirement
- ✓Final close price matches letter of intent; no earnout contingency on top customer
90-day exit readiness sprint
The sprint is sequenced so that high-dependency, long-lead tasks begin first. Legal and financial items can run in parallel. Operational and key-person items require lead time and cannot be compressed.
- 01Days 1–10: Score and gap-rank the rubricComplete the six-dimension rubric with supporting documentation. Rank gaps by dollar impact. Assign an owner and deadline to each remediation item.Output: scored rubric + ranked gap list + owner assignments
- 02Days 10–30: Financial package — clean and currentConvert cash-basis books to accrual. Complete owner-earnings normalization with a consistent methodology. Update trailing 12-month financials. Engage QoE advisor for preliminary review.Output: lender-grade, QoE-ready financial package
- 03Days 15–45: Legal and structural cleanupAssign all IP to the operating entity. Review and update customer contracts for change-of-control provisions. Resolve any open disputes or contingent liabilities. Update cap table and operating agreement.Output: clean legal package ready for buyer counsel review
- 04Days 20–75: Operational documentation and key-person transitionDocument the top ten revenue-driving and cost-driving processes as written SOPs. Transfer owner-held vendor and customer relationships to named operators. Run a 30-day owner absence simulation.Output: SOP library + documented relationship handoffs + simulation results
- 05Days 60–90: Re-score, narrative, and readiness declarationRe-score the rubric against completed remediation items. Draft the one-page business narrative for buyer marketing. Declare exit-ready status when score reaches 75 with no dimension below 10.Output: updated rubric score + buyer narrative + exit-ready declaration
- Quality of Earnings →
The QoE review is the financial backbone of the exit-readiness process — completed sell-side to prevent retrades.
- Transferability Readiness →
Two of the six rubric dimensions — Operations and Customer Base — are scored through the transferability framework.
- Bookkeeping & Fractional CFO →
The Financial Engine produces the accrual-basis, QoE-ready financials the exit rubric requires at full score.
Frequently asked questions
When should an owner start preparing for an exit?+
Three to five years before the intended transaction date is the standard professional answer. Two years is the minimum if the business has clean financials, documented operations, and no key-person concentration. Starting 90 days before a target close date produces a distressed process and a discounted valuation.
What is a quality-of-earnings review and do I need one before selling?+
A quality-of-earnings review is an independent analysis of whether reported earnings reflect the true, sustainable cash-generating capacity of the business. Any buyer with an advisor will order one. Having a sell-side QoE completed in advance of the process removes surprises, compresses the timeline, and strengthens your negotiating position.
Does exit readiness only apply to full business sales?+
No. The same preparation disciplines apply to partial sales, minority recapitalizations, management buyouts, and generational transfers. In each case, a third party is underwriting the value of the business, and they will apply the same scrutiny regardless of transaction structure.
How does the 90-day plan work if I am not planning to sell within 90 days?+
The 90-day plan is a sequenced sprint to close the most critical readiness gaps, regardless of your timeline. Running the sprint now means you are in a maintained state of readiness — so that when an offer comes unsolicited, or when the window opens, you are not starting from zero.
What is the single highest-leverage thing an owner can do to increase exit value?+
Reduce key-person dependency — specifically, the owner's own indispensability. Buyers underwrite risk before they underwrite value. A business that cannot operate for 30 days without the founder is priced accordingly. Owner independence is the highest-multiplier variable in the exit-readiness rubric.
What score is considered exit-ready on the rubric?+
A score of 75 out of 100 on the Exit-Readiness Rubric, with no single dimension below 10 points, is the threshold for proceeding to an active transaction process. Below that threshold, the recommended path is a 90-day remediation sprint followed by a re-score.
Exit ready is capital ready.
The free OWNABLE Assessment takes about ten minutes and scores your Five Hidden Taxes in real dollars.