What Happens to Your Company in the Ninety Days After You Stop Answering the Phone

Answer that honestly and you have your valuation problem in one sentence.

If you hold the customer relationships, the pricing judgment, the supplier terms, and the institutional memory, then what is for sale is a job with equipment attached. Reducing that is the single highest-return preparation most owners can do, and it also takes the longest, which is why it is the one most often skipped.

What a buyer is actually worried about

Not that you are good at your job. That the company’s performance is an output of you being in it.

A buyer cannot verify a transition before they own the thing. So they price the risk, and with no evidence either way they price it pessimistically: some customers leave, some pricing discipline goes, some supplier terms get renegotiated by somebody who does not have your history with them. None of that has to happen. It only has to be plausible.

The evidence that makes it implausible is specific, and it has to exist before anybody looks.

The four places dependence actually lives

Customer relationships. Who do your top ten accounts call when something goes wrong. If the answer is you, personally, on your mobile, then the relationships are yours rather than the company’s.

Pricing judgment. Who decides what a non-standard job costs. If there is no rule, no rate structure, and no one else who can be trusted to quote, then the margin is a function of your attention.

Supplier and lender terms. Which of your terms exist because of a relationship rather than because of volume. Those are the ones that reset when the name on the door changes.

Institutional memory. The things that are not written down anywhere: why the process is done that way, which customer gets the exception, what happened the last time somebody tried the obvious thing.

What fixing it looks like

Not an org chart. Transferred authority, and evidence that it was transferred.

A second person on every significant account, present in meetings, copied on everything, who the customer actually knows. A documented rate structure with somebody other than you authorized to quote within it. Written processes for the handful of things only you know. And a management layer with real decision rights rather than real titles, which is the one buyers test hardest and the one owners fake most often.

The test of all of it is the same test the buyer will run: take two months off, starting soon, and find out what breaks. What breaks is your preparation list. The owners who do this discover that the list is both shorter and different from what they expected.

Why it takes years and not months

Every item above is a change in behavior, and most of it is your behavior.

Handing over an account means the customer has to come to trust somebody else, which happens over several interactions rather than one introduction. A manager with decision rights makes some decisions you would not have made, and the first few are the expensive ones. A documented rate structure gets its exceptions argued out over a year of real quotes.

None of that compresses. An owner who begins this three months before going to market produces an org chart and a buyer who can tell the difference.

The part that is also for you

There is a reason this work is worth doing even if the sale never happens.

A company that runs without you is the thing that makes most of the alternatives to selling possible: hiring a general manager and keeping it, selling a majority and staying on, taking two months off, handing it to the person already running it. Owners who have not done the work have exactly one option, which is a full sale, and they usually discover that at the point when they want a different one.

What it is worth

The gain is not a rounding adjustment. Two of the structural reasons larger companies command higher multiples are management depth and the ability to be financed, and both of them are this.

It also changes who can buy you. Financial buyers back an industry operator or keep and incentivize your existing management, which makes the depth of your team a direct input into what they will pay and, in some cases, into whether they will look at all.

What getting it wrong costs

An owner-dependent company sells. It sells at a discount, and it sells with strings.

The strings are the part owners do not anticipate. A buyer who cannot verify the transition builds it into the deal instead: a longer period you have to stay, a larger share of the price deferred, an earnout tied to performance you no longer control after the first year, a holdback against the customers everybody is quietly worried about. Each one of those is the same unverified transition risk, converted into a term.

Which means the owner who never did the work pays for it twice. Once in the multiple, and again in how much of their own price they have to stay around to collect.

More on this: Why Two Companies With the Same Earnings Sell for Different Money.

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This is what we do. Prism Edge runs the preparation that moves this: transferring accounts with evidence a buyer can verify, putting a rate structure and real authority under the people who will stay, documenting what only you know, and then testing it the way a buyer will. It takes two or three years to do properly, which is the entire argument for starting before you have decided.

The full chapter on what drives value, including why owner dependence is the costliest item on the list, is in The Business Sale, free to download here.