Exit-Readiness Self-Assessment

The 9 Dimensions Buyers Diligence Before Issuing an LOI

Institutional acquirers price risk into the multiple. When earnings depend on the founder, one customer, or undocumented add-backs, buyers cannot be confident those earnings will survive the transition, so they lower the EBITDA multiple, shift value into earn-outs, or re-trade the price during diligence.

How each factor is scored

Financial Visibility & QoE Hygiene

How diligence-ready are your financial statements and EBITDA add-backs? Score 1: Cash-basis or mixed accounts, unverified add-backs, no audited financials. Score 3: Standard accrual accounting with some EBITDA add-backs documented. Score 5: Multi-year audited GAAP/IFRS financials, pristine QoE-ready add-back schedule.

Founder Dependency & Autonomy

How well does the business run without the founder? Score 1: Business halts if the founder takes 2 weeks off; all key client/sales relationships reside with founder. Score 3: Key ops delegated, but founder still leads major sales and strategic delivery. Score 5: Autonomous leadership team; founder can step away for 3 months with zero operational friction.

Customer & Revenue Concentration

How concentrated is your revenue across customers? Score 1: Single customer represents >25% of total revenue (or top 3 represent >50%). Score 3: Largest client represents 12-18% of revenue. Score 5: Highest single customer <7% of ARR; highly diversified customer base.

Contracted Recurring Revenue & Retention

How contracted and sticky is your revenue? Score 1: Transactional / project-based revenue with high annual logo churn (>20%). Score 3: Annual contracts with 85-90% Net Revenue Retention (NRR). Score 5: Multi-year sticky subscriptions with >110% NRR and low churn (<5%).

Gross Margin & Pricing Power

How strong are your gross margins and pricing power? Score 1: Thin margins (<45% software / <20% tech services), heavy pricing competition. Score 3: Industry-median gross margins (60-70% software), stable pricing. Score 5: Premium pricing power with >80% software gross margin (or >45% services).

Sales & Marketing Engine Predictability

How predictable and measurable is your go-to-market engine? Score 1: Word-of-mouth & founder-led hustling; no measurable CAC, LTV, or pipeline conversion data. Score 3: Established marketing pipeline with 3-6 months predictable pipeline coverage. Score 5: Machine-like inbound/outbound engine with documented unit economics (LTV:CAC > 4x).

Tech Architecture & IP Cleanliness

How clean is your technology and IP ownership? Score 1: Tech debt, outsourced untracked code, missing IP assignment agreements with past engineers. Score 3: Documented architecture, clean cap-table IP assignments, manageable tech debt. Score 5: Enterprise-grade architecture, SOC2/security verified, automated CI/CD, 100% clean IP ownership.

Working Capital & Cash Flow Predictability

How predictable is your working capital and cash flow? Score 1: Erratic swings in AR/AP, frequent cash crunches, unclear working capital peg. Score 3: Steady 30-day AR collections, standard working capital requirements. Score 5: Predictable negative or ultra-lean working capital, immediate upfront customer payments.

Management Depth & Key Person Diligence

How deep is your leadership bench beyond the founder? Score 1: No second-in-command; departure of 2 key staff would cripple the business. Score 3: Experienced VP layer in place with standard employment retention terms. Score 5: C-suite operators with equity vesting, non-competes, and proven succession depth.

Score = (sum of 9 ratings ÷ 45) × 100. Tiers: 85–100 Institutional Buyer Grade; 70–84 Market Attractive; 50–69 Moderate Deal Friction; below 50 High Diligence Risk.