Exit Readiness Assessment

EXIT READINESS PHILOSOPHY

What It Means to Be Exit-Ready

EXIT READINESS FUNDAMENTALS

THE PURPOSE OF READINESS ASSESSMENT:
☐ Know where you stand objectively
☐ Identify gaps before buyers do
☐ Plan remediation with time
☐ Avoid surprises in due diligence
☐ Maximize value when moment comes
☐ Reduce deal risk

READINESS VS. TIMING:
☐ Readiness = Can you execute successfully?
☐ Timing = Is now the right moment?
☐ Both matter, but readiness is in your control
☐ Being ready when timing is right = optimal

THE HONEST READINESS TEST:
☐ If a buyer called today, would you be embarrassed?
☐ Could you populate a data room in 30 days?
☐ Would diligence reveal surprises?
☐ Are your numbers defensible?
☐ Is your team stable?
☐ Do you know your value?

READINESS REALITY CHECK:
☐ Most companies overestimate readiness
☐ Due diligence reveals what you've hidden
☐ Buyers have done this before, you haven't
☐ Small issues become big during process
☐ Six months of prep saves millions in value

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COMPREHENSIVE READINESS EVALUATION

Exit Readiness Scorecard

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EXIT READINESS ASSESSMENT
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Company: _______________
Assessment Date: _______________
Assessor: _______________
Target Exit: _______________

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DIMENSION 1: FINANCIAL READINESS (25%)
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ACCOUNTING & AUDIT:
☐ Audit-ready financials: ___/10
  Current status: ☐ Audited ☐ Reviewed ☐ Compiled ☐ Internal
  Action needed: _______________________

☐ Financial statements quality: ___/10
  GAAP compliant: ☐ Yes ☐ No ☐ Partial
  Revenue recognition proper: ☐ Yes ☐ Concerns
  Accruals/estimates reasonable: ☐ Yes ☐ Concerns

☐ Historical accuracy: ___/10
  Budget vs. actual variance: ___% average
  Restatements required: ☐ None ☐ Minor ☐ Major

☐ Financial controls: ___/10
  Segregation of duties: ☐ Yes ☐ No
  Approval processes: ☐ Strong ☐ Adequate ☐ Weak
  System controls: ☐ Strong ☐ Adequate ☐ Weak

REVENUE QUALITY:
☐ Revenue composition: ___/10
  Recurring %: ___% (target 70%+)
  Contract backlog: $___M (___ months)
  Customer concentration: ___% top 10

☐ Revenue defensibility: ___/10
  Churn rate: ___% (target <10%)
  NRR: ___% (target >100%)
  Contract length: ___ months avg

PROFITABILITY:
☐ Margin quality: ___/10
  Gross margin: ___% (trend: ↑↓→)
  EBITDA margin: ___% (trend: ↑↓→)
  Cash flow positive: ☐ Yes ☐ No

☐ Unit economics: ___/10
  LTV:CAC: ___x (target >3x)
  Payback: ___ months (target <18)

FINANCIAL DIMENSION SCORE: ___/10

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DIMENSION 2: OPERATIONAL READINESS (20%)
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PROCESS MATURITY:
☐ Process documentation: ___/10
  Critical processes documented: ___%
  SOPs current: ☐ Yes ☐ Mostly ☐ No

☐ Scalability: ___/10
  Automation level: ☐ High ☐ Medium ☐ Low
  Bottlenecks identified: ☐ Yes ☐ No
  Capacity planning exists: ☐ Yes ☐ No

☐ Operational metrics: ___/10
  KPIs defined and tracked: ☐ Yes ☐ Partial
  Dashboards/reporting: ☐ Robust ☐ Basic ☐ None

TECHNOLOGY:
☐ Systems/infrastructure: ___/10
  Technical debt: ☐ Low ☐ Medium ☐ High
  Security posture: ☐ Strong ☐ Adequate ☐ Weak
  Compliance (SOC2, etc.): ☐ Yes ☐ In progress ☐ No

☐ Product stability: ___/10
  Uptime: ___% (target 99.9%)
  Incident frequency: ___/month
  Customer impact: ☐ Rare ☐ Occasional ☐ Frequent

OPERATIONAL DIMENSION SCORE: ___/10

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DIMENSION 3: TEAM READINESS (20%)
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LEADERSHIP:
☐ Management depth: ___/10
  Leadership team complete: ☐ Yes ☐ Gaps
  Gaps: _______________________

☐ Founder dependency: ___/10 (lower is better)
  Critical functions requiring founder: ___
  Succession for key roles: ☐ Ready ☐ Partial ☐ None

☐ Key person risk: ___/10
  Flight risks identified: ☐ Yes
  Retention plans in place: ☐ Yes ☐ No
  Critical departures recent: ☐ None ☐ Minor ☐ Major

ORGANIZATION:
☐ Team stability: ___/10
  Annual turnover: ___% (target <20%)
  Regrettable attrition: ___% (target <10%)
  Average tenure: ___ years

☐ Organizational health: ___/10
  Employee engagement: ___/10
  Culture strength: ___/10
  HR compliance: ☐ Clean ☐ Issues

☐ Compensation alignment: ___/10
  Equity plans clean: ☐ Yes ☐ Issues
  Employment agreements: ☐ Standard ☐ Issues
  Contractor classification: ☐ Clean ☐ Risk

TEAM DIMENSION SCORE: ___/10

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DIMENSION 4: LEGAL/COMPLIANCE (15%)
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CORPORATE:
☐ Corporate records: ___/10
  Minutes current: ☐ Yes ☐ No
  Cap table clean: ☐ Yes ☐ Issues
  409A current: ☐ Yes ☐ No ☐ N/A

☐ Stock/equity: ___/10
  Option grants proper: ☐ Yes ☐ Issues
  83(b) elections filed: ☐ Yes ☐ Unknown
  Vesting schedules documented: ☐ Yes ☐ Partial

CONTRACTS:
☐ Customer contracts: ___/10
  Standard terms used: ___%
  Assignment clauses: ☐ Favorable ☐ Issues
  Material contracts accessible: ☐ Yes ☐ Scattered

☐ Vendor/partner contracts: ___/10
  Material agreements current: ☐ Yes ☐ No
  Change of control provisions: ☐ Reviewed ☐ Unknown
  Termination exposure: ☐ Low ☐ Medium ☐ High

IP:
☐ Intellectual property: ___/10
  IP properly assigned: ☐ Yes ☐ Gaps
  Patents/trademarks filed: ☐ Yes ☐ N/A
  Open source compliance: ☐ Clean ☐ Risk

LITIGATION:
☐ Litigation exposure: ___/10
  Pending claims: ☐ None ☐ Minor ☐ Material
  Threatened claims: ☐ None ☐ Yes
  Regulatory issues: ☐ None ☐ Yes

LEGAL DIMENSION SCORE: ___/10

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DIMENSION 5: STRATEGIC READINESS (20%)
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MARKET POSITION:
☐ Competitive position: ___/10
  Market share: ___% (#___ in market)
  Growth vs. market: Above/Below/At
  Differentiation: ☐ Strong ☐ Moderate ☐ Weak

☐ Market dynamics: ___/10
  Market growing: ☐ Yes ☐ Flat ☐ Declining
  Consolidation trend: ☐ Active ☐ Moderate ☐ None
  Buyer interest evident: ☐ Yes ☐ Possibly ☐ No

GROWTH STORY:
☐ Future potential: ___/10
  Growth runway: $___M addressable
  Expansion opportunities: ☐ Clear ☐ Vague
  Roadmap credible: ☐ Yes ☐ Somewhat ☐ No

☐ Strategic rationale: ___/10
  Clear to potential buyers: ☐ Yes ☐ No
  Synergy potential: ☐ Obvious ☐ Moderate ☐ Unclear
  Integration complexity: ☐ Low ☐ Medium ☐ High

STRATEGIC DIMENSION SCORE: ___/10

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OVERALL READINESS CALCULATION
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| Dimension | Weight | Score | Weighted |
|-----------|--------|-------|----------|
| Financial | 25% | /10 | |
| Operational | 20% | /10 | |
| Team | 20% | /10 | |
| Legal | 15% | /10 | |
| Strategic | 20% | /10 | |
| **TOTAL** | **100%** | | **/10** |

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READINESS INTERPRETATION
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☐ READY NOW (8.0+): Can initiate process
☐ READY SOON (6.5-7.9): Minor prep needed (3-6 months)
☐ NEEDS WORK (5.0-6.4): Significant prep (6-12 months)
☐ NOT READY (<5.0): Major remediation (12+ months)

OVERALL ASSESSMENT: _______________
ESTIMATED TIME TO READY: ___ months

Detailed Gap Analysis Matrix

Dimension	Sub-Area	Current	Target	Gap	Priority	Owner	Due
Financial	Audit readiness	/10	8		High/Med/Low
Financial	Revenue quality	/10	8
Financial	Controls	/10	8
Operational	Processes	/10	7
Operational	Technology	/10	7
Team	Leadership depth	/10	8
Team	Key person risk	/10	7
Legal	Corporate records	/10	9
Legal	Contracts	/10	8
Legal	IP	/10	8
Strategic	Market position	/10	7
Strategic	Growth story	/10	8

Comprehensive Exit Preparation Action Plan

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EXIT PREPARATION ROADMAP
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IMMEDIATE PRIORITIES (0-3 months):

FINANCIAL:
☐ Complete/update financial audit
   Owner: ___________ Due: ___________
☐ Clean up revenue recognition
   Owner: ___________ Due: ___________
☐ Implement missing controls
   Owner: ___________ Due: ___________

LEGAL:
☐ Update corporate minutes
   Owner: ___________ Due: ___________
☐ Clean up cap table issues
   Owner: ___________ Due: ___________
☐ Review material contracts
   Owner: ___________ Due: ___________

OPERATIONAL:
☐ Document critical processes
   Owner: ___________ Due: ___________
☐ Address key technical debt
   Owner: ___________ Due: ___________

SHORT-TERM PRIORITIES (3-6 months):

TEAM:
☐ Fill leadership gaps
   Gap: ___________ Target hire: ___________
☐ Implement retention plans
   Owner: ___________ Due: ___________
☐ Reduce founder dependency
   Actions: ___________________________

FINANCIAL:
☐ Improve metrics trajectory
   Focus area: ___________________________
☐ Build financial model
   Owner: ___________ Due: ___________

STRATEGIC:
☐ Refine growth story
   Owner: ___________ Due: ___________
☐ Develop buyer rationale
   Owner: ___________ Due: ___________

MEDIUM-TERM PRIORITIES (6-12 months):

☐ Achieve target metrics
   Targets: ___________________________
☐ Complete operational improvements
   Focus: ___________________________
☐ Build data room
   Owner: ___________ Due: ___________
☐ Engage advisors (if needed)
   Type: ___________________________

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PREPARATION MILESTONES
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| Milestone | Target Date | Status | Notes |
|-----------|-------------|--------|-------|
| Financial audit complete | | ☐ | |
| Corporate cleanup done | | ☐ | |
| Leadership team complete | | ☐ | |
| Processes documented | | ☐ | |
| Data room ready | | ☐ | |
| Metrics at target | | ☐ | |
| Growth story finalized | | ☐ | |
| **READY FOR PROCESS** | | ☐ | |

ESTIMATED PREPARATION COST: $_____
ESTIMATED TIME TO READY: ___ months
RECOMMENDED PROCESS START: ___________

Exit Readiness Red Flags

CRITICAL RED FLAGS (MUST FIX):

FINANCIAL:
☐ No audit or serious audit issues
☐ Material revenue recognition problems
☐ Undisclosed liabilities
☐ Customer concentration >40%
☐ Declining revenue/high churn

LEGAL:
☐ Cap table errors or disputes
☐ IP assignment gaps
☐ Material litigation pending
☐ Compliance violations
☐ Contract issues (change of control)

TEAM:
☐ Key founder/exec departing
☐ No management depth
☐ Critical unfilled roles
☐ High recent turnover
☐ Employment disputes

OPERATIONAL:
☐ Major customer at risk
☐ Technology crisis/debt
☐ Security incident
☐ Regulatory non-compliance

IF RED FLAGS EXIST:
☐ Do NOT start exit process
☐ Fix issues first (or disclose and price in)
☐ Consult legal counsel
☐ May need to adjust timeline significantly

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