How founder dependency destroys valuation, extends earnouts, and leaves you trapped
It happens to me quite often. A business owner calls me and says they have been thinking about selling for some time, that they have finally made the decision, and that they want to go to market “in about twelve months.”
After asking the first question everyone asks: “What multiple do you think a company like ours could achieve?”
the second question is usually: “What should I do over the next few months to prepare the company?”
It is a good question, and there is both a long answer and a short answer.
The long answer includes many things: growing revenue, optimising EBITDA, improving margins, avoiding expensive investments that hurt short-term earnings, making sure contracts with customers and suppliers are properly documented, reducing dependence on your largest customer, improving cash flow, cleaning up personal expenses running through the business, tightening churn, net retention, or whatever KPIs are most relevant in your sector. Then there is the housekeeping required for due diligence: software licences, data protection compliance, equality plans (where applicable), health and safety procedures, registered trademarks, and so on.
There is a lot to do. Some of it is relatively straightforward. Other parts, such as increasing revenue, maximising EBITDA, or eliminating customer concentration, are not always realistic within twelve months.
But if I were forced to choose just one thing—the single most important action, the one with the greatest impact on both the transaction and the outcome—you should do this: Make the company depend on you as little as possible over the next twelve months.
Why this is the most important advice (and not just for the buyer)
There are three reasons why reducing founder dependency is the most profitable move you can make before a sale. It is difficult to decide which matters most.
First reason: the company is worth more—or at least becomes sellable
A buyer—whether a private equity fund, a strategic acquirer, or a search fund—is buying an asset. That asset needs to function without you.
If you are the one managing customer relationships, closing contracts, solving problems, and holding all the institutional knowledge, then the buyer is not purchasing a company. They are purchasing a dependency on a person who intends to leave.
Valuation suffers, or the deal may not happen at all.
Second reason: it gives you leverage to negotiate better deal terms
If the buyer needs you, they will tie you down.
You may end up with a long earnout, subject to demanding conditions that only pay out if you remain heavily involved. Or you may be offered a partial acquisition, with 51% acquired today and the remaining 49% purchased five years later.
You may face a two- or three-year retention period during which you are effectively still an employee. There may even be tax risks if the earnout is treated as employment income rather than capital gains because payment depends on your continued involvement.
If integration problems arise, or if the new owner makes decisions you disagree with, you cannot simply leave.
You are trapped.
By contrast, if the business can operate without you, you negotiate from a position of strength. Upfront cash consideration increases, earnouts shrink or disappear, and transition periods become shorter.
Third reason: it gives you optionality
Maybe you want to stay after the sale.
Maybe you do not.
Maybe you think you do today but six months into integration with the new owner you change your mind completely.
If the company depends on you, you have no choice.
If it does not, you decide.
What it really means to make the company independent from you
This does not mean hiring someone to do your job while you continue doing exactly what you have always done.
The first temptation is to find a “mini-me”—someone who thinks like you, makes decisions like you, and behaves like you.
That rarely works.
There are three almost mathematical reasons why.
First, people are different. Looking for a clone is unrealistic.
Second, you are an entrepreneur. The person you hire is probably a manager. Those are different profiles, and they should be. A strong professional CEO is not an entrepreneur, and that is not a problem. In fact, it is often exactly what the buyer wants.
Third, you are the founder. You have moral authority, historical knowledge, and relationships built over many years. Those things are difficult to replicate.
If you have built a company worth buying, you are probably part of a very small percentage of exceptionally capable people. You cannot reproduce that in someone else.
What you can do is build a leadership team that, collectively, does not depend on any one individual—neither you nor anyone else.
The practical move is to appoint a new CEO, ideally someone already inside the company who understands the business. If that person does not exist, recruit externally.
However, instead of transferring everything you do to one person, redistribute responsibilities across the leadership team.
What was once “John knows everything” becomes “a team of four people collectively covers everything.”
That is what buyers want to see. They want to avoid a situation where losing one individual threatens the entire business. They want risk diversification.
Perception matters too—and a lot
The transition does not just have to be real.
It has to look real.
Buyers conduct due diligence, and some aspects are very easy for them to verify. They speak with customers. They interview employees. They review LinkedIn profiles. They watch interviews and podcasts.
If, for example, the “new CEO” is being paid like a department head while you continue earning what you always have, buyers will immediately understand what is really happening.
Before going to market, several things should already be in place:
Because if, during due diligence, a major customer says:
“Yes, I know there is a new CEO, but I still discuss everything with John, the founder,”
or the CTO says:
“John still makes those decisions; the new CEO is finding their feet,”
the transaction can become significantly more complicated.
The most dangerous temptation during buyer meetings
You enter meetings with prospective buyers.
You have done everything right. There is a new CEO, a leadership team, and a clear narrative.
Then the buyer asks a technical question.
You know the answer.
Then another.
And another.
Before you realise it, you are answering everything. You have all the information. You explain the strategy. You know the key customers.
The new CEO is sitting there watching while you run the meeting.
At that moment, the buyer stops believing there is a real CEO.
Or worse, they become convinced that you are indispensable and revise the deal accordingly, insisting that you remain involved for another three years.
That mistake can be expensive.
In those meetings, the CEO and management team should be in the spotlight.
You support them, but you do not lead.
Even if you know more.
Even if you are more impressive.
Even if you have a stronger relationship with the buyer.
Because if you take all the oxygen in the room, everything you built over the previous twelve months becomes irrelevant.
The buyer leaves convinced that the company is still a one-man show.
Aligning the new leadership team: the detail most founders forget
The new CEO and key executives must be aligned with the objective of completing the sale.
The problem is simple.
You may receive several million euros when the deal closes.
They will not.
In fact, for them, the transaction may be a source of uncertainty.
Today they know how the company works. They know their role, their relationships, and their routine.
After the acquisition?
Nobody knows.
They may become the buyer’s favourites.
Or they may be reorganised out of the business six months later.
Why should they invest energy in helping the transaction succeed?
That is a question every founder should answer seriously.
And the answer should be specific for each key person.
Options include:
It may cost part of your cash proceeds or a small portion of your earnout.
But the difference between having your leadership team actively supporting the transaction and passively watching from the sidelines is worth far more.
In my experience, this is one of the most common reasons transactions become unnecessarily complicated. A certain degree of generosity and empathy toward key executives goes a long way.
The founder who left before leaving
Ultimately, what I am describing is a gradual process of disengagement while you still own the company.
It is not comfortable.
You may have spent ten or fifteen years at the centre of everything.
Now you need to give up visibility, allow others to make decisions you would make differently, and accept that long-standing customers may prefer speaking with someone else.
But that is exactly what serious buyers are looking for.
They want to see a founder who has built something capable of thriving without them.
If you can demonstrate that when the company goes to market, you arrive in a much stronger position.
Financially.
Structurally.
And with the freedom to decide what you want to do next.
At Bondo Advisors, we have completed several company sales where the founder had done this work properly beforehand. They had built a genuine transition to a new CEO or leadership team and had aligned those individuals so they also wanted the transaction to succeed.
I can say, with very little doubt, that those founders ended up with some of the lowest earnout percentages relative to enterprise value in their category, and with the most flexible post-closing arrangements.
Some were completely out of the business within six months.
Very few founders are that fortunate.
So if you can only do one thing during that year of preparation, make it this.
By Joshua Novick- Bondo Advisors
cloud technology axon
The company generates annual revenues of approximately €90 million a...
