I see no shortage of posts aimed at owners warning about valuation gotchas. Founder dependence is usually near the top of the list: no capable lieutenants, no delegation, value looks more like a job than a business.

There’s truth in that. But it’s also incomplete.

In many early and mid-stage companies, a founder-centric model isn’t a flaw—it’s the reason the business exists. The insight, the relationships, the judgment, the sheer force of will. Strip that out too early and there may be nothing left to value. Structure and delegation come later, when the business is ready for them.

Where founders get hurt on valuation is often somewhere else entirely.

Structural risk vs. Unforced errors

There’s an important distinction that gets lost in most of these conversations:

• Founder concentration is often necessary, especially early. Buyers may price it, but they usually understand it.
• Operational and compliance sloppiness is different. Those are unforced errors—and they get punished hard.

I’m not talking about strategy or vision. I’m talking about the decidedly non-core disciplines that feel like distractions when you’re building the business.

Sales tax is the classic example. Not strategic. Not value-creating. But if it’s been ignored, it turns into a dollar-for-dollar discount—or worse, a holdback—during diligence.

Self-insured benefit plans without clean audits are another quiet trap. Everything seems fine until someone actually looks under the hood.

Wage and hour issues? Overtime rules are complicated, no question. But buyers’ advisors don’t grade on effort. They grade on exposure.

These things rarely kill a deal outright. What they do is quietly transfer value away from the founder at exactly the wrong moment.

Why diligence checklists are so effective

Every buyer shows up with a diligence checklist, usually carried by consultants who are very good at what they do. Those checklists often earn back their entire fee many times over—in valuation discounts.

From the founder’s seat, it can feel unfair. “This isn’t how we run the business day to day.” That may be true. But once a process starts, the rules change.

This is why I’m a big believer in not treating cleanup as a pre-sale exercise.

Make the bed every day

The real leverage comes from embedding basic discipline early—long before any offering, process, or “strategic conversation.”

Someone has to make the bed every day.

Perhaps not the founder – it’s not core to the mission. But someone must own the housekeeping because the ROI on getting the non-core right is paid back in multiples later—often when it matters most.

This doesn’t mean building a big finance or compliance function too early. It means having a steady hand—internal or external—whose job is to keep the foundation clean while the founder focuses on building the business.

From a valuation perspective, that kind of routine discipline does two things:

1. It avoids preventable discounts.
2. It lets the founder’s true value—vision, product, market insight—come through without noise.

Founders shouldn’t be told to stop being founders. They should be helped to avoid traps that have nothing to do with why they started the business in the first place.

 

See attached “Quality of Earnings Brief” for more detail on what that someone should own.