Advised by Leo Meggitt, Managing Director, Mastella Advisory
Model version 1.0 · Published 29 September 2026
This is the scoring model behind our free Exit Readiness Score and our paid Exit Readiness Assessment. We publish the structure, and the thresholds for the 11 core measures the free score uses, so owners can see what they are measured against. The Assessment scores 18 more, named under each area below. A buyer's due diligence asks the same questions, usually with less warning.
How the score works
Each measure falls into one of four bands. Strong scores 4, adequate 3, weak 2 and critical 1. Bands convert to a score out of 100 (strong 100, adequate 67, weak 33, critical 0) and are averaged within each area. Within their areas, founder-held revenue, successor readiness, largest customer carry one and a half times the weight of the other measures.
The overall score weights the five areas as shown below. 75 or more is strong, 50 to 74 adequate, 25 to 49 weak and below 25 critical.
Some measures are blockers, including founder-held revenue, absence test, successor readiness, largest customer, normalisation adjustments. A critical score on any of them is reported separately from the average, because it can change the structure of a deal on its own.
The free score uses the owner's own answers. In the paid Assessment the same measures are calculated from the business's data where possible and tested in interviews with the senior team, and each is marked as verified, owner's view only, or missing.
| Area | Weight | Measures scored | In the free score |
|---|---|---|---|
| Founder dependency | 25% | 6 | 2 |
| Management depth | 20% | 6 | 2 |
| Earnings quality | 25% | 6 | 3 |
| Growth evidence | 15% | 5 | 2 |
| Due diligence readiness | 15% | 6 | 2 |
25% of the score
Founder dependency
How much of the business walks out of the door if the founder does. The main driver of earn-out size, lock-in length and how much consideration is paid in cash at completion.
| Measure | Strong | Adequate | Weak | Critical |
|---|---|---|---|---|
| Founder-held revenueblockerShare of last-year revenue from customers where the founder is the primary relationship holder. Shared relationships count at 50%. | 10% or less | 10% to 25% | 25% to 50% | over 50% |
| Absence testblockerLongest period in the last 24 months the founder was fully unavailable, in working days, and whether anything material went wrong. | 20 working days or more | 10 working days to 20 working days | 5 working days to 10 working days | below 5 working days |
Also scored in the Assessment: founder-only decisions, knowledge held only by the founder, founder time in day-to-day operations, personal ties.
What buyers do when the core measures are weak
- Founder-held revenue
- TradeEarn-out tied to customer retention, typically over two to three years. Buyer may insist on a formal handover period. PEFounder expected to stay and roll equity. Relationship transfer written into the 100-day plan.
- Absence test
- TradeBuyer has no evidence the business runs without the founder and will price that into the earn-out. PEInvestment committee will ask for evidence. Absence of it pushes towards rollover and lock-in.
20% of the score
Management depth
Whether a team exists that a buyer can back. Sets how much of the founder's role a buyer has to replace, and whether an MBO or EOT route is realistic.
| Measure | Strong | Adequate | Weak | Critical |
|---|---|---|---|---|
| Successor readinessblockerWhether a named individual could run the business for six months starting tomorrow. | Named successor ready now | Named successor ready within 12 months with development | No internal successor, external hire needed | No successor and no plan |
| Finance functionStrength of the finance function. | Qualified FD or FC in house | Qualified part-time or outsourced FD producing monthly packs | Bookkeeper plus external accountant, annual focus | Founder does the finance |
Also scored in the Assessment: second-line cover, key people locked in, top team tenure, priorities aligned.
What buyers do when the core measures are weak
- Successor readiness
- TradeBuyer must supply management or keep the founder. Narrows the buyer universe to those with a bench. PEHard to back without a CEO. Likely to require a pre-completion hire or a longer founder commitment.
- Finance function
- TradeLonger, more expensive due diligence and completion accounts rather than a locked box. PEBuyer will require an FD hire before or at completion. Locked box unlikely.
25% of the score
Earnings quality
How much of reported profit a buyer will actually underwrite. Drives the EBITDA the multiple is applied to, and whether price is paid on the latest year or an average.
| Measure | Strong | Adequate | Weak | Critical |
|---|---|---|---|---|
| Contracted or recurring revenueShare of last-year revenue under a recurring contract or a multi-year or framework agreement. | 60% or more | 35% to 60% | 15% to 35% | below 15% |
| Largest customerblockerLargest single customer as a share of last-year revenue. | 10% or less | 10% to 20% | 20% to 35% | over 35% |
| Normalisation adjustmentsblockerTotal normalisation adjustments as a share of reported EBITDA for the last year. | 10% or less | 10% to 20% | 20% to 35% | over 35% |
Also scored in the Assessment: top five customers, margin stability, cash conversion.
What buyers do when the core measures are weak
- Contracted or recurring revenue
- TradeLower visibility, lower multiple. Buyer applies more weight to pipeline risk. PEHarder to support leverage. Equity cheque larger, so price lower.
- Largest customer
- TradeEarn-out or deferred element tied to retention of that customer. Possible condition to obtain customer consent. PEConcentration discount on the multiple. Some funds will not proceed above 30 to 40%.
- Normalisation adjustments
- TradeUnsupported add-backs rejected in due diligence, reducing the EBITDA the multiple applies to. PEQuality of earnings report will test every add-back. Price chips at the confirmatory stage.
15% of the score
Growth evidence
Whether the growth story is supported by evidence. Buyers pay for growth they can see in the data, and discount growth that only appears in the plan.
| Measure | Strong | Adequate | Weak | Critical |
|---|---|---|---|---|
| Customer revenue retentionGross revenue retention. Last-year revenue from prior-year customers, capped at each customer's prior-year spend, as a share of prior-year revenue. | 90% or more | 80% to 90% | 65% to 80% | below 65% |
| Pricing powerRecord of price increases over the last 24 months. | Increases at or above inflation across most customers with minimal loss | Increases on some customers or products | Ad hoc increases only | No increases or discounting to hold volume |
Also scored in the Assessment: revenue growth, pipeline evidence, forecast accuracy.
What buyers do when the core measures are weak
- Customer revenue retention
- TradeBuyer discounts the forecast. PEGrowth case questioned. Lower entry multiple.
- Pricing power
- TradeMargin risk priced in. PEPricing becomes a value creation lever the buyer claims for itself.
15% of the score
Due diligence readiness
How quickly and cleanly the business can get through a buyer's due diligence. Weak readiness costs time, fees and price chips late in the process when the founder has least leverage.
| Measure | Strong | Adequate | Weak | Critical |
|---|---|---|---|---|
| Month-end closeWorking days after month end until the management accounts are final. | 10 working days or less | 10 working days to 20 working days | 20 working days to 40 working days | over 40 working days |
| Management informationContent of the monthly management pack. | P&L, balance sheet, cash flow and KPIs against budget | P&L against budget | P&L only | No regular monthly pack |
Also scored in the Assessment: revenue under written contract, employment records, IP and assets owned by the company, legal, tax and corporate housekeeping.
What buyers do when the core measures are weak
- Month-end close
- TradeLonger due diligence and a completion accounts mechanism. PELocked box less likely. Reporting upgrade forced on the business post-deal.
- Management information
- TradeBuyer builds its own analysis, slowing the process. PEQuality of earnings work takes longer and costs more.
See where your business sits
The free Exit Readiness Score asks the 11 core questions and scores your answers on these thresholds. About three minutes, no sign-up.
FAQ
Exit readiness scoring: FAQs
How much customer concentration is too much when selling a business?
On our thresholds, a largest customer at 10% or less of revenue is strong, 10% to 20% adequate, 20% to 35% weak and over 35% critical. At the weak end, a trade buyer typically responds as follows: earn-out or deferred element tied to retention of that customer. Possible condition to obtain customer consent. Private equity: concentration discount on the multiple. Some funds will not proceed above 30 to 40%.
How do buyers measure founder dependency?
We use 6 measures: founder-held revenue, absence test, founder-only decisions, knowledge held only by the founder, founder time in day-to-day operations, personal ties. The most heavily weighted is founder-held revenue, the share of revenue from customers who mainly deal with the founder: 10% or less is strong and over 50% is critical. Founder dependency drives earn-out size, lock-in length and how much of the price is paid in cash at completion.
How do add-backs affect the price of a business?
Buyers test every normalisation adjustment. On our thresholds, add-backs of 10% or less of reported EBITDA are strong, 20% to 35% weak and over 35% critical. Trade buyer: unsupported add-backs rejected in due diligence, reducing the EBITDA the multiple applies to. Private equity: quality of earnings report will test every add-back. Price chips at the confirmatory stage.
What recurring revenue do buyers want to see?
Contracted or recurring revenue of 60% or more of revenue scores as strong, 35% to 60% adequate, 15% to 35% weak and below 15% critical. Lower visibility means a lower multiple and, for private equity, less debt and a larger equity cheque.
How quickly should month-end accounts be ready before selling a business?
Final management accounts within 10 working days or less after month end score as strong, 10 working days to 20 working days adequate and over 40 working days critical. Slow reporting usually means a longer due diligence and completion accounts rather than a locked box.
What is a good exit readiness score?
On a score out of 100, 75 or more is strong, 50 to 74 adequate, 25 to 49 weak and below 25 critical. The overall number matters less than the individual measures: a critical score on a blocker such as founder-held revenue, the largest customer or add-backs can change the deal structure on its own.