Founder Extraction Checklist: 30 Processes to Document Before Exit

The "Genius" Discount

There is a dangerous lie in the startup ecosystem that acquirers buy "talent." In the lower-middle market ($10M-$100M revenue), acquirers do not buy talent; they buy transferability. If your revenue depends on your personal network, your code commits, or your intuition, you don't have a business—you have a high-paid job that no one wants to buy.

The data on this is brutal. According to a study of private company exits, more than 60% of earnouts pay out less than half of their potential total. Why? Because the founder is the operating system. When they sell, the system breaks. The "heroics" that got you to $20M ARR are the exact liability that will cost you millions at the closing table.

We call this the Founder Extraction Gap. It is the difference between the valuation you think you deserve (based on top-line growth) and the check a PE firm is actually willing to write (based on transferable EBITDA). If you cannot hand over a manual that explains exactly how the machine works, you are effectively asking the buyer to pay for a car with no engine.

The Bus Factor vs. The Deal Factor

Most founders worry about the "Bus Factor" (what happens if I get hit by a bus?). In M&A, the relevant metric is the "Deal Factor": If you leave the room, does the deal value drop?

Private Equity due diligence has evolved. In 2025, diligent buyers aren't just looking at your customer concentration or churn metrics. They are aggressively testing for Key Person Dependency. They will ask to see your process documentation not because they love reading SOPs, but because documented processes are the only proof that the revenue is an asset of the company, not an attribute of the founder.

The 30-Point Extraction Checklist

To close the gap, you need to move from "Tribal Knowledge" to "Turnkey Systems." This isn't about creating a bureaucratic nightmare; it's about building the "Operating Manual" that proves your business is a transferable asset. Below is the diagnostic checklist we use to assess Exit Readiness.

I. Commercial Transferability (Sales & Marketing)

Goal: Prove revenue is predictable, not personality-driven.

• 1. Lead Qualification Criteria: What objective metrics define an SQL? (Stop "I know a good lead when I see one.")
• 2. Demo Scripts & Recordings: A repository of the "perfect pitch" broken down by persona.
• 3. Pricing Calculators: A spreadsheet or tool that generates quotes without CEO approval.
• 4. Proposal Templates: Standardized SOWs with pre-approved legal language.
• 5. Objection Handling Battlecards: Documented answers to the top 10 competitor FUD points.
• 6. Pipeline Review Cadence: The exact agenda and metrics for the weekly sales meeting.
• 7. Client Onboarding Roadmap: The Day 0 to Day 30 step-by-step for new customers.
• 8. Renewal Playbook: Triggers and scripts for the T-90 day renewal conversation.
• 9. Case Study Library: Proof points organized by industry and use case.
• 10. Partner Channel Rules: Rules of engagement for referral partners and resellers.

II. Operational Continuity (Delivery & Product)

Goal: Prove delivery quality is standardized, not hero-dependent.

• 11. Implementation Project Plans: Standard Gantt charts for small, medium, and large deployments.
• 12. Incident Response (SLA) Protocols: Who gets called at 2 AM? (Hint: It shouldn't be you).
• 13. Quality Assurance (QA) Checklists: The "Go/No-Go" criteria before shipping code or deliverables.
• 14. Capacity Planning Model: The formula that dictates when to hire the next CSM or Engineer.
• 15. Vendor/COGS Management: List of critical software/service vendors and ownership contacts.
• 16. Change Management SOPs: How product updates are communicated to customers.
• 17. Root Cause Analysis (RCA) Template: The process for post-mortems on failed deliveries.
• 18. Customer Health Scoring: The weighted formula that predicts churn risk.
• 19. Key Account Management Plan: The QBR structure for your top 20% of clients.
• 20. Code Deployment / CI/CD Process: Documentation that allows a new engineer to ship code on Day 1.

III. Financial & Administrative Integrity

Goal: Prove the numbers are defensible and governance is real.

• 21. Chart of Accounts Definitions: Explicit rules for where expenses are booked (critical for EBITDA add-backs).
• 22. Collections Process: The automated sequence for chasing overdue invoices.
• 23. Commission Plans: documented OTE structures and payout triggers.
• 24. Signing Authority Matrix: Who can spend $500? $5,000? $50,000?
• 25. Hiring & Interview Guides: Standardized scorecards for key roles.
• 26. Onboarding Checklist: The 2-week ramp plan for new hires.
• 27. Board Reporting Pack: The standard deck format used for monthly/quarterly updates.
• 28. Data Privacy & Compliance Log: SOC 2 / GDPR evidence collection procedures.
• 29. IP Assignment Agreements: Proof that every contractor and employee has signed over IP rights.
• 30. Disaster Recovery Plan: The continuity plan for outages or cyber incidents.

Execution: The "Video-First" Documentation Method

The most common objection from Scaling Sarahs is: "I don't have time to write 30 manuals." You are right. You shouldn't write them. You should record them.

Writing SOPs is slow and often inaccurate. Instead, use the Video-First Extraction method:

1. Record the Task: Next time you approve a pricing exception or run a pipeline review, hit record (Loom, Zoom, etc.). Narrate your decision-making process out loud.
2. Delegate the Transcription: Send the video to an operations manager or EA. Their job is to turn your 5-minute video into a 1-page step-by-step checklist.
3. Test the Documentation: Hand the new checklist to a junior employee. Ask them to execute the task. If they fail, the documentation is the problem. Iterate.

The Transferability Premium

Acquirers pay a premium for transferability. A business with $5M EBITDA and complete documentation will trade at a significantly higher multiple than a business with $5M EBITDA and a founder who keeps the passwords in their head. This "Transferability Premium" is often valued at 1.5x to 2x EBITDA.

Do the math. On $5M EBITDA, that documentation checklist is worth $7.5M - $10M in enterprise value. That is the highest ROI activity you will ever perform as a CEO.

Stop selling your genius. Start selling your systems. Your exit depends on it.