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In a recent discussion on The Exit podcast, Steve McGarry sat down with Tim Golas, Partner at Spurstone, an advisory firm specializing in navigating the complex intersection of business growth and personal wealth realization for entrepreneurs. Their dialogue highlighted several critical structural failings in how private business owners approach the sale process.
In the current middle-market M&A landscape, we are witnessing a significant demographic tidal wave. The so-called “Baby Boomer” generation of entrepreneurs, particularly those holding substantial assets in manufacturing and skilled trades, are approaching a collective liquidity event. Yet, a persistent asymmetry remains between the quality of these businesses and their readiness for a sophisticated transaction.
The prevailing fallacy among founders is that an exit strategy is triggered by the arrival of a Letter of Intent (LOI). The reality, as seasoned dealmakers know, is that maximizing value is a discipline that begins years before investment bankers are engaged.
As an M&A advisor observing these trends daily, Golas’s insights underscore a fundamental truth: optimizing a deal is rarely about finding a “greater fool” buyer; it is about systematic de-risking and institutionalization.
The Fallacy of the “Perfect Time”
One of the most damaging behaviors in owner-operated businesses is the tendency to time the market rather than time the asset’s lifecycle.
Golas noted a prevalent issue where owners, particularly in the industrial sectors, wait too long. They hold a robust asset into their 70s, by which time the business’s performance is inextricably linked to an aging principal. This is not merely an operational risk; it is a valuation killer.
Sophisticated buyers, whether private equity sponsors or strategic acquirers, discount heavily for “key person dependency.” If the knowledge base retires with the seller, the multiple contracts significantly.
The advisor’s view is clear: do not wait to be forced into a sale by death, disability, or divorce. The optimal time to sell is when the business has a clear growth trajectory that a new owner can execute, not when the current owner has run out of energy.
The “Parallel Path” Protocol
A distinct concept Golas introduced is the necessity of running two “parallel paths” starting 24 to 36 months pre-transaction.
Many founders obsess over optimizing corporate EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) while neglecting their personal balance sheet. A founder whose entire net worth is tied up in the operating entity negotiates from a position of weakness. They are desperate for the liquidity event.
The parallel path involves:
- Institutionalizing the Business: Removing personal finances from corporate accounts and ensuring clean, audit-ready financials.
- Fortifying Personal Wealth: Ensuring personal estate planning, tax structures, and post-sale income strategies are established before the pressure of due diligence begins.
When an owner is personally secure, they can walk away from a sub-par LOI. That optionality is incredible leverage during negotiations.
De-Risking as a Valuation Driver
Valuation is not simply a multiple of top-line revenue. It is a reflection of risk-adjusted future cash flows. Golas provided a stark example of a client in Florida—likely in the trades or services sector—whose business derived 60% of its revenue from a single corporate contract.
To an M&A advisor, this is not a stable business; it is a binary risk. If that contract vanishes, the asset’s value collapses.
The solution proposed was elegant and counterintuitive: to prepare for a sale, the seller first needed to become a buyer. By acquiring smaller competitors, the business could dilute that 60% concentration down to a palatable level, instantly expanding the pool of potential buyers and increasing the exit multiple.
De-risking also involves resolving hanging litigation, securing long-term leases, or purchasing the underlying real estate of a manufacturing facility. A clean asset always commands a premium.
The “Fish and Chip” Mirage and the LOI
Perhaps the most critical insight for sellers is understanding the psychology of the buyer post-LOI. Golas referenced the infamous “Fish and Chip” method used by aggressive acquirers: “Fishing” with a high headline valuation in the LOI to hook the seller into exclusivity, and then systematically “chipping” away at that value during due diligence.
An unsophisticated seller sees a $50 million LOI and mentally spends the money. A sophisticated advisor knows that the headline number is meaningless without context.
Deal structure often supersedes valuation. A higher offer laden with excessive earn-outs, seller financing notes, or clawback provisions is often inferior to a slightly lower, all-cash offer at closing. As Golas shrewdly noted, a buyer can offer a billion dollars, but attach terms so onerous that the seller never realizes the liquidity.
Conclusion: The Necessity of Counsel
The journey from an operating business to a realized fortune is fraught with emotional and financial hazards. The key takeaway for any business owner approaching this horizon is that what built the business—guts, intuition, and operational focus—are not the skills required to sell it.
You need genuine partners at the table who can provide dispassionate, rigorous advice when an LOI arrives. If you are considering an exit in the next three to five years, the time to engage with qualified wealth and M&A counsel is now.
About Timothy Goals
Timothy Golas is an exit planning advisor, fiduciary, and Partner at Spurstone who serves as a trusted confidant to eight- and nine-figure business owners navigating major financial transitions. A founder himself, he understands the pressure and complexity of building a business and the risks of exiting without the right strategy or support. With more than 20 years of experience advising successful families, executives, and stakeholders across the U.S., Timothy helps founders and multi-owner teams protect what they’ve built, maximize value, and move forward with clarity and confidence. As a Certified Exit Planning Advisor (CEPA), he specializes in value acceleration, tax-efficient exits, and guiding entrepreneurs through Spurstone’s Grind to Good Life framework, from exit preparation to post-exit fulfillment, bringing both expertise and empathy to a deeply personal transition.
Website – https://www.spurstone.com/
LinkedIn – https://www.linkedin.com/in/timothygolas/
