Construction Subcontractor Exit Planning Timeline.

Financial System Has to Be in Place.

Three years before intended sale, the financial system that buyers will diligence has to already be running. Not getting installed. Running.

What that means specifically:

Books are job-costed with cost codes that mirror the estimating system. Monthly WIP schedule produced on a fixed cadence (first Monday after the tenth). 13-week cash flow forecast updated weekly. Owner on payroll at the revenue-band-appropriate salary ($180K target at $12M). Personal expenses fully separated from business. P&L, balance sheet, and WIP reconcile cleanly every month.

This is the foundation. Buyers will pull three years of monthly financials. If month -36 is the first month the books look clean, the buyer sees a system that started recently, which raises questions about everything before it. The fix is to install the system early enough that three full clean years exist by the time diligence starts.

The Construction CFO Executive Financial engagement at month -36 is the canonical setup for this. 60-day onboarding, then 34 months of system operation before the sale conversation begins.

Operations Transition to the Senior Team.

Two years before sale, the owner steps back from daily operations. Not entirely. But meaningfully.

What that looks like:

A general manager or operations lead handles day-to-day decisions. PMs run jobs without the owner approving every change. Estimators win work without the owner pricing every bid. The owner's role becomes strategic: relationship management with key GCs, capital allocation, hiring decisions for senior roles.

This serves two purposes. The first is preparing the business to run without the owner, which is what buyers are paying for. The second is showing buyers historical evidence that the business can run without the owner, which requires the transition to happen 18 to 24 months before the diligence conversation.

Customer concentration also gets addressed here. If one GC is over 40% of revenue, deliberate work happens to diversify. New GC relationships, expanded scope with existing diversified accounts, or strategic backlog adjustments. The target is under 35% from any single customer by month -12.

Advisor Engaged. Memo Drafted.

Twelve months before intended sale, the formal sale preparation begins.

An M&A advisor or broker who specializes in construction is engaged. They will run the process, manage buyer outreach, and quarterback the diligence. Construction-specific advisors matter because buyers, multiples, and structures are different in this industry than in generic small business M&A.

A confidential information memorandum (CIM) is drafted. This is the document that goes to potential buyers and tells the business's story. Three-year financial summary, growth trajectory, market position, key relationships, owner transition plan. The CIM lives or dies on the quality of the financial discipline installed at month -36.

Bonding and banking transferability is confirmed with the bonding agent and the bank. Buyers want to know the bonding capacity transfers under new ownership. The Construction CFO works with bonding agents on this specifically in the 12 months leading up to a sale. Some bonding lines transfer cleanly. Some require renegotiation. Knowing which is which 12 months out prevents surprises at closing.

Personal financial planning also happens here. Tax structure of the sale (asset sale vs stock sale, installment vs lump sum). Estate planning if the sale creates a taxable event. Wealth management arrangements for the proceeds. These conversations belong with the seller's CPA and personal advisor, not the M&A advisor.

Indications of Interest, Then Letter of Intent.

Six months before closing, the active sale process is running.

Indications of interest (IOI) come in from potential buyers. These are non-binding letters from buyers who have reviewed the CIM and want to advance to deeper diligence. The seller and advisor evaluate the IOIs on price, structure, cultural fit, and likelihood of close. Two to four IOIs typically advance to management meetings.

Management meetings happen. The seller meets the top finalists. Cultural fit, transition plan, employee treatment, and strategic vision get discussed. A letter of intent (LOI) is signed with one buyer, granting them exclusive diligence for 60 to 90 days.

Diligence begins. Buyer's accountants pull historical financials. Buyer's attorneys review contracts, employment agreements, customer concentration. Buyer's bonding underwriter evaluates transferability. This is where every shortcut in the financial system at month -36 shows up as a problem.

Closing happens at month 0. The seller transitions in a defined role (often 6 to 12 months of consulting post-close). The team transitions to new ownership. The seller takes proceeds and exits.

If You Have Less Than 12 Months, the Math Changes.

Not every sale has a 36-month runway. Health events, partnership disputes, market timing, and personal circumstances sometimes compress the timeline.

Compressed timelines reduce achievable valuation. The Construction CFO has seen the following pattern repeatedly:

36+ month preparation: 4.0x to 4.5x EBITDA achievable.

24 month preparation: 3.5x to 4.0x.

12 month preparation: 3.0x to 3.5x.

Less than 12 months: 2.0x to 3.0x and a real risk the sale does not close.

On a $1.7M EBITDA business, the spread between 4.5x and 2.5x is $3.4M of valuation. That is the real cost of compressed timelines.

If a sale is needed in less than 12 months and the financial system has not been installed, the highest-leverage move is to engage a fractional CFO immediately to compress what would normally be 36 months of preparation into the available window. One SPM engagement: a $13.5M marine GC's valuation moved from $2.3M to $5.5M in 9 months through clean job costing, tightened spending, and disciplined twice-monthly reporting. Compressed timelines can work, but the achievable multiple still depends on how many months of clean documented financials a buyer can review.