Enterprise value is built years before a transaction, not in the data room. In this episode Michael Zakkour sits down with a middle-market operator to take apart a stubborn truth: by the time most founders hire a banker, the value of the business is already set. What buyers actually pay for — clean unit economics, working capital that behaves, a team that runs without the founder — is the product of operating decisions made long before anyone drafts a letter of intent. The work of the exit is the work of the years that precede it.
In this episode
- Why a valuation is mostly decided before the sale process starts — and what that means for how you operate today.
- What sophisticated buyers actually pay for, and which line items they quietly discount.
- How Finance and Supply Chain together govern working capital, free cash flow, and the multiple.
- The owner-dependency trap, and how to make the business worth more by making it need you less.
- Why starting three years out beats scrambling in the final ninety days.
Transcript
Abridged for reading. Lightly edited for clarity.
Zakkour: Let’s start with the line I keep repeating to founders, because they hate hearing it. By the time you decide to sell, the price is mostly already set. The deal doesn’t create the value. It reveals it. You spent the last few years either building enterprise value or quietly eroding it, and the process just puts a number on the result.
Dana Reyes: That landed hard for me. I ran finance and then operations at a consumer goods company through a sale, and I came in thinking the exit was a finance event. Hire the right banker, build the right model, run a tight process. It is not a finance event. It is an operating event that happens to end in a wire transfer.
Zakkour: Say more about what changed your mind.
Dana Reyes: We had a margin story that looked great on a slide and fell apart the second a buyer’s diligence team pulled the thread. Most of our cash was trapped in inventory. We were buying in volumes that flattered our gross margin and strangled our free cash flow. A buyer doesn’t pay for gross margin. They pay for cash the business actually throws off and can keep throwing off after they own it.
Zakkour: This is exactly why I refuse to treat Finance and Supply Chain as separate conversations. The supply chain is where working capital lives. Inventory, fulfillment, vendor terms — those decisions set your cash conversion cycle, and the cash conversion cycle is half of what a serious buyer is underwriting. Fix the operating reality and the financial story fixes itself. Dress up the model without touching operations and diligence tears it apart.
Dana Reyes: What would you have told me three years earlier?
Zakkour: Start with the question a buyer will ask: does this business run without the founder? Owner dependency is the quietest discount in any deal. If the relationships, the judgment, and the firefighting all live in one person’s head, the buyer is purchasing a risk, not an asset, and they price it that way. So you build the layer underneath you on purpose. You document how decisions get made. You make yourself replaceable in the operating model years before you want to be replaced in fact.
Dana Reyes: And the numbers?
Zakkour: Make them defensible, not flattering. Know where margin truly comes from, by channel and by product. Tie the financial model to how the business actually operates, so every projection has a line back to an operating lever a buyer can verify. Free working capital by reshaping inventory and vendor terms before anyone is watching. When the diligence team arrives, you want them confirming a story, not discovering one.
Dana Reyes: The hardest part is that none of this feels urgent until it’s too late to do well.
Zakkour: Right, and that’s the trap. The work that lifts the multiple is unglamorous and slow. Cash conversion, clean reporting, a team that holds, margin you can prove. You can’t manufacture two years of operating discipline in the final ninety days. So the founders who win the exit are the ones who started treating the business as a sellable asset long before they wanted to sell — aligning operations and capital as one system, not two departments.
Dana Reyes: If I could give one piece of advice to an operator listening, it’s this: run the company today the way a buyer will read it later. The discipline that earns the multiple is the same discipline that makes the business better to own right now.
Zakkour: That’s the whole thesis. Value before the exit isn’t a deal tactic. It’s an operating standard. The companies that realize the most at the end are the ones that built the most all along the way.