The 3-Year Exit Countdown: What to Fix First When Selling Your Trade Business

Most contractors start thinking about selling six months before they are ready to walk away. By then, it is too late to fix the things that actually drive valuation. You end up either accepting a lowball offer or pulling the listing entirely—joining the 52% that never close.

The sweet spot is three years. That is enough time to clean financials, build recurring revenue, reduce owner dependency, and generate two to three years of "proof" that the machine works without you. Here is the quarter-by-quarter breakdown.

Year 1: Clean the Foundation

Q1: Financial Cleanup

Separate every personal expense from the business. Every personal charge on the company card muddies your financials and raises red flags during due diligence. Move to monthly P&L reporting with proper job costing by service type. Reconcile all accounts and fix categorization errors going back two full years.

This is also the time to review your entity structure. Buyers and their advisors care about this more than most sellers realize.

Q2: Know Your Real Numbers

Calculate your true EBITDA and SDE with proper add-backs documented in a clear schedule. Benchmark your gross and net margins against industry standards: 25–35% gross margin, 8–12% net margin for well-run trade contractors. Identify your margin leaks—labor burden gaps, underpriced service work, unbilled scope creep.

Q3–Q4: Revenue Mix Assessment

Audit your revenue split between installation, service and repair, and maintenance agreements. If service agreements are below 20% of total revenue, this is the quarter to launch an aggressive membership program. The goal is to reach 30%+ by the time you go to market—and that takes 18–24 months of disciplined execution.

Train your technicians to present the service agreement at the end of every call. Implement incentives: $25–$50 per agreement sold. This is where the service agreement playbook earns its keep.

Year 2: Build the Machine

Q1–Q2: Reduce Owner Dependency

Hire or promote an operations manager who handles daily dispatch, scheduling, and customer escalations. If you are the primary salesperson, begin training a replacement—start with service sales, then move to project estimates. Document every critical process: estimating, dispatch, hiring, collections, vendor management. If it lives in your head, it needs to live on paper.

The owner dependency post covers this in detail, but the summary is: if the business cannot run for 90 days without you, a buyer is purchasing a job, not a business.

Q3–Q4: Scale Recurring Revenue

Target: 30%+ of revenue from service agreements by the end of Year 2. Implement automated renewal systems—reminders at 60, 30, and 7 days before expiration. Make renewal the default; cancellation requires action. Track membership growth monthly as a standalone KPI alongside your other financial metrics.

Year 3: Prove It Works

Q1–Q2: Run Without You

Take a two-week vacation. Actually disconnect. See what breaks. Fix it. Then take another two-week stretch. If the business generates consistent revenue and maintains margins while you are absent, it is transferable. If things fall apart, you now know exactly what still depends on you—and you have six months to fix it before going to market.

Q3: Assemble Your Advisory Team

Engage a business broker or M&A advisor with specific trade contractor experience—not a generalist. Have your financials reviewed by someone who understands exit tax planning (the difference between proper and improper structuring can be six figures on a $2M sale). Prepare a confidential information memorandum that tells your story in numbers: revenue trends, margin improvement, recurring revenue growth, team stability.

Q4: Go to Market

List confidentially through your broker's network. You will have three years of clean financials, growing recurring revenue, a management team that has proven it can operate independently, and documented systems throughout the business.

That package is what separates the 48% that close from the 52% that do not. It is the difference between a 2.5x multiple and a 5x+ multiple on the same earnings. And every bit of the work you did in those three years also made the business more profitable and less stressful to own along the way.

The best time to start preparing for an exit is three years before you want one. The second-best time is today.

The Bottom Line

Three years feels like a long time until you are in the middle of it. Every quarter has specific, concrete work that builds toward a higher sale price. Start now, even if selling feels far away—because the same playbook that makes your business sellable makes it more profitable and less dependent on you every single day.