**Episode 4 of the Business Growth and Exit Strategies Podcast**
Most businesses cannot be sold because they cannot be handed off.
The magic thing to think about when it comes to selling your business is: can I hand off this business to somebody else? And how predictable is the business for them?
## What Transferability Really Means
For a buyer, transferability means one thing: the business works without you.
You want to make sure you are building a moat. You want to make sure you could leave for a stated amount of time. You are looking for places where you break transferability.
If everything has to run through you, it is a sign of a problem. A delegation issue. Things are not as effective as they could be.
In the mind of an investor or buyer, if everything runs through you, they are going to have to find somebody to replace you. And they may place a discount on your business.
## The Grading System for Valuation
Here is how I look at valuation:
**A Plus:** The business can run without you for three to six months. Everything runs. It is predictable. Growth happens.
**A Level:** A couple of issues that are easy to fix.
**A Minus:** A couple more things to address.
**B:** Management issues or standard operating procedures need work.
**C:** Chaos. When the founder steps away, it is pure chaos.
## Critical Knowledge Living in Heads
Sometimes critical knowledge lives in people’s heads instead of systems.
If you listen to any episode of this podcast, you are going to hear me talk about standard operating procedures, job descriptions, and org charts. There is a reason: it creates predictability.
When the only way something gets done is because information sits within somebody, you have a problem.
## The Black Boxing Problem
Black boxing information means someone does not want to share what they know. This is bad for several reasons:
– What happens if somebody gets sick?
– What happens if somebody gets fired?
– What happens if something worse goes down?
Black boxing causes problems. Usually it is a key person who knows that if they hold back information, they maintain control. It could mean they have to hire more people who are friends or family. It could mean they are inefficient. It could be they are scared of being fired.
When you are talking about transferring a business, a risk is somebody inside the organization who does not want to play ball.
## Undocumented Execution Becomes Fear
When an investor or buyer comes in, undocumented execution becomes fear.
They ask: how are we going to extract this information?
Sometimes that person has to be job shadowed. Sometimes they have to be paid extra to show what they do. And they know the jig is up—they are probably going to be let go or replaced.
When you have standard operating procedures for any role, people know they can be replaced, especially if there is a scorecard in place.
## The Discount Math
If you count all the things that cannot be done without you, think of each one as a discount.
Every little issue is like a ding on a used car: that is a discount, that is a discount, that is a discount.
If your exit number was $5 million, you are looking at $100,000 discount here, another $100,000 there. It is real money. Real retirement. For a lot of people, it is moving to a tropical location and never having to wear shoes again.
## Revenue That Underwriting Does Not Like
Revenue that is not durable or repeatable does not underwrite well.
There is some MBA graduate from a really good school who overlooks your books, especially at large firms. They are looking for predictability and consistency.
## The Transferability Self-Test
Ask yourself: if I disappeared for 60 days, what breaks first?
Use that to find your biggest transfer risk.
**Your action this quarter:** Pick one transferability blocker—process, finance, customer, or leadership—and remove it.
—
📊 **Free Framework Assessments:**
– [SELL Framework (Revenue Quality)](https://scottsylvanbell.com/sell-framework)
– [SCALE Framework (Operational Readiness)](https://scottsylvanbell.com/scale-framework)
– [DRIVER Test (Execution Capability)](https://scottsylvanbell.com/driver-test)
Apple Podcasts: https://podcasts.apple.com/us/podcast/episode-4-why-most-businesses-are-not-transferable-ep-4/id1876771297?i=1000749397463
Spotify: https://open.spotify.com/episode/11NBjta7TPy57xm7B8kMCG
YouTube: https://youtu.be/yRGYSLz7GjA
**Transcript Details: **
Most businesses can’t be sold because they can’t be handed off.
That’s the core issue. When you think about selling your company, the real question is simple: can I hand this business to someone else and have it run predictably without me?
For a buyer, transferability means the business works without you. If everything runs through you, there’s a delegation issue and a valuation problem. In the mind of an investor, that means they’ll need to replace you—and they’ll discount the business accordingly.
I like to think of valuation in grades. An A+ business can run for three to six months without the owner, with predictable performance and growth. An A-level business may have minor issues. A B-level business may require management upgrades or stronger systems. A C stands for chaos. The more chaos, the deeper the discount.
One major blocker to transferability is critical knowledge living in someone’s head instead of in systems. Standard operating procedures, job descriptions, and org charts create predictability. Predictability creates value.
When information is “black boxed”—meaning someone refuses to share how things are done—you have hidden risk. That person may fear being replaced. They may want control. They may simply be inefficient. Whatever the reason, black-boxed knowledge lowers your valuation.
When an investor encounters undocumented execution, it creates fear. If performance depends on interpretation rather than measurable systems, risk increases. There’s no room in a spreadsheet for “kind of.” Buyers want clear numbers and documented processes.
You should be asking: who in my organization is holding critical knowledge? What would happen if they left tomorrow? If you can’t answer that confidently, you have a transferability problem.
I’ve seen businesses take extreme steps to solve this—sometimes even paying a key individual to step away after documenting their role. It depends on the company and the situation, but the principle remains the same: undocumented knowledge is expensive at exit.
If you are the founder and no one else can perform key functions, that’s a discount. Think of every non-transferable dependency as money coming off the table. If your target exit is $5 million and you identify five serious transferability gaps, that could represent hundreds of thousands of dollars in lost value.
Revenue that isn’t durable or repeatable doesn’t underwrite well. In larger firms, analysts review your financials without emotion. They input numbers, not stories. If revenue can’t be shown as repeatable and predictable, they begin reducing your multiple.
Founder charisma is not transferable. Culture built solely on your presence is difficult to hand off. If you must be in the building for the company to function, that’s not scalable and it’s not transferable.
The good news is this: transferability isn’t a trait—it’s a build process. It’s not your fault if no one taught you this before. But now that you know, it’s your responsibility.
You build transferability by stabilizing operations, documenting processes, delegating authority, and proving results repeatedly.
When I ran organizations, I pushed decision-making down. I would ask leaders to bring me three solutions, recommend the best one, and explain why. That’s how you develop leadership depth. Sometimes the founder’s role is to mentor the next operator. Sometimes it’s to hire someone capable of stepping in immediately.
Here’s a simple test: if you disappeared for 60 days, what would break first? If 60 days feels impossible, try 30. If not 30, try 14. If not 14, try seven. Wherever it breaks, that’s your starting point.
Identify one transferability blocker over the next 90 days and eliminate it. The 90 days don’t need to align with the calendar. Start tomorrow. Waiting for perfect timing only delays progress.
Transferability builds predictability. Predictability builds value. And value creates options.