The Exit Readiness Score: Which Dependencies Cost You the Most (And What to Fix First)

You've diagnosed the Chaos King symptoms. You've measured your Shadow Approval Rate at 33% and Founder Gate Share at 30%. You know you have a valuation problem. Now the question: which dependencies cost you the most at exit? What's the minimum viable path to fix them in 24 months? And what does 'exit-ready' actually look like in measurable terms?

The Red/Amber/Green Functional Audit maps operational independence across seven core business functions. Combined with your Authority Metrics from the previous article, it produces your Exit Readiness Score—the single diagnostic that tells you if you're 6 months from exit-ready or 24+ months away.

This is the synthesis. Articles 1-2 diagnosed and measured. This article shows you what to fix first.

Section 1: The Exit Readiness Score

The Exit Readiness Score combines two measurements:

Operational Independence (50% weight): Can your business functions execute without you? The R/A/G audit we'll conduct in the next section scores seven functions as Red (founder-dependent), Amber (operationally independent but authority-constrained), or Green (genuinely autonomous).

Delegation Quality (50% weight): When you delegate, do you transfer genuine decision rights? Your Composite Authority Gap Score from Article 2—averaging Shadow Approval Rate, Founder Gate Share, Authority Band Utilisation, and four other metrics—measures whether your delegation is real or theatre.

Both matter equally. A function can be operationally independent (capable team, documented processes) but still authority-constrained (team seeks approval for decisions within their remit). That's the gap between Amber and Green—and it's where most exit protocols stall.

Score interpretation:

• 63%+ (17/27 points or higher): Exit-ready within 6-12 months. Buyers will find operational independence across revenue-critical functions. Remaining gaps are tactical.
• 52-62% (14-16/27 points): Exit-ready within 12-18 months with targeted interventions. You have capability but authority theatre persists. Protocol focus: Amber→Green transitions.
• 37-51% (10-13/27 points): 18-24 months minimum. Multiple Red functions require full remediation. Budget £400-600k for senior hires, knowledge transfer, process systematisation.
• <37% (<10/27 points): Not exit-viable. Delay any transaction processes. Focus on Red→Amber transitions for revenue-weighted functions first.

Calculation walkthrough:

R/A/G Component (50% weight):

• Score each function: Red = 1 point, Amber = 2 points, Green = 3 points
• Apply revenue weighting: 2× for Revenue Generation & Client Relationships and Sales & BD; 1× for all others
• Total: your score ÷ 27 possible points = percentage
• Example: Revenue Gen (Red = 1×2), Sales (Amber = 2×2), Financial Control (Amber = 2×1), Operations (Red = 1×1), Product (Amber = 2×1), People (Green = 3×1), Marketing (Amber = 2×1) = 17/27 = 63%

Authority Metrics Component (50% weight):

• From Article 2: average the seven metrics, inverted where needed
• SAR 33% → score 67% (lower SAR is better)
• FQTS 67% → score 33% (lower FQTS is better)
• ABU 78% → score 78% (higher ABU is better)
• Average all seven inverted scores → composite percentage
• Example composite: 58%

Exit Readiness Score:

(63% × 0.5) + (58% × 0.5) = 60.5%

Interpretation: 60.5% = 12-18 month timeline with targeted interventions needed. You have operational capability (63%) but authority gaps persist (58%). Protocol focus: Amber→Green transitions to close the delegation quality gap.

Your Composite Authority Gap Score from Article 2 becomes 50% of your Exit Readiness Score. The R/A/G functional audit we're about to conduct provides the other 50%.

Section 2: The R/A/G Functional Audit

You've measured your authority gaps with seven metrics in Article 2. Now we map those gaps to business functions to answer: which dependencies cost you the most, and what do you fix first?

The seven functions:

Maximum score: 27 points (7 functions, 2 weighted 2×, 5 weighted 1×: [3×2] + [3×2] + [3×1] + [3×1] + [3×1] + [3×1] + [3×1] = 27)

Scoring methodology:

Assess each function honestly. If you scored above 30% on Shadow Approval Rate (Article 2), expect Red status in Financial Control. If you recognised Crisis Validation symptoms (Article 1), Operations will likely be Red.

Multiply each function's score (1/2/3) by its weight (1× or 2×), sum the total, divide by 27. Convert to percentage.

These thresholds calibrate for £5-20m businesses. Earlier-stage founders will see these patterns at lower absolute values; later-stage should demonstrate independence at higher thresholds. The diagnostic test isn't the specific pound amount—it's whether decisions at material levels relative to your business size can execute without you.

Cost reality:

Budget £75-130k per Red→Amber transition (senior hire + 6-month knowledge transfer), £45-95k per Amber→Green transition (authority framework implementation + founder behaviour change). For a business with 4 Red functions and 3 Amber, expect £400-600k total investment over 24 months. These ranges reflect UK SME advisory engagements 2021-2025 for comparable remediation programmes.

Section 3: Before You Start—Is Your Dependency Actually Valuable?

Run the R/A/G audit first. If you score Red in Revenue Generation because you hold exclusive distribution relationships that can't legally transfer to others, your dependency may be an asset buyers will pay for. But if you score Red because your team seeks your approval out of learned risk aversion from past reversals, that's pure valuation risk.

Genuinely unreplicable founder value exists in three scenarios:

1. Exclusive access: Personal relationships that create structural competitive advantage (e.g., sole UK distributor for a category-leading brand; regulatory approvals tied to founder credentials) 2. Technical IP: Founder holds patents or trade secrets that can't be documented without compromising protection 3. Brand equity: Founder is the brand in ways that transfer to acquirer advantage (e.g., thought leadership platform that drives inbound demand)

In these cases, buyers may pay retention premiums rather than discounts. But the test is stringent: the dependency must create value the acquirer can't replicate through normal post-acquisition integration.

Most founder dependencies fail this test. If your Revenue Generation scores Red because your team has learned to escalate decisions you've historically reversed, that's not unreplicable value—it's learned helplessness. If your Financial Control scores Red because you haven't trusted anyone else with budget authority, that's not expertise protection—it's delegation failure.

The falsifier: If founder-dependent businesses consistently achieve 1.5× sector median multiples with explicit retention premiums by Q1 2027, this framework is wrong. Current evidence (UK200Group SME Valuation Index, November 2024: median 5.4× EBITDA; key-person discounts typically 10-25%) suggests the opposite.

If your audit shows Red functions that don't meet the unreplicable value test, proceed to the protocol.

Section 4: The 24-Month Protocol

Sequencing logic:

Red→Amber first for revenue-weighted functions (Revenue Generation, Sales). Protect enterprise value during remediation. Then Amber→Green for supporting functions (Financial Control, Operations). Rationale: buyers will tolerate operational dependencies if revenue generation is independent; they won't tolerate revenue dependencies regardless of operational maturity.

Three validation gates:

30-day founder absence tests at Month 3, 12, 24. Not holidays—genuine absence where the team believes you're unreachable. These aren't optional. Buyers will ask during due diligence: "What happens if the founder is unavailable for a month?" Your answer needs to be "We tested that in Q2 2024. Revenue continued, operations executed, no material decisions stalled."

Timeline with psychological thread:

Months 1-9: Red→Amber transitions (revenue-weighted functions)

• Hire senior capability for Red functions (Finance Director if Financial Control is Red, Sales Director if Sales is Red)
• 90-day knowledge transfer: document client relationships, deal processes, operational protocols
• Establish co-primary contacts for top-20% revenue clients
• Target: SAR below 15% by Month 9 (from Article 2 baseline)

Months 10-15: The stall point

This is where most protocols fail. Red→Amber transitions complete: you've hired capability, transferred knowledge, documented processes. Then comes the Amber→Green push—genuine authority transfer.

Your Finance Director now has authority for operational spend. Then they approve a £12k software purchase you wouldn't have approved. Not because it violated criteria—you simply disagree with the judgment call. So you reverse it.

The FD learns: authority bands are suggestions. Next month, your Shadow Approval Rate spikes from 15% back to 28% as the team reverts to seeking pre-approval for decisions within their authority.

The protocol hasn't failed. You've sabotaged it because making yourself less central feels like planned obsolescence. That's the Chaos King symptom from Article 1 manifesting in protocol execution. That's when founders need outside accountability.

Months 16-24: Amber→Green transitions (if you survive Month 10-15)

• Authority framework implementation: publish decision rights, financial thresholds, escalation criteria
• Founder behaviour change: commit to 7-day response times for non-urgent decisions; force team to own outcomes
• Target: FGS below 20% by Month 18, FQTS reduction of 50% by Month 21 (Article 2 metrics)
• Success metrics: Exit Readiness Score 63%+ by Month 21, 5+ functions at Green by Month 24

Adaptive timing (Decision Stack integration):

• If sector M&A activity increases 15%+ vs prior year (check UK200Group SME Valuation Index quarterly) and you're at Month 12+ with Exit Readiness Score 55%+: Compress remaining protocol to 6-9 months. Trade-off: execution risk increases, but market windows don't wait. Prioritise Revenue Generation and Sales to Green; accept Amber status in supporting functions.

• If Bank of England base rate drops to 4.5% or below (check BoE monthly) and you're at Month 18+ with score 60%+: Engage corporate finance advisors for preliminary valuation. Rising multiples create urgency, but don't chase them with unresolved Red functions—buyers will discount more aggressively in competitive markets.

• If you receive inbound buyer approach before Month 12: Assess current score. 60%+? Engage cautiously. 50-59%? Respond: "Flattered by interest, not currently in market but open to conversation in 12-18 months." <50%? This approach validates your dependency problem—use it as motivation, not distraction.

Section 5: Why Protocols Fail

Founders mistake operational delegation for authority transfer. You've assigned the Finance Director budget responsibility. You've published authority bands. The R/A/G audit shows Financial Control moving from Red to Amber.

But when the FD approves a £12k software purchase you wouldn't have approved, you reverse it. Not because it violated criteria—you simply disagree with the judgment call.

The FD learns: authority bands are suggestions, not genuine delegation. Next month, your Shadow Approval Rate spikes from 15% back to 28% as the team reverts to seeking pre-approval for decisions within their authority.

The protocol hasn't failed. You've sabotaged it because making yourself less central feels like becoming dispensable. That's the Chaos King symptom from Article 1 manifesting in protocol execution.

The obstacle isn't team capability—it's your psychological resistance to systematised dispensability.

Three diagnostic signals that you're sabotaging your own protocol:

1. Reversal pattern: You reverse team decisions not because they violated criteria, but because you disagree with judgment calls. Track this monthly. If you reverse >2 decisions per month that met documented criteria, you're the bottleneck.

2. Escalation creep: Your team escalates decisions back to you despite having authority. They've learned that exercising authority without your pre-approval creates conflict. Check your FQTS (Founder Queue Time Share from Article 2)—if it's increasing after Month 9, you've trained the team to seek permission, not forgiveness.

3. Validation theatre: You claim to want delegation but create reasons to stay involved. "I just want to be kept informed" becomes "I need to review this before you proceed" becomes "Let me handle this one." If your SAR isn't declining month-over-month, you're performing delegation, not executing it.

If Red functions remain Red after 12 months of protocol execution, assume founder unwillingness, not team capability gaps. That's when the choice becomes: accept outside intervention or accept you're building an unsellable business.

Section 6: Synthesis + Series Completion

Article 1 diagnosed the Chaos King symptoms. Article 2 measured the authority gaps with seven metrics. Article 3 mapped those gaps to business functions and gave you a 24-month roadmap.

You know if you're dependent. You've measured how dependent. Now you know what to fix, in what order, and when to start based on market signals.

The protocol is simple. Execution is brutal.

Most founders underestimate the psychological resistance to systematically making themselves less central. Red→Amber transitions are mechanical: hire capability, transfer knowledge, document processes. Amber→Green transitions are psychological: genuinely letting go of decisions you could make better yourself. That's where protocols stall.

If you're at Month 15 with Red functions still Red, the obstacle isn't team capability—it's your sabotage of the delegation you claim to want. That's when outside accountability matters.

Run the audit. Calculate your Exit Readiness Score. The number tells you if you're 6 months away or 24+ months. What you do with that information determines whether you exit at full value or accept a founder dependency discount when buyers discover what you've been avoiding measuring.

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This article is not financial, legal, or tax advice. It is educational commentary on UK SME exit readiness. Consult qualified advisors for your specific circumstances.