Are You Ready To Sell?

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The Founder’s Dilemma

Founders of UK software, SaaS, or data businesses face unique challenges when considering a sale.
Middle-market companies (20–200 employees) are highly valuable but often misunderstood in M&A.

The best time to sell is when you don’t have to; momentum and unsolicited offers are strong signals.
Data companies command premium valuations due to proprietary data and AI enablement.
Waiting for a “better time” can reduce exit value due to market cycles, interest rates, and founder fatigue.
Buyers focus on quality of revenue, net revenue retention, customer concentration, and management independence.

Valuation is more than revenue multiples; it’s about growth, profit, revenue quality, and competitive process.
Key metrics for sale readiness: ARR, NRR, GRR, gross margin, CAC, CAC payback, LTV:CAC, Rule of 40, customer concentration, R&D spend.
Strategic actions (multi-year contracts, diversifying clients, launching new modules, building management) can add millions to valuation.
Adjusted EBITDA is critical; founders should normalize earnings to reflect true profitability.
Recurring revenue is valued far higher than project-based revenue.

Two main sale paths: strategic sale (targeted buyers) vs. competitive auction (multiple bidders).
A well-run competitive process usually maximizes value.
90-day pre-sale roadmap: build data room, craft investment story, finalize buyer list, prepare management.
Due diligence is rigorous; founders should prepare financial, legal, and customer documentation in advance.
Earn-outs are risky; founders must negotiate clear metrics, control, reporting, and acceleration clauses.
Most sales fail due to unrealistic valuations, poor financials, or founder distraction.

Founders can structure deals to stay involved post-sale (PE “first bite,” strategic roles, earn-out transitions).
Selling is an emotional journey—excitement, doubt, stress, sadness, relief, and the “void” after exit.
Life after exit is a transition; most founders don’t retire but pursue new ventures or investments.
Protecting the team is vital; choose buyers who value employees and negotiate retention pools.

Buyers pay for future growth, not just past performance; they seek platforms to scale, reduce risk, and cut costs.
PE buyers offer solid valuations and partial exits; strategic buyers may pay premiums for synergy.
Smaller software companies (20–200 employees) are attractive as platforms for growth.

Customer concentration is a major risk; diversify revenue and sign multi-year contracts.
Technical debt must be managed and documented; buyers want reassurance, not perfection.
Building a strong management team increases business value and reduces founder dependency.

Selling without an adviser is risky; advisers create competitive markets, negotiate terms, and shield founders from distraction.
The adviser’s fee is outweighed by the value they add to the process.

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