5 Signs It’s Time to Start Exit Planning

Whether you’ve been in business for a couple years or your startup has momentum, it’s never too early to start exit planning. Here’s how to know when it’s time to sell your startup. 

Written by Kevin McArdle
Published on Aug. 10, 2023
5 Signs It’s Time to Start Exit Planning
Image: Shutterstock / Built In
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Entrepreneurs wear a lot of hats and have too little time. This is especially true for software-as-a-service (SaaS) founders, who are often juggling complex product iterations and shifting needs in very competitive markets. As such, SaaS business owners end up spending most of their time in the weeds or putting out fires, leaving little time to think about big-picture plans, like their future exit. 

5 Signs It’s Time to Sell Your Startup

  1. You’ve been in business for at least two years.
  2. Life is pulling you in another direction
  3. You and your partners disagree about the future of the company.
  4. You’ve lost your passion.
  5. Your business has had momentum for a while. 

If you have a SaaS business and are wondering whether exit planning applies to you, it probably does. But, read on for five clear signs that it’s time. 

 

1. You’ve Been in Business For at Least Two Years 

Many entrepreneurs believe they only need to think about selling their businesses a year or so prior to a sale. This is one of the biggest misconceptions, and mistakes, they make. The fact of the matter is that a good business to sell is a good business to own. So, the sooner you get your company in selling shape, the sooner your operations will be optimized. 

The first two years you’re in business should be focused on survival and sustainability. But after that? It’s already time to think about your future exit, and how you can build the foundation for it now.

More on EntrepreneurshipHere’s How Non-Tech Founders Built High-Tech Startups Without Going Broke

 

2. Life Is Pulling You in Another Direction. 

Mike Tyson once said, “Everybody’s got a plan until they get punched in the mouth.” He’s not wrong. Sure, your plan might be to sell in 10 years, but plans can, and do, change. Maybe you’ve had a wonderful life change that allows you to hit the brakes on your professional work and enjoy more family time. Or, maybe you’ve had a tragic life change that leaves you without the energy or wherewithal to continue running your business right now.

Either way, life has a way of surprising even the most intentional among us. Businesses are run by humans and humans have emotions and life challenges. So, remember that selling doesn’t happen in a vacuum. It’s OK if life changes your plans. Sometimes, the right thing to do is to heed that call.

 

3. You and Your Partners Disagree About the Future of the Company 

Even the most synchronized business partners are bound to clash about decisions from time to time, but what if these conflicts are more major? For instance, what if one person wants to sell and the other doesn’t? This happens all the time. 

In such a situation, one person can buy the other one out, or find a new partner to buy them out. What happens more often, though, is that the person who wants to sell just keeps hanging in there and getting more and more resentful. 

If you’re disagreeing about whether or not to sell, don’t let this outcome happen. It will poison the partnership and the business. If you run into such a conflict, know that it’s probably a good time for an exit. If you don’t know how to make it happen, speak with an advisor or neutral party to find a solution that gets both partners what they want.

 

4. You’ve Lost Your Passion 

Entrepreneurs are often tired because entrepreneurship is hard. But, when you tire of the business itself, you may have lost your passion. If the parts of your company that used to excite and energize you now zap you and fill you with dread, it’s almost certainly time to sell. 

There’s no honor in running a business if it’s no longer a source of joy for you, just because you feel obligated. It will only wear you down more and even make you a poor leader. Do your team and your business a favor and consider what selling, and life after a sale, might look like for you.

More on EntrepreneurshipLet’s Figure Out Your Startup’s Valuation

 

5. Your Business Has Had Momentum for a While 

This one often surprises people. When everything in their business is going well, founders tend to want to ride the wave as long as possible. This can sometimes be ok, but a lot of times it indicates that you’re in the midst of a really good time to sell. 

Think of it as “selling into momentum.” When a stock is going up, that’s when you sell. You don’t wait until it’s peaked and then sell, or else it will start going down. Even if you have momentum, it won’t last forever. If your metrics look exceptional right now, and you think you can get a premium valuation for your SaaS business, you owe it to yourself to at least think about selling before you hit a plateau and miss the window. 

Are you seeing any of these signs in your business? If so, this might be a great time to begin thinking about selling. Even if it’s not quite your time, starting down the path sooner than later will help your business become healthier in the near-term and better positioned to sell when you are ready.

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