Exiting company

Exiting a Company

Overview

Companies are bought, not sold. The best exits happen when a strategic or financial buyer identifies you as the solution to their problem — not when you announce a sale. This skill covers valuation drivers by buyer type, diligence-ready metrics, and the 12–24 month runway most exits require.

Not legal or tax advice. Use qualified counsel for transactions, earnouts, and cap table mechanics (equity-management, legal-for-founders).

When to Use

• "How do I prepare my company for acquisition?"
• "What's my company worth to PE vs strategic?"
• "Build an exit strategy"
• "Prepare for due diligence"
• "Maximize acquisition value"
• "Sell my bootstrapped SaaS"
• "Negotiate earn-out" / "earnout terms" / "retention bonus vs earn-out"
• "Walk away from LOI" / "seller note" / "rollover equity in acquisition"

Do not use for path choice (bootstrap vs VC) — use saas-outcomes first. Do not use for metric calculation — use saas-metrics-calculator.

Authoritative Foundations

• David Skok. Unit economics gate every exit. LTV:CAC <3x or payback >18 months compress multiples in diligence — fix before process.
• Jason Lemkin (SaaStr). Burn multiple and growth efficiency matter as much as ARR scale; inefficient growth gets discounted at LOI.
• Nathan Latka (GetLatka). Sub-$10M ARR bootstrapped SaaS has real acquisition liquidity; weight churn, growth, and clean books over VC headline multiples.
• Ben Murray (The SaaS CFO). PE buyers model EBITDA and FCF; bridge from unit economics → P&L → EBITDA multiple (financial-modeling/references/unit-economics-exit-bridge.md).
• KeyBanc SaaS Survey. Private ARR multiple bands by growth tier — use as range, not quote.

Step-by-Step Process

Phase 0: Exit Optionality Gate

Score whether exit is realistic vs distraction before M&A prep. Load saas-outcomes/references/exit-potential-scorecard.md:

• <3.0 avg: Fix retention and concentration — exit is distraction
• 3.0–3.9: Passive readiness only (metrics pack, relationships)
• ≥4.0: Proceed with Phase 2–4 readiness

Phase 1: Valuation Drivers by Buyer Type

Load references/valuation-drivers.md and saas-outcomes/references/exit-metrics-matrix.md.

Buyer type	Metrics they weight	Red flags
Strategic	Product fit, customer overlap, talent	Customer concentration; IP gaps
PE	EBITDA, NRR >110%, predictable renewals, efficient GTM	High burn; founder dependency
Acqui-hire / small M&A	Team, tech (Latka sub-$10M ARR)	No product velocity
Bootstrap acquirer	Profitability, clean cap table, low churn	Messy books; cap disputes

Scale thresholds (planning): $1M ARR acqui-hire possible; $5M strategic interest; $10M+ serious conversations; $20M+ banker-led if inbound.

Multiples (indicative): Strategic 5–15x ARR; PE 8–12x ARR or 15–25x EBITDA; bootstrap 4–8x ARR or 3–6x SDE. See templates/valuation-sensitivity-table.md.

Phase 2: Due Diligence Package

Prepare before anyone asks. Load references/due-diligence-metrics-pack.md.

Financial: 36 mo P&L; ARR bridge; cohort NRR/GRR; fully loaded CAC/LTV
Legal: Cap table; IP assignments (contractors critical); material contracts
Technical: SOC2 or equivalent; architecture; DR
Commercial: Concentration; churn reasons; documented playbook

Phase 3: 12–24 Month Runway

Load references/buyer-readiness-checklist.md and templates/exit-readiness-scorecard.md.

Phase	Focus
Months 1–6	Cap table, IP, metrics pack, concentration plan
Months 7–12	NRR trend, GTM repeatability, founder dependency ↓
Months 13–18	Market signals, partnerships, data room 80%
Months 19–24	Counsel, LOI, diligence (60–90 days), close (30–60 days)

Phase 4: Exit Options

Option	Valuation basis	Typical timeline
Strategic acquisition	ARR × growth + synergy	6–12 months
PE (majority)	EBITDA + ARR growth	4–8 months
Bootstrap sale (MicroAcquire/GetLatka)	ARR/SDE, churn	3–6 months
Acqui-hire	Team value	2–4 months
IPO	$100M+ ARR, Rule of 40	12–18 months

Cross-ref: saas-outcomes/references/bootstrap-vs-vc-paths.md for hold vs sell.

Phase 5: Deal Structure — Earn-Outs & Deferred Consideration

When LOI includes earn-out, seller note, or rollover — model cash at close first, not headline EV. Load references/negotiating-earn-out.md:

Topic	Founder sensibility
When fair	Real diligence gap; metrics you already run; want to stay 18–24 mo
When trap	>40% at risk; buyer controls OpEx; vague metrics; at-will + forfeiture
Typical at risk	15–40% mid-market; bootstrap sales often lower earn-out %
Walk	Cash at close below floor; >50% at risk without audit/carve-outs

Negotiation artifacts: templates/earn-out-term-sheet-review.md (worksheet), templates/valuation-sensitivity-table.md (hold vs sell + deferred scenarios).

Related structures (high level):

• Retention bonus — time-based; prefer separate from performance earn-out
• Rollover equity — upside alignment; understand liquidation prefs
• Seller financing — only with security, market interest, clear subordination

Legal handoff: Contract language → M&A counsel. Commercial velocity → deal-desk/references/legal-gtm-playbook.md (Pattern 29). Not legal advice in this skill.

Reconcile structure norms → references/benchmark-reconciliation.md (Earn-Out vs Upfront Cash).

Output Format

Exit readiness assessment with: buyer-type fit, valuation range (low/base/high with method named), diligence gaps, 24-month timeline, scorecard summary.

Quality Check

• Buyer type identified (strategic vs PE vs bootstrap)
• Valuation method matches buyer (ARR vs EBITDA vs SDE)
• Metrics pack items mapped to gaps
• No guaranteed valuation claims — ranges and assumptions only
• Cross-refs to saas-metrics-calculator, financial-modeling, saas-outcomes

Common Pitfalls

1. Missing IP assignments. Contractor IP gaps kill deals — fix in month 1–6.
2. Customer concentration. One logo >20% ARR → un-acquirable or deep discount.
3. Founder dependency. Acquirer buys key-person risk, not a company.
4. Optimizing ARR before NRR. Diligence strips low-quality revenue.
5. Shopping the company. Inbound from relationships beats outbound "for sale."
6. Headline EV without cash-at-close math. Earn-out traps look like big deals. Fix: earn-out-term-sheet-review.md before signing.
7. Accepting EBITDA earn-out without carve-outs. Buyer can cut marketing and void payout. Fix: negotiating-earn-out.md governance section.

Execution Artifacts

• references/framework-notes.md — named frameworks and agent routing
• templates/output-template.md — deliverable shell
• scripts/check-output.py — lightweight validator
• references/valuation-drivers.md — strategic vs PE criteria, EBITDA vs ARR, adjustment table
• references/buyer-readiness-checklist.md — 24-month prep timeline
• references/due-diligence-metrics-pack.md — standard metrics export for M&A
• references/negotiating-earn-out.md — earn-out playbook, levers, decision tree, anti-patterns
• templates/exit-readiness-scorecard.md — 1–5 scoring worksheet
• templates/valuation-sensitivity-table.md — ARR, EBITDA, DCF, hold vs sell
• templates/earn-out-term-sheet-review.md — founder worksheet for LOI/term sheet Cross-skill artifacts: saas-outcomes/references/exit-potential-scorecard.md, saas-outcomes/references/exit-metrics-matrix.md, saas-outcomes/references/bootstrap-founder-playbook.md, financial-modeling/references/unit-economics-exit-bridge.md, references/benchmark-reconciliation.md

Related Skills

• saas-outcomes — path choice, exit-metrics matrix, bootstrap vs VC
• saas-metrics-calculator — formulas and benchmarks
• financial-modeling — unit-economics-exit-bridge, DCF
• fundraising-strategy — alternative to exit if metrics support raise
• soc2-compliance — enterprise diligence readiness
• equity-management — cap table cleanup

⚠️ Disclaimer

This skill provides general informational guidance based on publicly available frameworks and operator experience. It is NOT legal advice, accounting advice, tax advice, or financial advice.

Consult qualified professionals for your specific situation — attorneys for legal and M&A matters, CPAs for tax and accounting. This skill does not create a professional-client relationship.