When to Sell Your SaaS

There's a piece of advice that circulates endlessly in founder circles, usually delivered with the smug confidence of someone who's never actually had to think about it: "Startups are bought, not sold."

The implication is that if you're trying to sell, you've already failed. That the right approach is to build something so good that acquirers come knocking, checkbook in hand, begging you to let them buy you. That any active effort to sell your company is somehow beneath you, or worse, a signal of desperation.

This advice is, to put it plainly, bullshit.

It's the kind of thing that sounds profound at a dinner party but falls apart under any scrutiny. It usually comes from one of two sources: venture capitalists who want you to keep building (and keep their marks intact), or founders who got extraordinarily lucky, the ones who happened to know the right person at Google or got acquired in a frothy market where strategics were panic-buying anything that moved.

For the vast majority of founders, "get bought, don't sell" is useless advice. It's like telling someone looking for a job to "just be so talented that companies find you." Sure, that happens sometimes. But most people send resumes.

Here's the reality: most successful exits are the result of deliberate, well-executed sale processes. They happen because founders decided to sell, hired a banker, ran a competitive process, and extracted real value from the market. The companies that get "bought" without trying are the exception, not the rule. And even many of those founder-friendly acquisition stories, if you dig into them, involved more active selling than the mythology suggests.

The Binary Choice

The real advice isn't "get bought, not sold." It's this:

Either be for sale, or don't be. But don't half-ass it.

Half-assing it looks like: taking every inbound call, entertaining every "exploratory conversation," sharing your metrics with anyone who asks, and generally signaling that you're open to offers without actually committing to a process.

This is the worst of both worlds. You're distracted from running your business. You're leaking information to potential competitors. And you're anchoring yourself as someone who's eager to sell, which, as we covered in Chapter 2, invites lowball offers and opportunistic value buyers.

If you're not for sale, act like it. Be polite but standoffish with inbound interest. Don't take the meeting. Don't share your metrics. Don't let corp dev people "build a relationship" with you over quarterly coffee chats. The truly motivated buyers, the ones who would actually pay what you're worth, will keep coming back. They'll get more interested, not less, as you play hard to get. Your apparent disinterest signals confidence.

If you are for sale, commit to it fully. Hire a banker. Run a real process. Create competitive tension. Extract maximum value from the market. Don't dabble.

The founders who get hurt are the ones in the middle, the ones who are sort of for sale, kind of taking meetings, maybe open to the right offer. They end up selling for less than they should, to buyers who correctly identified them as easy targets.

This Is a Personal Decision

Everything else in this guide is about mechanics: valuation drivers, deal structures, buyer types, process steps. This chapter is different.

The decision of when to sell is, fundamentally, a psychological one.

Yes, there are thresholds and timing considerations we'll cover. Yes, there are moments when your company is objectively worth more or less. But the question of whether you are ready to sell, whether this is the right time in your life, for your goals, given everything else happening around you, that's not a spreadsheet exercise.

Founders sell for all kinds of reasons:

• They're burned out and can't imagine doing this for another five years
• They have a new idea they're more excited about
• Their co-founder wants out and they can't run it alone
• Their spouse is tired of them working weekends and missing vacations
• They have young kids and want to be present for a few years
• Their Series A investors have mentally written them off and aren't returning emails
• Half the board wants to sell and the other half is blocking it, and the dysfunction is exhausting
• They've made enough money on paper that the risk/reward of continuing no longer makes sense
• They just know it's time, even if they can't fully articulate why

All of these are valid. None of them show up in your ARR or growth rate.

The analytical frameworks in this chapter will help you understand when your company is likely to command the best price. But don't confuse "optimal timing for valuation" with "right time to sell." Sometimes the right time to sell is when you're ready, even if it's not the theoretical peak.

Some founders optimize ruthlessly for maximum value. Others just know they're done and are fine leaving some money on the table. Both are legitimate choices.

What matters is being honest with yourself about which one you are.

The Thresholds Worth Hitting

If you've decided you're ready to sell, or you're getting close, there are certain milestones that meaningfully change your outcome. Not because the numbers are magic, but because they shift who's in your buyer pool and what they're willing to pay.

ARR Thresholds: $2M, $5M, $10M

Each of these marks a step-change in buyer interest:

$2M ARR is roughly the floor for institutional interest. Below this, you're mostly looking at search funds, individuals, and micro-acquirers. The buyer pool is thin, sophistication is low, and processes are often messy. If you're at $1.5M and growing, pushing to $2M before going to market is almost always worth it.

$5M ARR further opens up the lower mid-market PE universe. More buyers start taking serious looks. You're large enough to be a small platform or an attractive tuck-in. The number of potential bidders roughly doubles.

$10M ARR is where the mid-market really kicks in. The bigger funds can now write checks for you as a standalone platform. Strategics take you more seriously. The competitive dynamics of your process improve significantly.

Profitability: The Breakeven Milestone

If you're within a few quarters of breakeven, getting there before going to market is almost always worth the wait.

Profitability transforms your buyer pool. It unlocks debt financing for acquirers, which means they can pay more without diluting their returns. It removes the "this company needs post-close capital" discount that cash-burning businesses face. It signals operational maturity and means you don't have to sell.

A company doing $6M ARR at 25% growth and 15% EBITDA margin will often trade higher than a company doing $8M ARR at 35% growth and -10% EBITDA margin. The profitable company is a financial asset. The unprofitable one is a bet.

If breakeven is 6-9 months away and achievable without gutting growth, wait.

New Growth Channels: Let Them Show Up on the Books

You've just figured out that LinkedIn ads actually work for your ICP. Or you hired your first outbound SDR and they're crushing it. Or you launched a partnership with a platform that's sending you qualified leads. The new channel is working, but it's not in your numbers yet. You have maybe one quarter of data, and it's noisy.

If you go to market now, you won't get credit for it. Buyers underwrite based on demonstrated, repeatable performance, not your conviction that something is about to inflect. They'll see your trailing twelve months, note the recent uptick, and maybe give you partial credit in their models. But they won't pay for potential.

Wait two or three quarters. Let the new channel prove itself. Let it show up in your cohort data, your CAC calculations, your growth rate. Then go to market with a story that's backed by evidence.

The difference between "we just started testing LinkedIn" and "LinkedIn has been 30% of new ARR for three quarters with better unit economics than any other channel" is a turn or two of multiple.

When Waiting Costs You Money

Everything above assumes that waiting improves your position. Often it does. But there's a scenario where waiting destroys value, and it's more common than founders want to admit.

The Growth Deceleration Trap

Here's how it plays out:

A founder is at $6M ARR, growing 40% over the last year, but growth is getting tricky to keep up at that rate (often the case as you grow). They decide they want to hit $8M before going to market. Round number, feels more impressive, should unlock better buyers.

So they wait. They grind. They hit $8M ARR 12 months later.

But by then, growth has decelerated to 20%. The same channels that worked are saturating. The sales motion is getting harder. CAC is creeping up.

The $6M company at 40% growth was worth more than the $8M company at 20% growth. They waited to hit a number, but the waiting itself degraded their most important valuation driver.

This is the single most common timing mistake founders make. As we covered in Chapter 3, growth dominates valuation in SaaS. A company growing 50% might trade at 7x ARR; the same company growing 20% might trade at 3–4x. That’s not a small difference. That’s the difference between a $42M outcome ($6M at 7x) and a $24M outcome ($8M at 3x). The math is unforgiving: chasing an extra $2M of ARR while growth decays from 40% to 20% can cost you $18M in enterprise value.

Why Growth Always Decays

This isn't pessimism. It's math.

Growth decays because the things that drive growth (marketing channels, sales motions, product features, partnerships) all have natural ceilings. Every channel saturates. Every sales playbook gets copied. Every product feature gets commoditized.

What looks like smooth exponential growth from the outside is actually a series of S-curves stacked on top of each other. Our friend Jason Cohen talks eloquently about how HubSpot's growth chart looks like a steady line up and to the right. But inside, it's one initiative after another: inbound marketing provides the required growth burst until it flattens out, then freemium provides the required growth burst until it flattens out, then the partner ecosystem provides the required growth burst until it flattens out, then international expansion provides the required growth burst until it flattens out.

Each new curve requires a new bet. A new product launch. A new channel. A new market. And each bet carries risk. It might not work.

The empirical reality: on average, next year's growth rate is about 85% of this year's. A company growing 50% this year will, on average, grow about 42% next year, then 36%, then 30%. There are exceptions, but they're exceptions and all involve some risk.

This has a profound implication for timing.

If you're growing 60% today, you should assume, absent a major new initiative, that you'll be growing slower in 12 months. The question isn't whether growth will decay, but whether you have another curve to stack on top of this one.

The Question You Need to Ask Yourself

Here's where the psychological and the analytical meet:

Do I have the stomach to stack another growth curve?

Because that's what sustaining growth requires. "Keep doing what's working" isn't enough. What's working will stop working - your churn is a fixed percentage of your ARR whereas your new customer ARR is not. Sustaining growth means finding the next thing, and the thing after that, while the current thing is still producing.

That means taking risk. Launching products that might fail. Betting on channels that might not work. Hiring people who might not pan out. Doing it again and again, for years.

Some founders are energized by this. They see another five years of stacking curves and feel excited. They have ideas. They have energy. They want to see how big they can make it.

Other founders are exhausted by the thought. They've stacked three curves already. They're tired. The idea of doing it again, knowing it might not work, knowing the stress it involves, makes them want to get off the ride.

Neither answer is wrong. But you need to know which one you are.

If you don't have another curve in you, sell while the current one is still working. Don't wait until it's decayed and you're exhausted and your leverage is gone.

The Valley of Death

There's a specific scenario that applies to founders who have raised VC funding and deserves its own section, because founders who end up here have very few good options.

The valley of death is the space between two viable states:

• Growing fast enough to raise more capital (100-200%+ growth, clear path to scale, venture-backable story)
• Profitable enough to be an attractive acquisition (breakeven or better, sustainable growth - but not at VC rates)

The valley is the middle ground: burning cash, growing 30-80%, not fast enough to raise at a good valuation, not profitable enough to attract serious buyers.

This is the worst place to be.

Investors look at you and see a company that's not moving fast enough to justify more dilution. Acquirers look at you and see a company that will need post-close capital, which means they have to either fund your losses or cut costs immediately after buying, both of which reduce what they're willing to pay. They are also probably thinking you'll be cheaper when you run out of money.

If you see yourself drifting toward the valley, act before you get there.

The options narrow fast once you're in it:

Option 1: Hail Mary. Pour your remaining cash into a bet that could reignite growth. New product, new market, new channel, something that could get you back to 100%+ growth and make you fundable again. This is high-risk. If it doesn't work, you've accelerated your cash runway depletion and you're now in the valley with less time and fewer options. That is the risk you'll have to take to stay on the VC path.

Option 2: Cut to Profitability. Reduce burn aggressively, probably by cutting headcount, and get to breakeven or better. This will almost certainly hurt growth in the short term. You might go from 80% growth to 40% growth, or even lower. But here's the thing: a profitable company growing 35% is dramatically more valuable than a money-losing company growing 50%. The profitable company is a financial asset that buyers can hold indefinitely. The money-losing company is a problem that needs to be solved. Cutting to profitability isn't giving up. It's repositioning yourself from "distressed asset requiring capital" to "stable asset generating cash." The buyer pool changes completely.

Option 3: Accept the Valley. If you're already in the valley and neither option above is feasible, you're looking at a compressed outcome. Value buyers and turnaround shops will circle. Multiples will be low. You may need to accept a deal you wouldn't have considered a year ago. This isn't necessarily a disaster (some outcome is better than no outcome), but it's not what you spent years building toward.

The lesson: don’t drift into the valley. If you see it coming, make a decisive move in one direction or the other. Either go for growth hard, or cut to profitability hard. The middle path leads to the worst outcomes.

The Market Timing Fallacy

Some founders convince themselves that the market is the main variable. If they could just time their exit to catch the peak of a valuation cycle, they'd maximize their outcome.

This is mostly wrong.

Yes, markets move. In 2021, SaaS multiples were historically high. In 2022, they compressed significantly. A company that might have traded at 10x ARR at the peak might trade at 6x ARR in a down market.

But here's what founders miss: the same market forces that affect your exit multiple affect your reinvestment opportunities.

Let's say you sell in a down market at 6x instead of the 10x you might have gotten at the peak. That feels like leaving money on the table. But consider what you do with the proceeds.

Most founders who sell a SaaS company end up reinvesting a significant portion, either in public SaaS stocks, in other startups, or in starting something new. All of those opportunities are also cheaper in a down market.

If you sold at 10x in 2021 and invested in public SaaS stocks, you watched those holdings drop 50-70% over the next two years. If you sold at 6x in 2023 and invested in the same stocks, you bought them at a fraction of the price.

The math often washes out. Lower exit multiple, lower reinvestment prices. Higher exit multiple, higher reinvestment prices.

Meanwhile, while you're waiting for the market to "come back," your company-specific factors are changing. Growth is decaying. Competitors are emerging. Your energy is flagging. You're burning months or years of your life waiting for macro conditions you can't control or predict.

Don't try to time the market. Time your readiness.

The founders who optimize for "peak market" usually either miss the window entirely or make themselves miserable waiting for conditions that may not materialize. The founders who optimize for "right time for me and my company" tend to execute better processes and end up happier with their outcomes.

Putting It All Together

Here's a framework for thinking through the timing decision:

Wait if:

• You're within striking distance of $2M, $5M, or $10M ARR and can get there in 2-3 quarters without sacrificing growth
• You're 2-3 quarters away from breakeven and can get there without major cuts
• You have a new growth channel that's working but hasn't shown up in your trailing metrics yet
• Your growth rate is strong and you have energy for another stack of growth curves

Go now if:

• You're growing 40%+ but can see that growth decelerating over the next 12 months
• You don't have another growth initiative you believe in
• You're burned out and the thought of doing this for three more years makes you want to quit
• You're drifting toward the valley of death (burning cash, growth slowing, can't raise)
• Your personal circumstances have changed and you need liquidity or flexibility
• You've hit a milestone and you're ready, even if waiting might theoretically be better

Don't wait for:

• "The market to recover" or "multiples to come back"
• Some arbitrary revenue number that doesn't change your buyer pool
• The perfect moment when everything is optimized
• External validation that it's "the right time"

“Einar & the Discretion Capital team were part-therapist, -confidante, and -broker when I sold my previous company. Having someone with Einar’s experience beside me to help navigate the process was invaluable. We ran a competitive bidding process where we increased the first LOI to the final closing by 35%.”

Adii Pienaar

Founder, Conversio

The Decision Is Yours

At the end of the day, this is your company and your life. The frameworks in this chapter can help you think through the tradeoffs, but they can't make the decision for you.

Some founders will read this and realize they should have sold a year ago. Others will realize they should wait another 18 months. Some will realize they've been avoiding the decision entirely, hiding behind "maybe next year" while their leverage slowly erodes.

The only wrong answer is not deciding. The founders who drift, who are perpetually "maybe for sale," who take every meeting but commit to nothing, who wait for some external signal to tell them it's time, those are the ones who end up with suboptimal outcomes.

Decide. Either commit to not being for sale (really commit, stop taking the meetings, focus on building) or commit to selling and do it properly.

The market rewards decisiveness. So does your own peace of mind.

Timing Decision Checklist

Before committing to a sale process, work through these questions:

Company Readiness

• Am I past the $2M/$5M/$10M ARR threshold, or can I get there quickly?
• Am I at or near breakeven, or can I get there in 2-3 quarters?
• Have recent growth initiatives had time to show up in my metrics?
• Is my growth rate stable, or visibly decelerating?

Personal Readiness

• Do I have energy for another 3-5 years of stacking growth curves?
• Am I excited about the next phase, or exhausted by the thought of it?
• Are there personal circumstances pushing me toward liquidity?
• Have I been avoiding this decision, or am I ready to commit?

Risk Assessment

• Am I drifting toward the valley of death (burning cash, slowing growth)?
• Is my growth likely to be higher or lower in 12 months?
• Do I have a believable next growth initiative, or am I hoping one appears?
• What happens if I wait another year and growth decays to half its current rate?

Decision

• Am I truly not for sale, willing to ignore inbound and focus on building?
• Or am I ready to commit to a real process with a banker?
• Have I stopped half-assing it?

This guide is for informational purposes only and does not constitute legal, tax, or financial advice. Consult qualified advisors before making decisions regarding your transaction.