In a previous Friday’s on Recur post, we talked about Selling Your SaaS business on the other side of 2020, and how the Mergers and Acquisitions (M&A) market was one of the fastest to bounce back from COVID-19’s impact.
A lot of the M&A action we’ve seen in the market recently has been due to a variety of reasons: COVID-19, changing priorities, looming tax changes, family dynamics and more. While it may seem straightforward financially (if you’re getting a good deal), there’s a lot that goes into the decision. The reality is that selling your business is a difficult decision, because a founder is looking to part ways with something they’ve built from the ground up and spent countless hours on.
While every situation (and SaaS founder) is unique, here are some of the common reasons we’ve seen of founders deciding to sell their business.
You’re ready for the next step in your personal or professional journey
This one tends to come up frequently, and while each founder has a different situation or motivation for moving on from their business, the one thing they share in common is that they’re ready for the next step. Our life is made up of chapters and at some point, chapters do end. Founders are people (crazy right?), and things can come up. Whether it’s family, looking to start a new adventure, build a new business/solution or they’re simply burnt out, it’s not uncommon for people to change plans and start a new and better opportunity.
The business is doing well, so well, that someone else comes knocking
While it may seem like this isn’t the best time since you’re gaining lots of traction, this is a good opportunity to get an outstanding deal. Others recognize when you’re making waves in your market and sometimes that means they feel like they have to own that. Selling as your company is performing is a great place to negotiate from. The worst (or best) outcome is you don’t reach consensus and you keep owning an asset that is accumulating value over time. Just because your business is doing well doesn’t mean you should turn down a conversation. It’s good practice to take a call or respond to an email, and learn where you stand in the industry.
The business is struggling and you’ve done all you can
This obviously isn’t good, and sometimes it can be beyond a founder’s control, such as an economic downturn, high employee turnover, etc. While it tends to be best practice to stabilize and reconsider selling later, there are times where these circumstances can create frustration and burnout. Sometimes it can be best to say you’ve tried all you can and give someone else the opportunity to see if they’re able to improve the situation.
You need help, but aren’t ready to exit stage left
This is the primary reason most founders will choose to sell their company. Some founders can see that there is a lot of opportunity down the road that an acquirer can take the distance, but you don’t want someone else to get all the gain. The reality is that growth costs a lot of money, and scaling up rapidly can take up even more resources depending on a time frame. This doesn’t necessarily mean you have to move away from the business. Depending on the agreement, founders can also have the opportunity to stay with the company and see it through.