Sharon Gillenwater is the author of a new book, Scaling With Soul: How I Built and Sold a $25 Million Tech Company Without Being an A**hole. 

Back in April 2021, I was sitting in my office with my business partner when I got a call from a private equity firm with which we’d had a few conversations the previous year. They were checking in to see if we wanted to explore selling a majority stake in our business to them.

I was running a data company called Boardroom Insiders, and we’d seen record growth in 2020. We had a mammoth pipeline that gave us confidence that we would reach $5 million ARR in 2021. We’d just hired a VP of Operations and formed a leadership team. The business was growing well, so selling was not top-of-mind.

“I am sorry to hear that,” the PE guy said. “Because we could get you a term sheet for $48 million today.”

That single, five-minute conversation changed everything. While I knew that the PE guy’s verbal offer was mostly BS, it caused me to ponder whether the timing was right to sell. Multiples for SaaS companies were at an all-time high and my partner and I knew that it was just a matter of time before there was a major correction.

I called my advisor/angel investor and told him about the PE firm and my concerns about timing. His response: “Then hire a banker and run a process. Don’t negotiate with a single buyer.” So I did. Nine months later, we sold the company for $25 million in cash to Euromoney.

The power of retrospect when you sell your business

One month after our deal closed, a brutal war was initiated by Russia, where our outsourced development team was located. Some team members fled to Istanbul.

Later in the year, tech stocks tumbled and many of our former customers — among the biggest tech companies in the world — began the first of several rounds of layoffs and budget cuts.

AI was making headlines and I thought about how I would have had to figure out how to incorporate it into our production process, had I still been running the company.

As the chaos of 2022 stretched into 2023, my former business partner called. “Aren’t you glad we sold when we did?” he asked.

“Hell yes!” I replied.

In retrospect, we realized the timing of our deal could not have been better. Had we waited another six months, it is very possible that our deal would not have happened. This is what M&A bankers mean when they say, “Time is not your friend.”

I have not always had such impeccable luck and timing.

Back in April 2000, I had another startup, which raised $3 million in venture capital from an incubator. It was the beginning of the spectacular “dot bomb” NASDAQ crash but somehow we were able to raise the funds anyway.

At the time we thought we were lucky, securing the money despite dot com companies imploding all around us. However, when that crash was deeper and more prolonged than anyone expected, the firm pulled our funding and tried to sue us for fraud to scare us into walking away from their commitment. We agreed to a settlement but it killed the company. The timing could not have been worse.

How listening plays into when to sell your business

How do you know when it’s the right time to sell?

You can’t know for sure, but paying attention to market signals and the dynamics of your customers’ industries is important.

My partner and I were worried in 2021 because SaaS company multiples were crazy high and our tech industry customers had been flying high for years. We knew all of it was going to come crashing down at some point and we wanted to orchestrate our exit before it happened.

And there were a few other things that we were worried about.

We had been struggling with our marketing funnel for several years and were beginning to wonder if we would ever figure out how to effectively generate qualified leads. Our sales were driven almost entirely by referrals and loyal customers moving from one company to another and bringing us with them. Would referrals alone sustain us in a tougher market? We weren’t sure.

But in April 2021, we were so busy running the company that weeks and months had passed without us sitting down and thinking it through. The phone call from that PE firm stopped me in my tracks and forced me and my partner to carefully consider the timing issue. We decided to go for it and sell, and it worked out beautifully.

As for the PE firm that sparked the whole thing? They declined to participate.

Maybe they saw the writing on the wall, too.

How to decide whether the timing is right to sell your business

Are you wondering whether the timing is right to sell your company?

Here are five factors to consider:

  1. Deal trends: What are the recent multiples for deals in your industry? Are they climbing or falling? Ideally, you want to get out when multiples are at an all-time high.
  2. Personal considerations: I was 57 at the time I sold my company. I didn’t want to spend my late 50s and possibly beyond steering my company through a market crash. If I were 10 years younger, my attitude might be different. Pay attention to personal considerations like family needs, retirement planning and how much longer you want to run the business.
  3. Inability to take advantage of new markets: At the time we sold, we were getting more and more customers in Europe and were considering whether we should create a FTSE data set and launch a dedicated EU sales effort. This would have taken money and expertise that we did not have. And, if I am honest, neither my partner nor I had the energy to figure this out. Selling to a British company with an existing EU infrastructure was the right thing to do for our business and our team. If you don’t have the energy, the capital or the team to take you into ripe, new markets, it might be time to sell to someone who can.
  4. Struggling to scale key functions: I already mentioned our challenges with marketing and lead generation. Although the few sales people we had were killing it, we struggled to scale our sales team and identify a repeatable process that worked.
  5. A need for more experienced, professional leadership: Recognize when you have taken the business as far as it can go without experienced functional leaders (e.g. sales, marketing, product) and a seasoned growth CEO. Selling your company and turning the reins over to a more seasoned leadership team can ensure that your company and your team continue to thrive.