exiting-company · diff

v1.0.0 to v1.1.0

143 added, 120 removed. Audit A to A.

---

name: exiting-company

description: >-

- Prepare a SaaS company for acquisition or exit — valuation drivers, due

- diligence readiness, financial preparation, legal structuring, and exit

- timeline. Use when planning an exit, preparing for acquisition, or maximizing

- company value for a future sale. Triggers on: "exit strategy", "sell company",

- "acquisition prep", "M&A", "due diligence", "company valuation", "exit

- planning", or any request about selling a business.

+ Prepare a SaaS company for acquisition or exit — valuation drivers by buyer

+ type (strategic, PE, bootstrap), due diligence readiness, EBITDA vs ARR

+ multiples, and 12–24 month exit timeline. Use when planning an exit, preparing

+ for acquisition, or maximizing company value for a future sale. Triggers on:

+ "exit strategy", "sell company", "acquisition prep", "M&A", "due diligence",

+ "company valuation", "exit planning", "PE acquisition", "bootstrap exit".

license: MIT

compatibility: Claude Code, Cursor, Codex, Hermes, Windsurf, OpenCode, Gemini CLI, Copilot, Zed, VS Code, Goose

metadata:

- version: "1.0.0"

+ version: "1.1.0"

author: LeadMagic

category: founder-led

- tags: [exit, acquisition, m-and-a, valuation, due-diligence]

- related_skills: [saas-metrics-calculator, building-saas, soc2-compliance, investor-updates]

- frameworks: [SaaS Valuation Multiples, David Skok Unit Economics, KeyBanc SaaS Survey]

+ tags: [exit, acquisition, m-and-a, valuation, due-diligence, pe, bootstrap-exit]

+ related_skills:

+ - saas-outcomes

+ - saas-metrics-calculator

+ - financial-modeling

+ - fundraising-strategy

+ - equity-management

+ - soc2-compliance

+ - investor-updates

+ frameworks:

+ - "David Skok — Unit economics and diligence metrics"

+ - "Jason Lemkin (SaaStr) — Growth efficiency, burn multiple, acquisition operator lens"

+ - "Nathan Latka (GetLatka) — Bootstrap M&A under $10M ARR"

+ - "Ben Murray (The SaaS CFO) — EBITDA bridge for PE buyers"

+ - "KeyBanc SaaS Survey — Private ARR multiples"

+ - "Eunice Buhler — Legal GTM handoff for deal terms (not legal advice in-skill)"

---

# Exiting a Company

## Overview

- Companies are bought, not sold. The best exits happen when a strategic acquirer

- identifies you as the solution to their problem — not when you decide to sell.

- This skill covers preparation: the valuation drivers that matter, the due

- diligence package that speeds deals, and the 12-24 month runway most exits

- require.

- ## Frameworks Referenced

- This skill is grounded in public frameworks and source material relevant to the task:

+ 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.

- - **SaaS Valuation Multiples.** Use the relevant method or published guidance where it improves the requested deliverable; do not cite it as decoration.

- - **David Skok Unit Economics.** Use the relevant method or published guidance where it improves the requested deliverable; do not cite it as decoration.

- - **KeyBanc SaaS Survey.** Use the relevant method or published guidance where it improves the requested deliverable; do not cite it as decoration.

+ **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?"

+ - "What's my company worth to PE vs strategic?"

- "Build an exit strategy"

- "Prepare for due diligence"

- "Maximize acquisition value"

- - "Sell my SaaS business"

+ - "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 1: Valuation Drivers

+ ### Phase 0: Exit Optionality Gate

- SaaS companies are valued on revenue multiples. The multiple depends on:

+ Score whether exit is realistic vs distraction before M&A prep. Load

+ `saas-outcomes/references/exit-potential-scorecard.md`:

- **Growth rate:** Primary driver. 100%+ YoY commands premium. <20% YoY is a

- distress signal. Rule of 40 (growth rate + profit margin > 40%) is the

- standard filter.

+ - **<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

- **Scale:** ARR thresholds matter. $1M ARR: acqui-hire territory. $5M ARR:

- strategic interest begins. $10M ARR: serious acquisition conversations.

- $20M+ ARR: IPO-track or premium acquisition.

+ ### Phase 1: Valuation Drivers by Buyer Type

- **Efficiency:** CAC payback under 12 months. LTV:CAC above 3:1. Gross margin

- above 70%. NRR above 100% (enterprise expects 120%+).

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

- **Moat:** Proprietary data, network effects, switching costs. "Better features"

- is not a moat — anyone can build features.

+ | 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 |

- **Team:** Can the business run without the founder? If the answer is no, the

- acquirer is buying a job, not a company.

+ **Scale thresholds (planning):** $1M ARR acqui-hire possible; $5M strategic

+ interest; $10M+ serious conversations; $20M+ banker-led if inbound.

- ### Phase 2: Due Diligence Package

+ **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`.

- Prepare before anyone asks. Acquirers will request:

+ ### Phase 2: Due Diligence Package

- **Financial:**

- - 3 years of P&L, balance sheet, cash flow

- - Revenue by customer, cohort retention, churn data

- - CAC by channel, LTV by cohort

- - All contracts, especially enterprise agreements with change-of-control clauses

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

- **Legal:**

- - Cap table (clean, no disputes)

- - IP assignment from all employees and contractors (critical — missing IP

- assignment kills deals)

- - Commercial contracts (customer, vendor, partner)

- - Any litigation, past or pending

- - Data processing agreements and privacy compliance

+ **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

- **Technical:**

- - Architecture documentation

- - SOC2 report (or equivalent security documentation)

- - IP inventory (code, patents, trademarks)

- - Third-party dependency inventory

- - Disaster recovery and business continuity plans

+ ### Phase 3: 12–24 Month Runway

- **Commercial:**

- - Customer concentration (no single customer >15-20% of revenue)

- - Channel mix and CAC by channel

- - Sales playbook and documented processes

- - Market analysis and competitive positioning

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

- ### Phase 3: The 12-24 Month Runway

+ | 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) |

- Exits don't happen on your timeline. Start preparing 12-24 months before you

- want to exit:

+ ### Phase 4: Exit Options

- **Months 1-6:** Clean up. Fix cap table issues. Get IP assignments from everyone.

- Resolve any customer disputes. Get financials audit-ready.

+ | 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 |

- **Months 7-12:** Build relationships. Strategic acquirers don't buy strangers.

- Attend industry events. Build partnership relationships. Let potential acquirers

- see your momentum over time.

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

- **Months 13-18:** Market signals. Strong growth, industry recognition, strategic

- partnerships. This is when inbound interest typically starts.

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

- **Months 19-24:** Negotiation and close. Due diligence takes 60-90 days. Legal

- takes 30-60 days. Expect 4-6 months from term sheet to close.

+ When LOI includes earn-out, seller note, or rollover — **model cash at close first**,

+ not headline EV. Load `references/negotiating-earn-out.md`:

- ### Phase 4: Exit Options

+ | 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 |

- **Strategic Acquisition (most common SaaS exit):**

- A larger company buys you for your product, team, customers, or market position.

- Valuation: 5-15x ARR depending on growth rate and strategic fit. Timeline:

- 6-12 months from serious conversation to close.

+ **Negotiation artifacts:** `templates/earn-out-term-sheet-review.md` (worksheet),

+ `templates/valuation-sensitivity-table.md` (hold vs sell + deferred scenarios).

- **Private Equity Acquisition:**

- PE firm buys majority stake. You may stay on as CEO or transition. Valuation:

- 3-8x ARR. PE needs: $2M+ EBITDA or clear path to it, growing ARR, sticky

- revenue. Timeline: 4-8 months.

+ **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

- **Acqui-Hire:**

- Company buys you primarily for the team. Valuation: $1-3M per engineer.

- Relevant at <$2M ARR. Timeline: 2-4 months.

+ **Legal handoff:** Contract language → M&A counsel. Commercial velocity →

+ `deal-desk/references/legal-gtm-playbook.md` (Pattern 29). **Not legal advice in this skill.**

- **IPO (rare for most SaaS):**

- $100M+ ARR, predictable growth, public-company-ready financials and governance.

- Timeline: 12-18 months from decision to listing.

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

## Output Format

- Exit readiness assessment with: valuation estimate (ARR multiple range), due

- diligence checklist with gaps identified, 24-month preparation timeline, and

- exit option recommendation.

+ Exit readiness assessment with: buyer-type fit, valuation range (low/base/high

+ with method named), diligence gaps, 24-month timeline, scorecard summary.

## Quality Check

- Before delivering, verify:

- - [ ] All required sections are complete

- - [ ] Output matches the user's stated need

- - [ ] Named frameworks are cited for key recommendations

- - [ ] No vague claims — every recommendation has a specific action

- - [ ] Deliverable is ready for operational use, not just conceptual

+ - [ ] 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.** A contractor who built core IP without signing

- an assignment agreement can kill a deal. Fix this now.

- 2. **Customer concentration.** One customer at 30% of revenue makes the

- business un-acquirable. Diversify before you need to sell.

+ 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.

- 3. **Founder dependency.** If every deal requires you, the acquirer is buying

- a key-person risk. Build a team that operates without you.

+ ## Execution Artifacts

- 4. **Waiting too long to prepare.** Due diligence exposes everything. The time

- to fix problems is 12 months before the process starts, not during it.

+ - `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

+ - `references/framework-notes.md` — named frameworks and agent routing

+ - `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

+ - `templates/output-template.md` — deliverable shell

+ - `scripts/check-output.py` — lightweight validator

- 5. **Shopping the company.** Telling the market "we're for sale" signals

- weakness. Inbound interest from relationships beats outbound pitches.

+ **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, financial advice, insurance advice, or professional services advice.

- Consult qualified professionals for your specific situation — attorneys for legal/equity matters, CPAs for tax and accounting, licensed brokers for insurance, and certified security assessors for compliance. This skill does not create a professional-client relationship. Use it as a starting point for research and preparation.

- ## Related Skills

+ 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.

- - **saas-metrics-calculator**: Valuation inputs and benchmarks

- - **soc2-compliance**: Compliance as acquisition readiness

- - **investor-updates**: Clean investor communication

- - **building-saas**: Building what acquirers want

+ 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.