To justify a high acquisition multiple, a founder must prove the business can operate without them. A powerful tactic is showing an acquirer your calendar to demonstrate that a majority of key clients are managed by the team, not the founder. This de-risks the acquisition and proves the company has true enterprise value.
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Companies don't sign six-figure contracts to solve one person's frustrations. To justify a large purchase, you must anchor the sale to tangible business outcomes. Frame discovery questions around the company's goals, not just an individual champion's personal pain points.
A compressed diligence process relies heavily on projections. A superior approach is building a relationship over 1-2 years, which allows an investor to witness the company's actual execution against its stated goals, providing far greater conviction than any financial model.
Standout-CV's founder notes that his significant, ongoing involvement in the business makes potential acquirers reluctant to pay a simple multiple of MRR. Buyers discount the valuation because they must factor in the cost of hiring a replacement to handle the founder's tasks, a key consideration for solo founders planning an exit.
Before an LOI, share your high-level vision, then have the target's founders pitch back their own 6- and 12-month post-acquisition roadmap. This pre-commitment exercise reveals true alignment and integration potential far more effectively than traditional diligence, creating a joint vision early on.
Founder-led selling is essential for the first 6-12 months but becomes a critical growth bottleneck if it continues. Founders who can't let go create a self-fulfilling prophecy where the business can't scale beyond them. They must be coached to transition from being the primary seller to an enabler of the sales team.
Founders who wait until they need to sell have already failed. A successful exit requires a multi-year 'background process' of building relationships. The key is to engage with SVPs and business unit leaders at potential acquirers—the people who will champion the deal internally—not just the Corp Dev team who merely execute transactions.
When a potential acquirer calls, the founder's default mode should be information gathering, not pitching. By asking strategic questions ("Who else are you talking to?", "What are your goals?"), founders can extract valuable competitive intelligence about the market and the larger company’s plans, regardless of whether a deal happens.
A profitable business that requires the founder's constant involvement is just a high-paying job, not a valuable asset. Enterprise value, which makes a business sellable, is only created when systems and employees can generate profit independently of the founder's direct labor.
A founder's ability to sell is not proof of a scalable business. The real litmus test for repeatability is when a non-founder sales hire can close a deal from start to finish. This signals that the value proposition and process are teachable, which is the first true sign of a scalable go-to-market motion.
A key to M&A success is creating a founder-friendly environment. Avoid killing entrepreneurial spirit by forcing founders into a rigid matrix organization. Instead, maintain the structures that made them successful and accelerate them by providing resources from the parent company.
