When SaaS founders win big on their exits, they have these things:
- A growing business that will be worth more next year.
- A sustainable and profitable business, so they won’t run out of cash.
- Multiple offers from buyers to choose the right offer with the best fit.
So sell your company when you don’t have to.
This seems counterintuitive, but it’s the only way to win the important acquisition game.
You will lose if you have to sell your SaaS company quickly and don’t have alternative options.
The old saying is, “You’re not negotiating unless you can say No.”
Michael McAllister is the founder and former CEO of The CE Shop, the leading provider of pre-licensing and continuing education for real estate professionals in the U.S.
Michael started The CE Shop in 2005 by distributing existing training materials from a continuing education provider.
They quickly created their own online education solution and expanded with specific content and compliance elements for each state.
The CE Shop grew steadily without outside funding for 15 years by adding partner channels, expanding to new states, and providing more content for pre-licensing new real estate agents.
The company grew to over 130 employees and expanded faster during COVID-19 when all training went online.
Michael successfully sold the company to private equity investors in 2020 for a “9-figure exit,” meaning more than $100 million.
Michael shared the key lesson for practical founders who are trying to sell their companies:
“When founders sell their companies, it’s better to do it when they hold all the cards. During our first experience with a serious potential buyer, we asked for a lot of information about their business. It was reverse due diligence since I’d be the biggest private investor in their company.
“We were two weeks before closing, and I called our banker and said, This is really frustrating that we’re asking for all this information and not getting it back. Unless we do, we may need to pull the plug on this deal.
“We held all the cards. We had a great business. We didn’t need to sell. We were completely in the driver’s seat.
“It was really difficult, but we decided to pull the plug on the deal. The biggest thing was that there was a real mismatch in core values. One of them was doing what we said we’d do. And it was a $100 million question. It was a big deal.”
Michael McAllister, founder of The CE Shop
Two years later, they sold the company to a much better partner who was a great culture fit—for much more than the previous deal.
Michael had built a great business and didn’t have to sell.
And he knew he would be the biggest private investor in the new combined company.
Check out this amazing interview with Michael McAllister on the Practical Founders Podcast.
