Selling a Business While You’re Winning 

Mastering the Mechanics of Exit Timing  

Timing isn’t everything in M&A, but it certainly can make a difference to the success of a deal.  

One of the most crucial aspects I see in my investment banking work is the importance of selling on the way up. Ideally, you approach the market once your company is well established but still growing and scaling. Demonstrating that you’re on the right trajectory—and then backing up that impression with month-over-month performance throughout the deal process—will be critical to your outcome. 

Below, I expand on the business readiness section from Class VI’s new report Is It Time? A Business Owner’s Guide to M&A Readiness with a goal of illuminating the growth side of the transaction-timing equation.  

Why buyers consider future performance 

When it comes to M&A, buyers care about where you’re going, not where you’ve been. In other words, they reward anticipated future performance (what they believe the company is capable of going forward), not trailing results. Specifically, valuations are typically a bet on the next 3–5 years of cash flow because the new ownership wants to make a return on investment in a reasonable timeframe (although there are other considerations like strategic advantage that can affect the picture). 

The story you tell about your company’s expected growth trajectory directly affects what buyers will be willing to pay for it. Historical performance matters primarily as evidence for the narrative.  

That’s why businesses with a flat or mature revenue base tend to sell at the lower end of the multiple spectrum for their industry and size (if they sell at all). Buyers naturally assume that a plateau or decline will continue. On the other hand, companies that are scaling at a rapid clip can receive premium valuations, especially in a competitive process.  

Companies we consider to be in an optimal position for sale are often in an early maturity stage, with proven financials and operations but meaningful market share left to be captured.  

How a growth story gets stress tested 

When offering the company for sale, you will present your growth story in the confidential information memorandum, or CIM, which launches the M&A bidding process. In that document, you’ll back up your story with analyses of recent financials, but the job is not done when you lay out this hypothesis. You must keep walking the walk. 

Throughout the bidding process, through due diligence, and all the way to closing, your potential buyer will keep an eye on performance, including factors like: 

• Month-over-month revenue and margin trends 
• Customer retention 
• Pipeline and backlog quality and quantity 
• Growth rate projections from the CIM compared to what’s actually happening 

Every data point either reinforces the growth narrative you shared (which was used to justify the buyer’s initial offer) or creates a question that buyers didn’t have before. New questions erode confidence and lengthen due diligence, making the deal less likely to close because each question tends to invite more in a Pandora’s Box-style explosion of uncertainty.  

The danger of a single soft month  

It’s important to recognize that a buyer won’t necessarily need proof of an ongoing trend to renegotiate. One missed monthly projection often injects enough risk to justify revisiting price or restructuring a deal to add holdback protection (i.e., keeping back some of your earnings to be paid out after closing). It may seem unfair, but buyers tend to reward gradual growth incrementally but punish deceleration instantly. 

A true weakening trend that extends more than a month could prompt the buyer to walk away entirely. Most buyers have a risk threshold beyond which they won’t continue to pour money and effort into a process. 

Bottom line: the best way to protect your deal and avoid continuous rewriting of the terms is to meet performance expectations. Every. Single. Month. 

How to self-assess your growth position 

I want you to exercise care in picking the moment you will go to market, but all is not doom and gloom. Your company may be well prepared to take on the rigors of due diligence. As a status check, I recommend reading Is It Time? and working through the business readiness checklist on page 7.  

You can also stress-test your own numbers the way a buyer will by identifying two or more consecutive quarters of stable or improving growth and at least 12 months of defensible positive projections. If you find a plateau or volatility, you may want to back off from a market debut now to get your growth back on track. 

Sell on the way up 

Selling your business while you’re on an upswing means a greater chance of achieving a successful transaction at a life-changing valuation. Sustaining growth at this defining moment will require discipline, so work with your team now on forecasting accuracy and performance follow-through; it’s time and effort well invested. 

Just as importantly, lean on your M&A advisor as you assess your readiness and prepare for the ups and downs of due diligence. This can be one of the rougher patches of the entrepreneurial journey, so you need a team you trust by your side for guidance and perspective. They can help you develop a growth story that will hold up to the test, as well as take on the bulk of the M&A-related tasks so you can focus on the business. Those two factors alone can make a critical difference in realizing the deal you deserve.