6 Reasons Every Entrepreneur Needs an Exit Plan Strategy

If you're an entrepreneur with a business generating solid profits, you’re probably not thinking about your future exit plan just yet. But unexpected life shifts, market conditions, and the fast-changing nature of their goals lead many SaaS founders to conclude that it’s time to sell their companies and make a strategic exit earlier than they’d initially planned. 

That’s why an exit strategy for entrepreneurs is so valuable; the quicker you’re able to pivot as a founder, the better your outcomes are likely to be. Whether you’ve already set a goal of making a bootstrapped SaaS exit or your current focus is more tailored toward business growth, coming up with a smart business exit strategy ahead of time often leads to a greater payoff down the road. 

Let’s explore six primary reasons why business founders choose to make an exit earlier than planned. 

Table of Contents

1. 6 common reasons business founders make an early exit
   
   1. Life happens: Planning for the unexpected
   2. Burnout is real (and harder to bounce back from)
   3. When you hit your expertise limit
   4. Navigating co-founder conflict
   5. New passions and opportunities
   6. Strategic buyouts aren’t always what you expect
2. ‍Final Thoughts: Why planning early pays off

6 common reasons business founders make an early exit

‍1. Life happens: Planning for the unexpected

As the years go by, your life will inevitably change. Getting married, having kids, or caring for aging parents are just a few examples of things that might alter your ability or desire to continue being a business owner.

This is especially true for solo founders. Without a partner to step in and shoulder some of the workload, there isn’t anyone else there to prioritize the business when you’re not available. Selling before profits decline may suddenly become an appealing option if your other choice is to close up shop. 

Today, solo founders are often required to live a highly flexible lifestyle, one where they can change their schedule or relocate at a moment’s notice. For many people, this lifestyle just isn’t conducive to raising a family or taking care of a loved one. 

As well, life changes may lead you to the point where it’s time to remove some risk from the equation. Check out our interview with Mailparser and Docparser Founder, Moritz Dausinger for more on why he decided to sell one of his businesses in 2016, and then the other in 2018.

Quick Tips: How to prepare your operations for autonomy now

• Find out how long your business can run autonomously before there are issues. Is it a day? A week? A month? Some businesses may not take much maintenance, while others require constant attention.
  
• The length of time that your business runs autonomously is probably dependent on the type of work, so you’ll need to make a list of which tasks are critical. For example, you may be able to get away without doing your accounting for a month, whereas going a few days without shipping or customer service would put you out of business.
  
• Come up with a backup plan for your critical functions. Find out if there’s a service or person you could hire temporarily. You can also try testing things out on a short vacation to see the strengths and limitations of your plan.
  
• Educate yourself on how to value your business and how to recognize situations that might impact valuation.
  

2. Burnout is real (and harder to bounce back from)

It happens to the best of us. In fact, 54% of founders admitted to experiencing burnout just last year. It’s a common story. You work 60+ hours a week for years, too busy to optimize or hire help, until you finally hit a breaking point. Still, burnout is nothing to be ashamed of, especially for solo founders.

Although research suggests that entrepreneurs are better protected from burnout than their salaried peers, it remains a reality for anyone working the long and demanding hours of a founder. When you’ve skipped the typical 9-5 grind to run a remote team spread across the globe, you face the constant pull to work outside regular business hours – a habit that often leads to burnout.

And unfortunately, curing burnout isn’t always as simple as taking a vacation, especially if you have no choice but to take work with you.

Quick Tips: Track your time and energy to spot burnout risks

• First, make sure that you’re spending your time effectively. Use a time log to track your hours and make an honest assessment of which tasks are really moving your business forward.
  
• If you’ve already optimized your time management and you’re still slammed, decide on a reasonable Monthly Recurring Revenue (MRR) figure that will allow you to hire part- or full-time help. Many startup founders will tell you they waited too long to make their first hire.
  
• Examine which tasks are critical to your business, which ones you spend the most time on, and which you don’t feel especially passionate about. If a task fits in all three of those categories, it’s a no-brainer to hire it out as soon as you hit that MRR goal.
  
• When you’re ready to hire, spend time writing up a job description that includes info about your company’s mission and how the position contributes to the success of the business. Be as specific as possible about the skills and personality traits you’re looking for. Planning for your first hire can also be a great motivator to hit your revenue goals.

If you’ve been in business for more than 5 years, and you’re still working crazy hours without getting close to the MRR numbers that would allow for hired help, it might be time to think about whether you fall into the next category.

4. When you hit your expertise limit

As a business grows, it’s natural to find that the skill set needed to make it successful evolves, too. Early-stage founders often thrive in the scrappy, hands-on environment of building a product and finding product-market fit. But as the company matures, new demands emerge, like scaling infrastructure, managing larger teams, optimizing operations, or navigating complex financial decisions.

A common example of this shift is when bootstrapped SaaS entrepreneurs, who excelled at launching and growing a product from the ground up, begin to face scaling and performance challenges that require specialized technical, managerial, or strategic expertise. These challenges often highlight the gap between the founder’s strengths and what the business now needs to keep growing effectively.

Quick Tips: Self-Audit: Are you the right person for the next growth stage?

This can be a tricky one, and it requires a good deal of self awareness. Start by taking an inventory of what you’re best at, and what you love to do.

Next, write down the skills needed at your business to maximize growth.

If the two lists don’t overlap, you’ve probably hit an expertise limit, and it’s a good time to consider your options. In some cases, you might be able to bring in a partner, or simply hire for the skills you need. In other cases, selling may make more sense.

4. Navigating co-founder conflict

Whether it’s a disagreement over equity share, strategy, or the future of the company, co-founder disagreements happen, even in the most successful businesses. The stressors of running a lean startup can lead founders to make decisions under pressure, intensify conflicts, and strain even the strongest partnerships, sometimes pushing co-founders toward irreconcilable differences.

Plus, the rise of remote-first companies during the pandemic has made managing a startup even more difficult by adding the challenges that come with limited face-to-face interaction. The added stress from constrained business communication can pile on for founders, especially when they have less experience managing remote collaboration. 

Avoid some of the common causes of co-founder conflict by taking these actions early on: 

• Sign an agreement with a vesting schedule prior to starting your venture. 
• Outline everyone's roles and responsibilities at the outset.
• Decide ahead of time what happens to equity split when goals aren't met or the work load shifts.

While co-founder buyout is theoretically an option, depending on your business size and finances, it may not be practical or even feasible for one of you to buy the other’s share. If things get so bad that they’re affecting business performance, selling might make more sense than toughing it out.

Quick Tips: Pre-plan founder agreements, even for small teams

• If you’re considering a partnership, start by making sure that you and your potential partner have some common ground, because business always has a way of getting personal.
  
• Do as much pre-planning for as many scenarios as you can before formalizing any business agreement. A handshake deal might seem appealing for its simplicity, but talking about possible areas of disagreement when a relationship is in a good place makes it much easier to navigate conflict later down the road.
  
• Put it in writing. Especially in situations that involve money, it’s well worth the cost to hire a lawyer and draw up the appropriate documentation. If you hit it big, you want to celebrate with your partner, not spend your time haggling over shares, vesting, and equity.
  
• If you’re experiencing conflict with a co-founder, never avoid it in hopes it will go away. Prioritize co-founder conflict resolution by resolving to work through your issues productively. If things get really bad, consider hiring an executive coach to facilitate conversation and help develop a framework for problem resolution.

5. New passions and opportunities

In the words of Richard Branson, “Business opportunities are like buses – there’s always another one coming.” In other words, once an entrepreneur, always an entrepreneur. If you’re holding onto your current venture out of fear that you may not achieve success with your next undertaking, it may be helpful to remind yourself that success isn’t limited to a single venture, and many entrepreneurs find greater fulfillment and growth in their next chapter after making the tough decision to move on.

If you’re like most founders, you have a running list of projects you’d like to start, and there’s no shame in preferring one part of the process over another. Being a successful entrepreneur might mean wearing a suit every day and managing a team of 100+ employees to some, but for many of the bootstrapped SaaS founders we’ve spoken with, that sounds more like a worst-case scenario. Selling a business allows them to get back to the part of entrepreneurship they’re truly passionate about – bringing new ideas to life with a small team or as a solo founder.

In fact, we’ve had multiple founders sell to SureSwift for this exact reason, including the founders of MeetEdgar and ChargeStripe. These founders built their companies to a certain stage, then felt a shift in interest and decided to channel their time and energy toward new ventures. Selling to SureSwift gave them the freedom to pursue those projects, while knowing their established business, customers, and teams were in good hands.

Quick Tips: Track which elements of business-building truly energize you

Starting a business doesn’t need to be a lifetime commitment, and for the vast majority of founders it won’t be. Go ahead and keep a list of other projects you’d like to start, and take some time to reflect on your personal goals for your current company.

As you work on your business, keep tabs on which stages spark your passion:

• Do you love bootstrapping an idea and getting it off the ground?
• Do you get a kick out of making that first hire and knowing the business is bigger than just you?
• Do you dream of managing a big team across many locations?

If your business outgrows the stage you like best, or you simply feel boredom setting in, it might be time to sell it to someone with the skills and passion to take it to the next level, so you can move on to something new.

6. Strategic buyouts aren’t always what you expect

This last reason isn’t necessarily unplanned like the others on our list. But since a buyout by a bigger competitor is what a lot of founders dream of when they start a business, we thought we’d address it here.

Buyouts by bigger competitors aren’t as common as you’d imagine. This is because the cost and complexity of acquiring a business with the same knowledge, services, or skills doesn’t usually pencil out compared to organic growth. In reality, acquisition offers are more likely to come from businesses that offer an adjacent or complementary service or product, or from private equity companies, like SureSwift, with a business model based on acquiring businesses within a specific sector.

Quick Tips: Set yourself up for exit planning success

• Keep meticulous financial records of your cash flow, profits, losses, annual growth, and MRR. If an acquisition opportunity from a strategic buyer arises, you’ll be well prepared.
  
• Network with founders of companies with a complementary or adjacent product or service, so you can target opportunities to co-promote your offerings. Even if they never make an offer, both of your bottom lines may benefit.
  
• Research whether there are any companies that acquire businesses like yours. For example, at SureSwift, we focus on online businesses, acquiring B2B SaaS companies and subscription-based services.
  
• There may be private equity firms that specialize in acquiring businesses within your industry. Find out who they are and what they look for in an acquisition. Then, take the time to reach out once you’re generating profit and considering a sale in the next one to two years.
  
• If you’re serious about selling and the above notes aren’t options for you, consider talking to a business broker.

‍Final Thoughts: Why planning early pays off

Whatever your present circumstances, make sure your business is ready for change. Because whether it arrives tomorrow, or 5 years from now, you can be sure of one thing — it will arrive.

If you want your business to make a successful transition between hands, it’s wise to start building a comprehensive exit strategy before you’re ready to make an exit. By planning early, you have a better shot at choosing the best next steps for your business, whether that means strategic acquisition, internal succession, or a third-party sale.

Even if you aren’t considering selling your business today, having a good exit strategy provides you with the strategic optionality and resilience that can lead to a dream exit. If one of the situations we’ve outlined here applies to you, talking to other small business owners, a broker, or a prospective buyer can also help you understand the sales process and address any concerns.

At SureSwift, we’ve been acquiring SaaS businesses from independent founders since 2015. Though others make their profits by buying and flipping their acquisitions, we look for profitable software businesses that we can scale over the long-term.

Whether you’re ready to sell or not, we’re always interested in building relationships with passionate founders of great businesses. And if you run a B2B SaaS business with a minimum of 1 million in annual recurring revenue and you’re starting to think about making an exit, we’d love to meet you. Reach out to us here to get the conversation started.