CEOs face the question, should I sell or double down?
As a software company CEO, how do I evaluate whether to raise more money or sell the company?
To help you address this critical decision, we asked experienced entrepreneurs and business leaders for their insights. From analyzing the competitive landscape to having a well-thought-out game plan, there are several considerations and ways to evaluate whether to raise more money or sell your software company.
Here are six topics to evaluate whether to raise more money or sell the business, with each leader’s thoughts below:
Analyze Competitive Landscape
Weight How Much Risk There is
Use Growth, Debt, and Market Demand as Indicators
How Will This Affect Employees
Take Mindset into Consideration
Have a Well-thought-out Game Plan
Analyze the Competitive Landscape
The decision between raising capital or selling a company boils down to its market potential. If the venture is far from achieving its potential market share, infusing money into it can yield returns that beat the market. On the contrary, having achieved maturity and reached saturation point, selling might be a better option. Especially if the buyer offers a price higher than market value because of perceived merger/acquisition synergies.
Michael Sena, SENACEA
Weight How Much Risk There is
If you're a software company CEO, the best way to evaluate whether to raise more money for your business or just sell the company is to weigh how much risk there is for the future. One study from Bloomberg says, 80 percent of small businesses fail within the first 18 months of operation. Consumer trends can change, the tax burden has become overwhelming, or the competition is too much to handle. If you can see growing concerns and high risk low reward situations, it might be time to find a buyer and sell the company. However, if you feel you have great ideas and future potential for your business to continue to grow and bring in revenue, you should always try to raise more money to get moving. Always listen to your gut and ask others close to you for advice!
James Burati, 1-800-PackRat
Use Growth, Debt, and Market Demand as Indicators
There are a few key indicators that will help you determine whether to raise more money or sell the company. First, you need to assess the health of the business. Is the company growing and profitable? If so, then you may be able to raise more money to fuel more growth. If the company is not growing or is unprofitable, then selling the company may be the best option. The same is true if the company has too much debt or the market for your product or services seems to be dwindling.
Matthew Ramirez, Paraphrase
How Will This Affect Employees
It’s important to remember – finances shouldn’t be the only part of your evaluation. By selling a company, you might put the current employees’ jobs in your SaaS company in a state of uncertainty, so it’s often good to evaluate whether they’ll have security in their roles under the new buyer.
There’s also a personal decision to make: does owning the company give you personal value in your life? If you love your company and the role you have with it, sometimes it’s worth the fight to raise more capital.
Dan Bladen, Kadence
Take Mindset into Consideration
The differentiator for the raise versus sale mentality comes down to long-term planning and confidence. If you are committed to building and have all but achieved the level of your desired success, there isn't much left to obtain so weyou often see founders exit.
Looking long term and planning on iterations that build on vision with purpose paired with energy and belief will be almost infectious to those around you. That's when it's time to take inventory and think about raising capital to reach that next level.
Adam Griggs, CLARAfi
Have a Well-thought-out Game Plan
Be clear about the numbers involved before deciding to sell the company impulsively. For instance, if you want to start another company afterward, you should be sure that you have the right amount of funds to do so. No matter what, have a well-thought-out game plan.
Drew Sherman, Carvaygo
Want to talk about your options?
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