7 Steps to Prepare Your Software Business for an Exit

Exiting your business is one of the most pivotal decisions an owner can make. It’s not just about selling—it’s about setting clear priorities and preparing thoroughly for the next chapter. This process can be overwhelming and emotionally challenging, especially when combined with the daily demands of running a business.

Goal Prioritization

At Perseus, we asked our Portfolio Presidents, “what advice would you give an owner who is thinking about selling?”, and President Steve Latham replied with,  

Be clear about your priorities as an owner making an exit, and communicate those to potential buyers. There’s no one right answer, but knowing what matters most to you can guide you to a partner who aligns with your vision.

Select your Exit Strategy

There are several exit strategies to choose from; each with unique benefits and drawbacks. Having a succession plan shows buyers that the business can continue to operate smoothly after your departure.  

Strategic Timing of an Exit

This is easier said than done, however, choosing the right time to exit can maximize the sale price and make the process smoother. Ideally, plan your exit when the business is performing well, and market conditions are favorable.

Valuation

Understand what your business is worth in the current market and what steps can boost its value. For example, cleaning up financial records or increasing recurring revenue can make the business more appealing and increase the offer price.

Optimization and Streamlining

The book Built to Sell by John Warrillow encourages owners to think like an investor. Buyers will scrutinize your financials, so presenting clean, consistent figures is crucial.

• Financials: Ensure financial statements are accurate, organized, and easily understandable. Potential buyers want clear insights into your revenue streams, expenses, and profit margins.

Due Diligence

Buyers will conduct an in-depth examination of your business, so be prepared. Due diligence readiness involves:

• Legal and Compliance Readiness: Ensure all legal documents, contracts, and compliance records are up-to-date and make adjustments if necessary.

• Tax Planning: Tax planning is essential for both the business and your personal financials. A well-thought-out tax strategy can prevent unexpected liabilities and help you retain more of the sale proceeds.

Communication Strategy

Communication planning is essential, both internally and externally. Internally, you may want to inform key stakeholders at a strategic moment in the sale process. Externally, determine when and how to announce the sale to avoid unnecessary disruption.

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A smooth handover is easier if you’ve planned for it. Perseus Portfolio President Adam Zimmer, who has experience as a seller himself, shares,  

One of the biggest challenges I faced when selling my business was managing to keep the business going during the sales process. It is almost like having two jobs: one running the business, the other selling it.

We understand that time and resources are a limiting factor in preparing a business for an exit. However, failing to prepare can mean preparing to fail – or at least can significantly delay your ideal exit timeline. Buyers will be assessing several areas, and by taking proactive steps, you can present your business in the best light possible.

Plan in advance and talk to us early! A well-prepared exit process takes time, so start planning sooner rather than later. Engaging buyers early on can help you make informed decisions, align your goals with market conditions, and ultimately achieve a successful transition. Reach out to our team of M&A experts today.