How To Create An Exit Strategy | SaaS District
In this instructional video, Akeel Jabbar, investment director at Horizon Capital, explains why SaaS founders must plan an exit strategy from day one and outlines concrete steps to make their companies attractive to buyers. He begins by defining the two main types of acquirers—financial investors and strategic buyers—and their differing motivations. He then presents three foundational actions founders should start immediately: (1) develop comprehensive SOPs, documentation, and training for all business functions; (2) delegate responsibilities and reduce founder dependency by building a capable management team; and (3) ensure the right management structure is in place so day‑to‑day operations can continue without the founder. Jabbar moves on to the practicalities of preparing for a sale: gathering accurate financials, creating a pitch deck, understanding realistic valuation multiples (typically 2–3× ARR for $1M ARR companies), and articulating a clear, credible reason for selling. He advises founders to target appropriate acquirers—matching size, market, and geography—and to either reach out directly to decision‑makers or engage an M&A broker or investment banker who can position the business, craft the story, and negotiate better terms. Throughout, he emphasizes that early planning, operational rigor, and professional guidance dramatically increase the likelihood of a smooth transition and higher exit value.
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As a SaaS entrepreneur, you literally have a million things going on in your day every single day, from hiring to managing your team, making sure you have enough money in the account, and making sure the clients are happy with your work. So one thing you probably never even thought about since the day you started your business is what is my exit strategy? What am I going to do to exit my company? Now let me tell you, that is probably the biggest mistake that I see out there, not planning for your exit from day one. And that's what I'm going to talk about today and why it's super important To think about your exit strategy. Even if you never decide to exit your company and you want to keep your company forever, you still need to make sure you have an exit strategy even from day one of building your company. Hey guys, my name is Akeel Jabbar and welcome back to another video of SaaS District. I am the investment director and general partner at Horizon Capital where we invest and acquire SaaS companies doing over $500K in ARR. And today I want to talk about why you need to have an exit strategy for your SaaS company. Now a lot of you are probably thinking, look, I just started my company, or I'm in the middle of building my company, or I'm just in the process of scaling. I'm not even ready to to exit my company. I don't even want to think about it. But the truth is, if you build it from the beginning, it's going to make your life a lot easier, not only to operate efficiently and how you build your company, but it'll also make a difference when you do decide to exit on how your company looks and how easy it is to make that transition to the new owner and get the maximum value on your exit. So us as financial investors and financial acquirers, we see hundreds and hundreds of different SaaS companies every single day. Now, when we're doing an acquisition in a business, we always look at certain things that makes it easy for us to transition. It's the same with a strategic buyer. Now, just to give you a quick context on what's the difference, a financial buyer is somebody like us. So an investment firm who has some capital, who has some expertise, and we've done, you know, over maybe 8 investments or acquisitions in the last, you know, year or so. And our biggest thing is we look at businesses that we can take over, which we can operate, efficiently, easily, and continue to scale and take it to the next level. Now the strategic buyer, what they do is they're looking for a specific technology or a specific business where they can take over the clients. Maybe it's the existing client base, maybe it's the existing revenue, and they can integrate that product specifically into their product and help them grow as their business expands. So that's what a strategic investor does. And you can think of them, I mean, some of the big ones you guys know, Google, Amazon, Facebook, Facebook, these guys are doing acquisitions almost every single week. When you're thinking to actually now set up your exit strategy, I want you guys to think of 3 different things. Okay? And this is stuff you can start doing today to make your business a lot more attractive when you do go out and decide to exit. The first thing you want to do is having SOPs, processes, and training in place. Okay? Now what I mean by that is everything is not done by, you know, what he said, what she said. There's kind of different communication patterns. Uh, one person does it one way, the other person different, uh, in a different way, you need to have clear, clear practices and documentation on how you do every single, you know, how you operate every single part of your business. That can be from marketing. What do you guys do for marketing? What have you done for marketing? How do you set up your marketing program? What's being measured? And you want to have everything on record so that if somebody comes in and looks, they have everything clearly organized and they understand what's going on. Same with your sales. What's your sales process? What's your sales pitch? What's your sales data look like? What do your KPIs look like? What is your time to closing? Uh, what is your, you know, pitch kind of conversion rate look like? So all this data points you want to have stored, easy to access, and anybody can come in and take over. So you want to think about this from a buyer's perspective. They're taking that risk of, you know, buying a company with an existing team. Now, if one of these team members was to leave, right, maybe it's one of your salespeople, maybe it's one of your marketers, um, they have to now come in and think, okay, I have to retrain this person. I don't know what they were doing before and I don't know what the right person is to keep this engine going and keep the success that was what you've done so hard to build up to this point. What they want to know is that if that person does leave, that there's proper documentation, that there's proper training in place so that if, if, if I just needed to replace them and find a quick, easy replacement, that the training would be seamless and smooth and it wouldn't affect the revenue and the business of the company. Okay, so that's the first thing I would say. If you don't already have this, start building SOPs for every part of your business starting from today. I know it's something, you know, it's not fun to do, but once you start building it, I guarantee it's gonna make your life a lot easier as you scale your company. The second tip I'm gonna give you guys is don't do everything by yourself. Okay, as a founder, you think you should be doing marketing, support, sales, Hiring, firing, managing the cash, your accounting. And that's fine at the early stages, right? We all have to do that at some point. But at some point you need to think of your business not being dependent on you. Okay? People don't want to acquire a company that's so dependent where the relationships are based on the founder, where everything is managed, where they're full working, you know, 60, 70 hours a week and they're so critical to the business that if they were to leave that they wouldn't be able to operate efficiently as well. So I want you to start thinking now how you can start delegating your responsibilities. Okay? Finding people to start doing all the work that you should be doing, that they can take over most of the most important tasks. And maybe you have a manager in place who can do most of the day-to-day operations where you're all your— the only part where you should be focused on is on the oversight, making sure things are moving in the right direction, that you set the vision and you're tracking and managing the KPIs of the business on a on a weekly basis. Other than that, you shouldn't be as involved. You shouldn't be on every single sales call. You shouldn't be making every single decision and you shouldn't be on every single, uh, you know, support ticket answering. So think of ways of how you can actually do less work and be more effective with your time. You're only working on the activities that are highest, are the highest in terms of the value of your input and output. So that adds to my third point. The third point is maybe having the right management team in place. Okay, so maybe you have yourself as the CEO and maybe you may or may not have a co-founder, but you want to make sure you also have a type of management in place so that, you know, the day-to-day is taken care of by somebody who has experience, knowledge, and management skills to be able to operate a department individually. So that could be a marketing manager, that could be a sales manager, that could be a VP of sales or a marketing director, you know, HR, head of success. Now these are just different types of roles depending on the size of your business, or you might just have a general, you know, COO or operations manager who's running the day-to-day. Now that makes it a lot more attractive for another buyer because again, they're more likely— that operations manager or manager is more likely to stay involved, whereas you as a founder are looking to exit and are probably going to move on to something else. So make sure you try to build a management team under you who can delegate those bigger responsibilities to. So those are kind of 3 ways that I'd suggest to you guys to start working towards today with your SaaS company, building SOPs, making sure you're not, you know, everything's not dependent on you and hiring some type of management in place to operate and oversee day to day if you can. Now we've got it. That's what you should be doing today. Now the next step is how to actually build a plan. Let's say you've got this all set together. You're actually ready to go out there and find an acquirer. At this point, make sure you know all your numbers. Make sure you put together all your documentation, know your financials, know everything. So because acquirers are going to dig deep, they're going to find out everything. I mean, the right acquirers are going to dig into every part of your business, your financials, all the history of how your company's been operated, and they want to understand the full picture of what's going on. And make sure you have everything ready for them and easy for them to access because, you know, the more, more difficult that it is for them to understand the business, the less interesting your business becomes for them. And one tip here, guys, when you're just— before you go and decide to exit your company, I want you guys to nail down this one question is why do you want to sell your company? Okay? Because that's the first question that an acquirer is going to ask. And if you don't have the story straight, what people might think is that you're actually just trying to get rid of a problem. Maybe you're hiding something and you're looking to sell because there's actually a problem with your business and That's what most people might assume. And make sure your story is real, it's understandable, it's relatable, and it's legitimate that you have that story straight. Whatever that reason may be, you just want to move on to another project, maybe you're ready to cash out, you're tired of this business, you started a new venture, just make sure it's credible, it's real, and you can present that super easily to the acquirer. So there's a couple of ways now that you can do this. You have all this documentation, Maybe you've built a pitch deck with all your numbers, your financials, you've got all the history of your business. Obviously the hard part is understanding valuation. And that's something that you might not understand of how people are going to value your company. Don't look at the industry news of what the big guys are paying because unless you're at that size of $10 million, $100 million in ARR or what they are, don't expect to get those kind of valuations for your own company. Yeah. So talking about valuations, most people think that their company is going to get 10x ARR. I don't know where that number comes from, but every time we get approached by a seller, they're saying, I want 10x. So if they're doing $1 million in annual recurring revenue, they want $10 million for the valuation. That's not typically the case. Okay. When, if you're doing $1 million in ARR, you're probably looking at about maybe 3, maybe 2 to 3x ARR, maybe 4 if you're, if you're growing rapidly at a super fast pace. But I'll make another video about that, guys. If you're interested in that, let me know. I'll create a video on the different valuations and how they're calculated. But just to give you guys a little context on what to expect there. So now that we got that out of the way, the next point is how do we go out there and find the right acquirer? All right? So remember there's 2 different ones I talked about. Financial acquirer, the ones who have some expertise, maybe they're going to buy you out completely and maybe you have to move on. You want to move on to another project. They give you the cash and you know, somebody like us at Horizon Capital and you know, there's nothing to hold you back. With a— or if you decide to go with a strategic acquirer, know that they have very specific requirements. Okay? They might ask you to stay on board and you maybe have to commit for 1 year, 2 years, 3 years to the company until it's fully integrated and then you can move on. So just understand the value of what you're looking to do. Okay? At this point, are you looking to exit and move on or do you just want to cash out and continue working on your baby with somebody who knows your business a little bit better. So obviously the easy way, just build— just look for the right people. Look for people, for investment companies and strategic acquirers, and reach out to them directly. Okay? Who are the CEOs? Who are the decision makers? Who are the general partners and investment directors at these firms? And look for these companies who are looking to make these acquisitions and make sure you don't reach out to any company. Look, they're targeted. If you're a SaaS company, look for investors in SaaS or acquirers and other SaaS companies. The revenue is within the range of what they're investing in. If you're not in the right range, you're just going to be wasting your time. Are you in the same location of what they're looking to invest in? Are you in the right market or industry of what they're looking to invest in? Do some research, check out their website, understand their— what their investment profile is, and then look to reach out directly to them and say, hey, I've got this business for sale, let's have a conversation and see if we're on the same page. The second option is, look, if you're busy running your business And you know, just like with a house, when you look to sell your house, you can go and try and sell it and try to learn how to sell real estate. But the truth is you're probably going to hire a broker because a broker does this every single day of their lives. This is what they eat, live, and breathe on a daily basis. And they know how to present it properly. They know how to fix things. They know how to get the right value and maximize the price based on the market valuation. So same thing with your business. If you're not going to do it by yourself, and I highly suggest this, is actually work with a broker or an M&A consultant or investment banker as they are for bigger companies, because they're going to know how to position your company. They're going to know how to craft a proper story for you. They're going to make sure you're prepared. They're going to ask all the right questions. They're going to dig deep so that by the time you've got the pitch deck together, you've got the investment memorandum or the teaser ready to present to the buyer. You have everything ready. And they're ready to make an offer a lot quicker. And if you have the— if you hire the right person, if you hire the right consultant, they're going to get you a lot higher value than what you pay them. Okay? And that's, that's, that's the point of any broker, right? Is that if you go and sell it and you think you can get $1 million by yourself by selling your company, they should be able to get you, you know, $1.5 or $2 million because they've done their job properly in setting up your business in terms of maximizing how the value of your business looks and how the perception is to the potential buyer. They help you in the negotiations, they help you in making sure you get the right offer, and it'll get you targeted in front of the right people at the right time. So there you have it, guys. Hope you guys enjoyed this video. Like I said, super, super important, have an exit plan, exit strategy from day one. Start out working on it today and let me know what you guys think. If you guys enjoyed this video, obviously like this video, subscribe below and comment below. What have you done to plan for your exit? What kind of company do you operate? And what systems and processes do you have in place, or what have you done in the last couple of weeks to actually build your company for the right exit? All right, thanks guys for watching, and I'll see you guys on the next video.
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