Every founder eventually has a version of the same conversation. The market is moving. Valuations feel right — or at least, they feel like they could get worse. Inbound acquisition inquiries increase. And suddenly, a transaction that felt theoretical becomes very real, very fast.
The instinct, at this point, is understandable: get to market while conditions are favorable. But there’s a version of this instinct that is actively dangerous, and it’s one I see play out regularly in the data, insights, and analytics sector. It’s the decision to go to market, not when the business is ready, but when the moment feels opportune. To accelerate growth in the quarters before a process, paper over operational gaps with narrative, and hope that buyers are focused enough on the top line to not look too hard at what’s underneath.
The issue is that buyers always look at what’s underneath. And what they find almost always changes the deal.
Why Companies Go to Market Too Soon
There is a structural pressure in PE-backed and founder-led businesses toward premature sale processes. Investors have fund cycles. Founders have fatigue. Markets have windows. These forces are real, and they create a persistent temptation to treat the transaction as the destination rather than the outcome of a business that is genuinely ready to be sold.
The growth-at-all-costs mentality compounds this. Companies that have been chasing revenue growth without corresponding improvements in margin, infrastructure, and customer quality are particularly vulnerable to the timing trap. The revenue line may look impressive. But buyers underwrite EBITDA, not revenue. They pay for recurring, predictable, growing cash flows attached to a defensible market position. And when the top line is growing faster than the business can sustainably support, the quality of that revenue tends to be poor — high churn, concentrated customers, thin margins, and a sales motion that has been running ahead of delivery capacity.
Going to market in this condition doesn’t just produce a lower valuation. It often produces a failed process: an LOI that gets revised downward after quality of earnings, a deal that falls apart in diligence, or a closing that happens on terms the seller wishes they’d never agreed to.
What Buyers Are Actually Underwriting
To understand the M&A timing problem, it’s worth being precise about what sophisticated buyers are actually paying for. The answer is not the trailing twelve months of revenue or EBITDA. It’s confidence in the forward cash flow stream.
That confidence is built on a set of questions that diligence is designed to answer. Is the customer base diversified, or is revenue concentrated in a handful of relationships that could churn? Is the growth the company has shown in recent years the result of genuine competitive differentiation, or was it driven by market tailwinds that have since moderated? Are the margins sustainable, or have they been artificially improved in the run-up to a process? Is the team capable of continuing to perform under new ownership, or has the business been built around a founder who is walking out the door at close?
Companies that have been growing at all costs tend to have weak answers to at least several of these questions. They’ve burned through goodwill with early customers to chase new logos. They’ve optimized the P&L for the pitch by cutting costs that were actually load-bearing. They’ve promoted salespeople ahead of the infrastructure required to deliver what was sold. The business looks fast-moving on the surface and fragile underneath — and buyers, particularly PE buyers with experienced operating partners, are very good at finding the fragility.
Buyers don’t pay for revenue. They pay for confidence in the forward cash flow — and that confidence is earned long before the process begins.
The Pre-M&A Optimization Window
The good news is that most of these problems are solvable. The bad news is that they take time to solve — typically 12 to 24 months — which means the work has to start well before anyone is thinking seriously about a transaction.
The companies that achieve the best outcomes in M&A processes are almost never the ones that went to market at the moment that felt most convenient. They’re the ones that took a deliberate look at the business 18 to 24 months out, identified the gaps between where they were and where they needed to be to command a premium valuation, and systematically closed those gaps before putting a CIM in front of buyers.
That work looks different depending on the business, but the most common areas of focus cluster around a few themes. Revenue quality is almost always on the list — reducing customer concentration, improving net revenue retention, and building the data infrastructure to demonstrate it convincingly. Margin expansion is typically next, with a focus on identifying which costs are discretionary and which are genuinely required to sustain performance. And operational infrastructure — the processes, technology, and management layers that make a business scalable beyond its founder — is almost always underinvested in companies that have been in growth mode.
None of this is glamorous work. But it’s the work that determines whether you sell a business at a compelling multiple or settle for whatever buyers are willing to offer once diligence has revealed the gaps.
Narrative vs. Reality: Where Processes Break Down
One of the more predictable failure patterns in sell-side M&A is the divergence between the story in the CIM and what buyers discover during diligence. Sellers and their M&A advisors spend months crafting a narrative about growth trajectory, market position, and competitive differentiation. That narrative is presented compellingly, generates interest, and often produces a strong initial LOI.
Then the quality of earnings begins. And the adjustments start coming.
The adjusted EBITDA that looked solid in the CIM turns out to include add-backs that don’t survive scrutiny. The revenue growth that looked like a trend turns out to be driven by two customers who together represent 60 percent of revenue. The churn rate the company reported doesn’t match the cohort data in the CRM. Each discovery gives the buyer leverage to revise their offer downward, extend the timeline, or walk away. And each one represents a problem that, had it been identified and addressed earlier, would not have existed.
The implication for sellers is straightforward: treat your own business with the same skepticism a buyer will. Before you go to market, run your own quality of earnings process. Identify your customer concentration risk. Stress-test your EBITDA add-backs. Understand your churn at the cohort level. Know where your narrative and your reality diverge, and either close the gap or get ahead of it in the process.
The Right Moment to Sell
So, when is the right time to go to market? The honest answer is: when the business is genuinely ready, not when the market feels favorable or the investor timeline is pressing.
A business is ready to sell when its growth is sustainable — driven by structural competitive advantage rather than aggressive discounting, market tailwinds, or a sales motion that has outrun delivery. When its customer base is diversified and its revenue is sticky. When its margins reflect the real cost of operating the business at scale. When there is a management team that can take the business forward without the founding team in the room.
This readiness is not an accident. It’s the result of deliberate choices, made well in advance of a transaction, about where to invest, what to fix, and how to build the business for the kind of durability that commands a premium at close.
The companies that confuse market timing with business readiness tend to learn this lesson the hard way — in a diligence room, reading a revised LOI, wondering what happened to the multiple they thought they were going to get. The ones that get it right start the work earlier than feels necessary, stay disciplined about growth quality over growth velocity, and arrive at a process with a business that can withstand scrutiny.
In M&A, as in most things, the work that happens before anyone is watching turns out to matter most.
Interested in ensuring you’re M&A ready? Reach out to me.