Why waiting too long can destroy value

Adam Reynolds, Co-Founder & Managing Partner at ISH, on why momentum, not milestones, determines what a SaaS business is really worth.

There’s a moment in racing when a horse looks untouchable, and everyone can feel it. Sea The Stars had it. Camelot almost did. What happened next is the clearest lesson I can share about exit timing.

Sea The Stars delivered one of the greatest three-year-old seasons modern racing has seen and won everything put in front of him. He was retired just as his reputation peaked and his value was at its highest. His stud career has been extraordinary precisely because of it.

Camelot looked just as unstoppable at three, taking the Guineas, the Derby and the Irish Derby, and coming within touching distance of the Triple Crown. Then he stayed in training, and the momentum slipped. He remained a very good horse, but the belief that surrounded him at his height never returned.

Same talent. Same potential. Two very different outcomes. One exited at peak belief. The other waited and watched the story cool.

I think about that contrast whenever a founder asks me the question that lands on every growing SaaS business sooner or later: do we push for more or take some chips off the table? It feels like a question about ambition. Really, it’s a question about timing, and in SaaS, timing decides almost everything about what a business is worth.

I’ve watched it play out over and over. Two near-identical companies, same product, same market, same revenue, walk away with wildly different outcomes. One founder understood that value is driven as much by trajectory as by size. The other waited too long and watched the best deal disappear.

What ‘optimal exit timing’ actually means

Let’s be clear about what a great exit really looks like, because it’s rarely the biggest one. An optimal SaaS exit tends to share a few characteristics:

• Strong but credible growth, typically 30% to 60% year on year
• High-quality metrics: net revenue retention above 100%, low churn, efficient CAC payback
• Visible EBITDA and a clear path to sustainable profitability
• A convincing story about the scaling still to come

Buyers pay for the upside ahead, not the effort already spent. And, unlike during the SaaS boom, when growth at all costs was tolerated, and many players burned cash to scale, today buyers place far more weight on sustainable economics. The best time to sell is when the next chapter looks obvious and exciting, while you can still tell that story without waning momentum.

The brutal maths behind SaaS valuation

Buyers anchor on growth rate, revenue quality, predictability and margin profile. In today’s market, that margin profile matters more than it once did. When those are strong, the multiple tends to look after itself.

The part founders typically underestimate is how sharply the market re‑rates a business when growth decelerates. Multiples fall in steps. A company growing at more than 40% can earn 6x-8x its ARR. Slow to 20-30%, and you’re in the 3x-4x range. Drop to 10-15%, and you’re looking at 2x-3x.

That’s the economic engine of an exit. When growth slows, the market doesn’t pay you slightly less. It changes its entire view of what the business is worth.

Where value erodes

Four forces tend to drive re-rating. All running in the background, each one compounding the others.

1. Multiple compression. Buyers discount slower growth heavily, and that discount lands on your entire revenue base. A small change in trajectory can remove millions from the headline number before the accounts have even been questioned.
2. Complexity. As teams expand, agility drops and the structure built to scale becomes something a buyer worries about inheriting. More layers mean slower diligence and more places the story can wobble.
3. Execution risk. The bigger you get, the more there is to go wrong. Buyers price that risk straight into the offer, especially when there’s any sign of margin pressure or the business relies heavily on a few key people or founder heroics.
4. Market perception. Once the narrative tilts toward ‘the best days may be behind it,’ it’s hard to reverse. A company that has visibly slowed or lingered on the market starts to look like a problem to fix rather than an opportunity to win.

Proof in practice

Take a business at £2m ARR and play out two paths.

In Scenario A, you exit at optimal timing. Growth is running at 40%, SaaS metrics are strong, and EBITDA is around 10% (£200k) at roughly 6x ARR. That’s an enterprise value of £12m.

In Scenario B, you hold for two or three years. You grow ARR to £3m, but growth slows to 15%, and costs rise, eating into EBITDA. The multiple drops to around 2.5x ARR. That’s an enterprise value of £7m.

Revenue went up by 50%. Valuation fell by roughly 40%. More work, more risk, more time, yet £5 million less at the end of it.

If you want a real‑world example of how fast belief can evaporate, look at Groupon. At one point it was the fastest‑growing company in history, so hot Google offered about $6bn for it.

The founders held on, convinced they could push higher. The numbers were still rising, but the story was already cooling. Repeat usage was slipping, CAC was climbing and the model was losing momentum.

Within a few years, the valuation had collapsed by more than 90%. Same business, same market, but the belief had gone. The story stopped selling before the numbers did.

The mentalities that cost founders millions

None of this plays out on a spreadsheet. It shows up in founder psychology, and I understand the pull completely. A few familiar biases tend to push in the same direction.

Anchoring. You fix on a number and keep optimising for it long after it stopped being the right one.

Sunk cost. You feel tied to the journey you’ve poured years into, so walking away at £2m feels like leaving the job half done.

Optimism bias. You overestimate your ability to re-accelerate, certain the next product or market will reignite growth, while forgetting how hard the last leg was.

A blind spot. You underestimate how differently a buyer reads the same set of numbers to you. Founders optimise for size. Buyers optimise for trajectory.

How to know if it’s time to sell

Momentum rarely disappears overnight. It softens in stages. Growth slows, sales efficiency dips, overheads creep up, product innovation plateaus and founder energy dilutes. The story weakens before the numbers collapse.

At ISH, when we work with founders weighing an exit, we strip the decision back to a few honest questions: are growth and innovation accelerating, holding steady, or declining; is complexity being added faster than value; and would a buyer see more upside or more risk?

Then we turn those questions into triggers you can watch for:

• Two consecutive quarters of decelerating growth.
• Product teams building features to defend the business rather than grow it.
• Net revenue retention slipping below 100%, CAC payback stretching past 18-24 months.
• Headcount outpacing ARR for more than a year.

None of these means sell tomorrow. They mean get a current valuation read and start laying the groundwork while you still hold the leverage.

Sell while the story still sells

If you only take away one message, let it be this. In SaaS, maximum value isn’t reached at peak size. It’s reached at peak belief.

Sea The Stars retired at the exact moment belief was highest. Camelot stayed on and watched the story fade. Groupon pushed for one more chapter, only to see its valuation collapse.

The best outcomes go to the founders who read the moment. They act while the story still rings true. The real challenge is seeing it clearly and acting before the shine fades. The worst time to sell is the moment you realise it’s the only choice.

About Adam Reynolds – ISH Co-Founder and Managing Partner

Adam has worked in the software industry for over 20 years, from scaling small businesses to holding leadership roles at FTSE 100 and ASX-listed businesses. Adam’s role is to work closely with business leaders at ISH portfolio companies and support their ongoing growth.