Designing the Exit Backwards
- Difficulty
- Expert
- Time to result
- ~months to results
- Steps
- 7
- Confidence
- —
Armoo sold Fanbytes for a number he had predicted to an investor years earlier, and describes the exit as 'exactly how I designed it'. The method is to treat the sale as arithmetic rather than luck: learn how businesses like yours are actually valued, back-solve the revenue and asset profile required for the number you want, then build deliberately toward it. Tech and IP matter because they lift you from a profit multiple to a revenue multiple of roughly two to four times. Competitive tension matters because acquirers pay most when you are a threat to them. Above roughly £10–15m, an M&A bank runs the process, sources multiple bidders and — critically — stops you conceding too much when life-changing money is on the table.
Origin
Extracted from Deep Dive with Ali Abdaal
How to run it
- 1
Learn how your category is valued
Understand the actual mechanics: a combination of revenue, profit and growth rate. Service businesses without technology trade on a multiple of profit; with meaningful tech and revenue you can look at roughly two to four times revenue.
Pro tip Read acquisitions as arithmetic — a buyer pays five because they believe they will make ten.
Watch out Headline numbers in tech press are not a valuation model; ask 'based on what?' before anchoring on them.
- 2
Back-solve the target
Fix the exit number you want, divide by the realistic multiple, and you have the top-line revenue you must reach. Then break that into a countable number of campaigns, contracts or clients.
Pro tip Reducing the goal to 'ten campaigns at half a million' makes an unfathomable number operational.
- 3
Build value that is not the people
Deliberately create technology, IP and client retention so the business is worth something beyond its headcount. This is what earns the revenue multiple rather than a profit multiple.
Watch out An agency whose value walks out the door every evening is priced accordingly.
- 4
Become a competitive threat
Acquirers pay more for businesses that are taking their customers. Winning clients from a likely buyer converts you from a nice-to-have into a problem worth solving with cash.
Pro tip Adobe/Figma is the clean illustration: buy the threat, fold their customers in, sell them your other products.
- 5
Choose the type of buyer, then create tension
Decide deliberately between private equity and a strategic acquirer who wants to absorb your capability. Then run a process that produces several interested parties rather than one — competitive tension drives far more deals than people expect.
Pro tip Fanbytes ran with four companies wanting to buy, which put them in a position of strength.
- 6
Appoint an M&A bank above the DIY threshold
Below roughly £10m you can use a broker or do it yourself; above £10–15m appoint a bank. They build the anonymised presentation, circulate it to a small qualified group, make the introductions and run the meetings.
Pro tip Use the meetings both ways — you are also assessing whether you want your company to live there.
- 7
Run LOI, exclusivity, then signature
Interested buyers issue letters of intent naming a price; you pick one and open roughly ten weeks of exclusivity in which finances and legals are fully opened up. It closes with a share purchase agreement.
Pro tip Let the intermediary be the adult in the room while you are emotional about the money.
Watch out Bad buyers renege — restating the price downward late in diligence. An intermediary is your defence against conceding to get it done.
In the wild
A venture capitalist pushed Armoo to raise five or six million and turn Fanbytes into a hundred-million-dollar business. Armoo told him flatly it would not be that — it would make tens of millions, guaranteed. The VC invested personally rather than through his fund. When the company later sold, Armoo texted him to point out he had named not just the range but the exact amount. His explanation is unglamorous: he understood how businesses like his were valued through revenue, profit and growth rate, and had built the tech and client retention required to earn that multiple.
→ An exit that landed on the number he had modelled, with the price in the letter of intent holding all the way to signature.
During the process Armoo visited a potential acquirer's office and found it uncomfortably hot — old computers, fans running everywhere. He left and sent a voice note to his co-founder Ambrose saying that even if they paid a hundred million, nobody was ever going there. He flags the moment as evidence of the shift from optimising purely for money to optimising for a good home for the company and its people, which is part of why he treats the diligence meetings as a two-way assessment.
→ A buyer eliminated on fit, with three other bidders still live to preserve tension.
Common mistakes
Conceding too much to get it done
Armoo names this as the biggest error founders make without a bank or intermediary. Someone is about to hand you life-changing money, so every objection feels like a threat to the deal and you give ground you did not need to give.
Treating valuation as vibes
People read a headline and assume a billion-dollar outcome without asking what it is based on. Buyers buy because the acquisition makes them more money; if you cannot show that trade, the number is fantasy.
Building a business that is only its people
Without technology, IP or retention, you are valued on a multiple of profit rather than revenue — a materially lower outcome for the same top line.
From the transcript
“if you have Tech and revenue um generally you can look at like two to four times okay Revenue okay typically most of the businesses…”
“competitive tension drives a lot more deals than people think it does”
“the biggest thing people do when they're trying to sell the companies if they don't use a bank or like an intermediary is they concede…”
From the episode
From Council Estate To Selling A Global Business For Millions At 27 - Timothy Armoo Founder of Fanbytes
Timothy Armoo