When you're thinking about "Is my company ready to be acquired?", start by understanding what makes buyers move and which levers in your business make you irresistible.

The Five Reasons Someone Would Want to Buy Your Company

1. You are profitable or growing very quickly
You're either very profitable, growing very fast, or a little bit of both. The Rule of 40 is the benchmark: take your year-over-year growth rate percentage plus your net margin percentage. If it's over 40, you're generally an attractive asset. Worst-case scenario, they buy it and hold it, and it continues printing cash (which usually trades on an EBITDA basis). If your company hits this mark, it's likely that someone wants to buy it somewhere, especially if you're making above $1M in EBITDA per year. That's really when things start to open up for people interested in buying your company. $5M EBITDA is the magic number where buyers start calling you instead of you calling them.

2. You have people they don't
You've assembled a team of people that are harder for someone else to assemble. Sharp young people, or talented domain-specific experts that work really well together. These are acquihires. They're buying your talent because hiring individually would take too long or cost too much.

3. They can make a lot more money by selling your product to their existing customers (or vice versa)
If buying you means they can unlock 10x or 100x more revenue by selling your product to their customer base, that's the sweet spot. This is the most compelling reason for a strategic acquisition.

4. You're stealing their market share
This is a defensive acquisition. You're taking their customers, and they have the cash to stop the bleeding by buying you out. Sometimes they buy you not because you're great, but because you're dangerous.

5. You have technology that they don't
You've built something that's really hard for them to replicate or would take them years to develop internally. They're buying years of R&D in one transaction.

Market Timing Can Override Everything

Sometimes the market will tell you that you need to be ready, or that you're so ready that it can supersede all the advice above. Market conditions can create buying frenzies where companies get acquired even if they don't check all the boxes.

If you're noticing that some of your competitors are getting sold for 5-20x revenue and the market just feels frothy for your particular thing, then that's kind of an indicator that one of the five things above is on a bunch of buyers' minds, or something is changing about the industry that is causing them to pay so much money. It could be technology, it could be people, it's something. And maybe it's something about your product that you don't know.

When competitors are selling for stupid money, it's time to get stupid money too.

The Fundraising Litmus Test

Here's another powerful way to test if you're ready: Force yourself to think about going out and fundraising instead of getting acquired.

When you go out and create a pitch deck for your company to raise capital, you're going to think about how you can grow and what types of things will 2x, 3x, 10x, or 100x your growth. Oftentimes, those growth strategies involve some sort of partnership with a bigger company or some sort of channel that you wish you could sell through.

This gives you a clear indicator: if massive growth requires a partnership, you don't need funding, you need that partner to buy you.

The test is simple: Pretend like you're raising capital and see if you can get yourself excited about raising capital. If you can get genuinely excited about that fundraising process, OR if that process unveils big partnerships that you wish you could do, then those are good signs that your company would be better off acquired because it'll grow faster inside a larger organization.