So You Want to Sell Your Business?
Ask This One Question: What’s Their IRR?
We recently heard a story from our friend, Sharon.
Sharon built a thriving software business over 14 years, a company known for innovation, a loyal client base, and a close-knit staff. When she sold it for $25 million back in 2022 to what she believed was a strategic buyer, she felt confident she’d found the right long-term home for her team.
The buyer positioned themselves as stable, strategic, reliable. Long-term. Safe. But in reality, they were acting as a conduit, buying companies to package and resell.
And that’s exactly what they did. Within the first year of ownership, they sold Sharon’s firm, along with a few others they’d quietly bundled, to a private equity group.
Fast forward a few years, and Sharon began getting late-night messages from former employees:
“I just got laid off.”
“They’re shutting down our division.”
“Do you know what’s happening?”
The clock had run out. The private equity firm had reached the end of its hold period and was harvesting her business to meet its financial objectives.
Heartbroken, Sharon called the PE firm and asked if she could buy her company back. The answer was blunt.
“No.”
No negotiation. No interest. No empathy.
She had built something meaningful, and in less than three years, someone else’s IRR model decided it was worth more dead than alive.
IRR 101: The Hidden Hand Behind Every Deal
Behind every acquisition offer is a spreadsheet, and behind that spreadsheet is a formula called IRR, or Internal Rate of Return.
IRR measures how fast an investor’s money grows. It’s the “speedometer” of return — not just how much they make, but how quickly they make it.
A buyer targeting a 25% IRR is essentially saying, “We want to double our money in three years.”
To hit that number, they often need to resell or recapitalize your business fast. That means cutting costs, reshuffling staff, or packaging your company for the next buyer.
The higher their IRR target, the shorter their time horizon, and the more pressure they’ll feel to squeeze your company for short-term gain.
The Flip You Didn’t See Coming
Founders often sell believing their legacy is safe. The new owner says all the right things about preserving culture, keeping your people, and maintaining your mission. You breathe a sigh of relief.
Then, two or maybe three years later, you see your old company’s name pop up in another press release.
Sold again.
That second sale isn’t always a betrayal. Sometimes it’s just math. The original buyer hit their IRR target. They promised their investors a certain return on a certain timeline. And once the math works, you and everything you built become an asset in motion.
It’s not malice. It’s mechanics.
How to Vet for Long-Term Intent
If you want your company’s purpose to survive past the deal, don’t just ask about the purchase price. Ask about the plan.
Here are questions that separate the stewards from the speculators:
What’s your target IRR or return timeline?
(If they hesitate, they probably don’t want to say “three years.”)How are you financing the deal?
Heavy leverage means faster pressure to sell.What does success look like five years post-close?
If “exit” is the first word they say, take note.Have you held companies long term before?
Ask for examples, not promises.How do you handle legacy and people post-acquisition?
You’ll learn a lot from how they talk about your team.
These questions don’t make you difficult. They make you wise. You spent years building something worth protecting. The least your buyer can do is show you what “success” looks like on their side of the table.
Can You Actually Ask About IRR?
Yes and no.
Buyers aren’t required to share their IRR target. It’s an internal performance metric that helps them evaluate whether a deal meets their fund’s or investor’s goals. Most will never say, “We’re targeting a 27% IRR.”
But you don’t need the number. What you are looking for is the signal.
The way they talk about timelines, financing, and investor expectations will tell you everything you need to know. Here’s how to read between the lines:
Ask about their hold period.
A “three-to-five-year hold” is private equity speak for “we need to flip it to hit returns.” A long-hold or evergreen fund will talk about indefinite ownership or sustainable growth.Ask who their investors are.
Institutional LPs or time-bound funds must exit to deliver IRR. Family offices, cooperatives, or employee-ownership trusts can take a longer view.Ask how they define success post-acquisition.
If they emphasize EBITDA growth, cost reduction, and “strategic optionality,” you’re hearing an IRR-driven buyer. If they talk about brand integrity, cultural alignment, and shared prosperity, you’re talking to a steward.Ask how the deal is being financed.
The more debt involved, the greater the pressure to sell or recapitalize fast. Debt amplifies IRR.
By asking these questions, directly or indirectly, you’ll uncover what the buyer truly values: quick returns or lasting impact.
Flips vs. Foundations
When you sell to a traditional private equity group, they’re usually targeting an IRR in the 20–30% range. That almost guarantees a resale within three to five years.
When you sell to an impact investor, employee-ownership trust, or long-hold platform, the IRR targets tend to be lower, around 10–15%. The trade-off? They can afford to think long term. They can prioritize steady growth, not hockey-stick exits.
In short:
High IRR equals fast money.
Moderate IRR equals mission durability.
One is designed to flip. The other is built to last.
Protect What You Built
Your business deserves more than to be a line item in someone’s portfolio. It deserves to continue its mission, care for its people, and stand for something beyond multiples of EBITDA.
So before you sign the LOI, ask the question no one tells you to ask:
“What’s your IRR target?”
If the buyer blinks, smiles, or sidesteps, you’ve learned everything you need to know.
At Up & Over Advisors, we help founders find buyers whose math and morals line up with their mission. Because the real exit isn’t when you sell the business. It’s when you know it’s in the right hands.
Stay tuned for our next post where we’ll cover the other side of the negotiating table:
“How Mission-Driven Buyers Structure IRR to Build Regenerative Wealth for All Stakeholders.”
Author’s Note:
We share stories like Sharon’s not to scare sellers, but to help founders see the full picture of what happens when a deal isn’t values-aligned. If you want to learn more and follow Sharon as she takes the bold step to rebuild her company, you can follow along here: Sharon Gillenwater on LinkedIn.
