How to Command the Highest Price When Selling Your Business: A SaaS Exit Case Study

Hey there. I’m Marty M. Fahncke, an M&A advisor. I market startups for acquisition and advise founders on how to get the maximum consideration at exit. In other words, I help founders sell for the highest price, work that often happens long before listing your startup on Acquire.

I’ve been a business growth expert for the past 40 years. I started and grew a business to a multimillion-dollar exit, and after the thrill of getting Acquired, I wanted to help others do the same. I’ve since grown companies to over $1 billion in revenues and assisted in over $350 million in M&A deal volume. 

You could say I know the M&A market pretty well. I’ve helped close many seven and eight-figure deals. During that time, I learned that to sell for the maximum price, you must prepare for acquisition long before listing and learn how to market your business to find the best buyer.

In 2019, more entrepreneurs began asking for my advice on the buy and sell side. I connected with Andrew Gazdecki shortly after the pandemic hit, and after a few successful referrals, joined the M&A Advisor Directory to help founders exit or grow their businesses through acquisition. 

Your acquisition goals are simple: get the highest price in the least time while suffering the least stress. The following case study was one of my first referrals from Andrew and should help you understand how an advisor helps achieve those goals. Good luck!

Lessons from a Million-Dollar Deal

In June of 2021, Andrew referred me to help with the exit of a SaaS business (specializing in SMS marketing) doing around $460,000 in ARR. The founder was an experienced serial entrepreneur who’d sold several businesses and knew it made sense to hire an expert to help him achieve his acquisition goals. Perhaps the following lessons will also help you. 

Time Is Money

My team and I spent around 300 hours helping the founder market and sell his business, and it eventually got Acquired for around a million dollars. Let that sink in: The founder saved 300 hours of acquisition legwork – docs, research, calls, vetting – and still got a seven-figure exit. 

That’s nearly two months’ work (assuming a 40-hour workweek). The founder saved seven and a half weeks to run his business, hit his targets, and push his eventual valuation a little bit higher. If you’ve ever wondered how an advisor can help you, that’s your first answer: time.

If this SaaS founder had taken on the task of selling his business alone, two things might’ve happened. Either:

  1. The founder would’ve spent less time on the acquisition, leading to a smaller, less qualified buyer pool and a smaller price or tougher terms at exit (if an exit at all).
  1. The founder would’ve spent too much time on the acquisition, leading to a loss of growth momentum, which might’ve resulted in a smaller price or tougher terms at exit.

In both cases, you can see that time is money in acquisitions. You must spend it without negatively affecting revenue and profit growth. While some founders can do the improbable and manage both, it usually makes better financial sense to hire an expert to do the legwork for you. 

Start Preparation Years Before

Before I continue, please note that I’m not a business broker. Better to think of me more as a marketer. Either you hire me for strategic acquisition advice only, or we can execute an aggressive sales and marketing campaign to bring every potential buyer to your business. 

This SaaS founder chose the latter, but in both cases, I urge founders to think of acquisition a few years before selling. For example, some of our clients plan to sell in two or three years but have retained us to help do the things that result in maximum value at exit. 

Let me unpack that a little. Founders tend to focus on certain aspects of their business to the detriment of those that help them sell for the highest price. We give these founders a two or three-year roadmap that ensures they’re in the best position to sell when the time comes. 

This will likely be the biggest transaction of your life, so you want to make sure you’re doing it right. We ensure your financials are in good shape, connect you with people and resources to complete the transaction, and help you avoid the common pitfalls when selling.

When this SaaS founder retained our services, we didn’t have quite as much time, so it was harder to find the right buyer. Nevertheless, we diligently marketed his startup, found buyers, screened them, negotiated LOIs, helped with due diligence, and so on all the way to closing. 

In total, it took around ten months. 

Dealing with tire kickers can be frustrating, but we’ve built a system that weeds out the time wasters from serious buyers. Like many of our clients, this SaaS founder got several earnest offers, but his being too attached to a number disrupted the process, as I’ll now explain. 

Beware of Being Too Attached to a Number

One of the first things I told the SaaS founder was that his asking price of $2 million was too high based on his current revenue and profit (something we could’ve prepared for had we worked with him years earlier). Nevertheless, the founder was insistent on listing at that price. 

We had six months to help the founder sell. In that time, we vetted around 150 buyers and received many offers below a million dollars, one slightly above, and another substantially above. I took the highest offer to the founder, but he rejected it because it included an earnout. I believe he said something like, “Don’t bring me anything under a million dollars cash.”

One of the first things founders want to know before entering an acquisition is how much their business is worth. You can calculate a valuation in many different ways, and as a founder, you’ll always choose the way that results in the highest valuation. Buyers do the opposite. They’re trying to de-risk the investment, which results in diverging numbers.

A true definition of value is whatever a buyer is willing to pay and a seller willing to accept. With so many of this SaaS business’s offers clustering around a million dollars, I believed that was the market valuation – the best offer the founder would get. 

I explained this view to the founder. But rather than accept an offer of over a million dollars (subject to an earnout), he took his business off the market. 

That was in late 2021. Two months after unlisting the business, one of the originally interested buyers contacted me again asking if the founder would reconsider. To my delight, the founder was also in the mood to sell once again – he was super busy and wanted to invest the proceeds in new projects. So we were all set to market the business once more. 

But a lot can change in a few months. In early 2022, the SaaS market lost around 50 percent of its valuation. Tech stocks were down. Multiples were down. Despite a rigorous remarket of the business, the best offer we received was $300,000 less than the highest offer in the original marketing run. 

It was an all-cash offer, but the SaaS was a profitable business and likely capable of meeting the milestones in the earlier offer’s earnout. But that offer was no longer on the table. Now the founder had to accept the best offer on the market because time was a luxury he could no longer afford. Delay, and he might not command the same price in the future. 

Listen to the Market (and Your Advisor)

Two lessons emerge from this case study. First, listen to what the market tells you. If you receive a bunch of offers clustering around the same valuation, that might indicate it’s the best price the market is willing to pay. Industry reports are one thing, but the market (and timing) is another.

Second, if you hire an advisor who lives and breathes M&A daily, they probably know what they’re talking about and have developed strong market senses. If they tell you it’s the best deal you’ll get, they might be right. Not in all cases, but what’s the point of hiring an expert if you’re not going to heed their advice? The advisor and the market can keep each other in check.

Did this SaaS founder kick himself at losing that extra $300,000? No. It was still a seven-figure exit. He could leave the business with cash in the bank to reinvest in his other projects. Mission accomplished. But it’s a good reminder not to get too attached to numbers. 

Clean and Organize Your Financials

The biggest challenge of this acquisition was the asking price. Some numbers, like a million, are just plain exciting. Then when you make that first million, only multiples of a million will do. You end up chasing bigger and bigger numbers, which is okay if you let the market temper your expectations. 

Generally, our biggest obstacle to helping clients sell is their financials. If your financials aren’t clean and organized, potential buyers will assume nothing is. I’ve had clients whose financials were so bad that it was a challenge to determine their annual recurring revenue. 

Worse is when we believe a founder has given us clean financials, and then in due diligence, when the buyer digs deep into the details, we discover the numbers are a mess and not what we thought we had. We’d represented to the world that these figures were accurate, and now they’re not, which kills a deal very quickly. 

If you’re at all in doubt about the quality of your financials, hire an expert to help you. Quickbooks and a junior bookkeeper can’t replace a qualified, experienced accountant. Hire an attorney, too, because legal issues can derail your acquisition as fast as financial ones. 

To Command the Highest Price, Be Patient

If I could only offer you one piece of advice before entering your acquisition, it would be to practice patience. Every founder I’ve met wants more than their business is worth and faster than it’s possible to sell. Selling a business, even a perfect one (were one to exist), takes time. 

Think of everything that’s involved: preparation, marketing, finding buyers, evaluating buyers, negotiation, due diligence, transfer, and closing. Our fastest transactions only get done in four to six weeks. Yes, you might need to sell to a deadline, but you don’t want to offer a fire sale. 

You can sell fast for cheap or slow for maximum value. Even Acquire’s average acquisition timeline is about 90 days. We marketed this SaaS for six months and sold it in ten. That’s not uncommon. Be patient about your timeline and realistic about your price, and I’m sure you’ll walk away from your acquisition happy and ready for your next adventure. 

The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before entering into any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional. 

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