Strategic Pricing: How to Sell For More Cash in Less Time (Webinar Recap)

If maximizing cash in the least time matters most to your acquisition, strategic pricing can help achieve your goals. Put simply, strategic pricing involves asking for slightly less than fair market value for your startup to draw more interest, and then using that interest to leverage the best outcome. 

Check out our latest seller webinar where our VP M&A Paul Kelley and Senior M&A Advisor Rainier Nanquil explore how to price strategically in more detail. When you’re competing against 1,000s of other listings, strategic pricing can help you sell faster while still maximizing cash at exit. Learn more below.


Who Are Your Presenters?

Paul Kelley, VP of M&A at Acquire.com

Paul has spent 15+ years as an M&A advisor, helping close 100s of transactions from Main Street to Lower Middle Market ($10MM-$40M~). After cofounding Synesis Advisors, a boutique brokerage in San Francisco, Paul joined Acquire.com to help founders get expert help to sell their startups. 

Rainier Nanquil, Senior M&A Advisor at Acquire.com

Rainier has over a decade of experience in M&A, capital markets, and investment sales. In that time, he’s handled over a billion dollars worth of deal volume for various markets. He is an expert at understanding and achieving his clients’ goals, leveraging his years of M&A experience to help founders get acquired.

What Is Acquire.com?

Acquire.com is the best online marketplace to buy and sell SaaS startups. Combining expert M&A advisory and technology, our services help you get Acquire’d fast and maximize your exit. 

Since 2019, we’ve helped over a thousand founders sell their businesses, closed over half a billion dollars in deal volume, and registered over 500,000 buyers. Live internationally? No problem – we’re active in over 100 countries and every continent except Antarctica. 

What Is Strategic Pricing?

One of the most important considerations when selling your business is the asking price. It really sets the tone for the rest of the acquisition process from the potential volume of views and bids you’ll receive to how likely you’ll achieve your desired outcome.

Strategic pricing definition

There’s a bit of nuance to the definition of strategic pricing that balances factors around fair market value for your business to your acquisition goals and urgency to sell.

Finding the pricing sweet spot

There is a basic formula for how to find the “sweet spot” when pricing strategically where you’ll lower your asking price to the threshold that maximizes your buyer interest that will push you to, or above, your goal through leveraged negotiations. It’s a mix of data, buyer pool size, and an assessment from an experienced M&A expert.

Why Price Strategically?

As Paul would say, “having one buyer means the buyer has YOU.” Essentially, proper strategic pricing at its core is to help build more buyer interest. Like anything in life, when something has more demand against a limited supply, the price will naturally bid up.

Sell faster and for more cash at closing

How does strategic pricing actually translate to selling faster, more cash, better terms?

If you don’t price strategically?

Not only is it just opposite of the benefits but the “floor” drops further as there are negative compounding effects that makes the acquisition much more difficult.

What about testing the market?

Testing the market with an aggressive, top-of-range asking price is the fastest way to lose leverage because it simply narrows the interest of buyers to those with only the highest intent and match. Realistically, many interested buyers will be on the fence and pricing strategically is the reason that pushes them to invest their time to review and assess.

How to Price Strategically?

Every seller may have an arbitrary maximum worth for their business because it’s a reflection of the time, sweat, and effort that often can’t be easily measured in dollars. However, it’s just not how it works when buyers assess businesses to acquire. They have more realistic frameworks that intake current market trends, the business fundamentals, and much more.

Five step process

Here’s a view into how to go through the motions of pricing strategically.

What about listing as “open to offers”?

“Open to offers” means you’re giving the buyer a chance to set their bid. It may seem like this strategy can expand your buyer pool but it’s not that simple. There are a few dynamics that will negatively impact your outcome.


Want to get acquired?

Let us help talk you through it! Paul and Rainier are all available as part of the M&A team at Acquire.com and can support you along your acquisition journey. Get started by creating a listing to see if you’re approved to list on our platform.

Are you a larger, profitable SaaS business with $100K+ ARR? You may qualify for our Guided By Acquire program to help sell your business. Get in touch through that page and we’ll give you a free assessment.


Q&A

How do you balance between pricing strategically and not underselling your business?

To avoid underselling your business, get your business in front of as many buyers as possible and trust your acquisition to people who know how to market it. Then you won’t leave any money on the table.

Our goal is to get you the best price and terms possible and the only way to do that is to create a market for your listing. Once your listing is live, you get instant exposure to 500k+ qualified buyers. If you’ve priced to sell, you’re going to get a ton of signed NDAs and buyer conversations, all of which help to negotiate up your valuation, not drive it down.

Underselling your business is setting a price without knowing what the market is doing. We know what the market pays for SaaS startups because we see 100s of them get acquired. Be wary of anyone saying your valuation is higher without backing it up with data. Otherwise you could end up listing and not seeing any interest only to be forced to reduce your price later. Or selling off-market without access to our buyer pool.

How do you handle potential buyers who might perceive the lower asking price as a sign of distress or desperation?

Be completely transparent. We help you maintain living Q&As and other documents that help to bridge the knowledge gap with buyers. A buyer sees a startup at 5 or 10 percent below market value as being motivated to sell but might perceive anything more than that as indicating a problem with the business. So long as you have good fundamentals and the buyer understands your pricing rationale, they’re unlikely to see any issues with your business as a result of its price.

How can sellers effectively manage bids to maintain goodwill among potential buyers? Doesn’t it annoy a buyer if you come back and say you’ve got a higher offer and degrade trust?

Not when you’re transparent about the process and communicate with interested buyers. The important thing is sharing your deal schedule with buyers and deadlines for calls, indications of interest, initial offers, final offers, and more. That way, buyers know where they stand throughout the process. The last thing you want to do is shop an offer or play buyers off against each other, and we’ll work with you to help choose a winning bid that stands the best chance of closing.

What are my options if I end up pricing strategically (say 10% below FMV) but end up getting offers only at that amount?

The first thing is to learn the buyer's rationale so you can understand whether it's something that can be overcome with better info or data. It may be that you're not highlighting the right strengths or potential for your business. This is why having an objective source review your listing details and providing feedback from a buyer perspective before going to market is always recommended (it's the standard for all listings published to Acquire.com). At the same time, having multiple offers even if they're 10% below FMV gives you negotiation leverage. This is where exploring different deal structures can help get you to your desired acquisition goal in the form of less cash upfront but more in the long run through earnouts, or seller financing where the buyer pays out in a defined timeframe post acquisition. An experienced M&A expert in your corner can and often will advise on the ideal deal structures for you.

When pricing 5-10% below fair market value, how do you determine the EXACT percentage to apply?

There are many considerations but it starts with a basic range from a data source like our multiples report and applying a brokers opinion of value that consider financial health, growth potential, business fundamentals, market penetration, original funding source, reason for selling, and macro effects to name a few. This is less science but more art through experience. 

What are factors that you guys have seen which allows a company to price at or above the goal price and still do well?

All the good things that make a great business - having a unique market position with a defensibly strong brand, exemplary products/services, industry-leading status, consistency in growth and profitability, and long-term sustainability. However, it's also knowing the types of buyers that may be interested in your business. Solo acquirers, private equity firms, family offices, public companies may value your business differently and knowing which one you may encounter more often can be a huge factor to setting your asking price.

How do you determine fair market value and price especially for early stage or pre-revenue companies?

Our multiples reports are applicable to early stage startups. However, we don’t recommend listing your business without revenue – buyers generally less interested. If you do go to a marketplace for a pre-revenue business, you could apply a few different valuation methodologies to rationalize your pricing described in this article (cost-to-duplicate, Berkus valuation method, or risk factor summation).

How do you price a business that’s pre-revenue?

We don’t recommend listing your business without revenue – buyers generally aren’t interested. If you do go to a marketplace for a pre-revenue business, you could apply one of the valuation methodologies described in this article (cost-to-duplicate, for example). 

How should I price a business I want to sell as soon as possible?

If time is important for you, selling your business at 5-10% below fair market value (the average in our multiples reports) will draw enough buyers to get the best offer in the shortest time. Re-watch the full webinar on strategic pricing above or check out this article from our senior M&A advisor, Rainier Nanquil.

What is the average acquisition price for deals on Acquire.com?

The average acquisition price isn’t helpful for setting your asking price, so we don’t report on it. The multiple is more important since the price is a multiple against a startup’s revenue or profit. Please refer to our most recent multiples report for the average multiples at which SaaS startups got acquired. 

What is the average time to close an acquisition?

For large SaaS acquisitions, the average time to close is around 90 days. 

What’s the current market multiple for a SaaS with 95% profit margin?

Please refer to our most recent multiples report

Can I sell a business with no profit?

Yes, though you’ll need a good reason for not making any profit when speaking to buyers. Some buyers can see low or no profit as an opportunity, especially if revenue is high and growing fast.

Does Acquire.com report on discounted-cash-flow (DCF) valuations?

Our buyers typically value using the multiple methodology, so we don’t have any data on DCF valuations. 

Does Acquire help startups secure strategic investment?

No, not at the moment. 

What does it mean when a business has “good fundamentals”?

Good fundamentals means the business has features which are attractive to buyers, for example:

❍ SaaS business model
❍ High net revenue retention
❍ High profit margin
❍ High growth rate
❍ Low churn
❍ Operating for at least 3 years
❍ Few competitors

and so on.

Can Acquire help me sell my business?

Absolutely! If you own a profitable SaaS startup with $100k+ TTM revenue, you qualify for Guided by Acquire, which gives you a dedicated acquisition manager to plan a pricing and marketing strategy that achieves your goals while providing ongoing coaching throughout your acquisition. If you don’t meet that criteria, we can still help you by optimizing your listing and giving you the resources you need to get acquired at your ideal price and terms.

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. 

Get content like this, and more, sent directly to your inbox twice a month.