Strategically Priced Startups Get Better Offers – Here’s Why You Should Try It

What’s top of mind when selling your business? If it’s getting the most cash in the least time, the best thing you can do is price your startup strategically. In other words, enter the market at a price that grabs buyer attention and then use that interest to negotiate a higher valuation and friendlier terms. 

I’ve worked with hundreds of founders who’ve used this tactic to double or even triple buyer interest. Some went from zero to multiple offers in days. Why? Setting your asking price below fair market value distinguishes you from more aggressively priced startups and shows you’re serious about selling. 

Pricing low to sell high might seem counterintuitive, but planting your flag at a fixed price is terrible optics for buyers searching for someone easy to work with. You’re competing with 1,000s of other listings. Your ideal price might attract one or two buyers, but is that enough to maximize your exit?

As the saying goes, if you have one buyer, you have no buyers. How much negotiation muscle can you flex with one offer on the table? How long can you delay post-exit plans while waiting for more interest? If you start sweating, buyers may use any backstep on price as leverage against you.

Let’s be clear: pricing strategically does not mean selling your business for less money than you’d like – quite the opposite. As you learn to price strategically below, remember that it’s a two-fold strategy. The goal is to maximize buyer interest to achieve your goals while proving you’re serious about selling. 

How Strategic Pricing Works: A Case Study

When I analyze a listing, I provide a valuation range called a broker’s opinion of value that reflects your exit goals. You might want to sell quickly, get more cash, or negotiate a shorter transition period. All of it feeds into the valuation range and determines the price at which you’ll go to market. 

I recently helped a SaaS founder who needed to sell quickly for maximum cash. She didn’t want to offer seller financing or earnouts. Just a clean(ish) break. The business was making good money, growing fast, and had operated for years – but solid fundamentals aren’t always enough in today’s macroeconomic environment (and with 1,000s of listings competing for buyer attention). 

For buyers, closing fast comes with a time cost and heightens risk due to an expedited due diligence process where things might get missed. Condition-free cash is also less attractive since it lacks safeguards should the business fail to perform. Knowing this, I recommended we price at 5 to 10 percent below fair market value (below the average multiple) to entice more buyers to the table.

In just a few days, that business received over 100 signed NDAs from buyers requesting access to the full listing. The founder met with over 20 of them and received several offers at the listed price with clean terms and even a few above. In other words, the seller got the offer and terms she wanted despite asking for less when going to market. 

How Low Should You Go?

Say the multiple report suggests a range of 3.5-5.5x profit for your business. You ask me, your acquisition advisor, for an opinion of value, and we narrow that down to 3.75-4.25x profit. SaaS startups within this range typically exhibit strong fundamentals (that’s why they get acquired). 

At or above 4.25x, competition is fierce. These are extraordinary businesses with superior financial performance, business features, and exit-ready founders. You must offer the same or better to attract interest, and even so, pricing at the high end may result in a smaller buyer pool, a slower sale, less cash, and a longer transition period. Expect to offer seller financing or an earnout to attract more offers. 

At or below 3.75x, however, your business is a competitive opportunity for every financial buyer in the market. The best balance of risk and reward. And this perception only grows the more competitively you’ve priced the business. As a rule of thumb, pricing 5-10 percent below what similar startups are trading for will get you over 50 interested buyers and tens of meetings in the first couple of weeks. 

What Happens When You Don’t Price Strategically?

Failing to price strategically could mean you never get acquired. I’ve seen plenty of founders aggressively price their startup and get no interest, no offers, and be forced to reduce the price anyway. 

Even if you’re in no rush to sell, what might time do to your valuation? Market appetites change. Economies fluctuate. Consumer behavior shifts. New competitors emerge. For example, imagine what AI might do to anyone running a stock video business today. It’s worth repeating: time kills all deals.

And while you might want to test the market at a higher price, doing so is risky. If you don’t get any offers and then reduce the price, you’ll get much more interest, but savvy, professional buyers might also smell blood in the water. Your motivation to sell is an opportunity to see what else they can get away with. 

But if you price strategically and are open to seller financing, earnouts, and other holdbacks, you’ll maximize your negotiation power. Unlike in a poker game, showing a little of your hand early in an acquisition can result in better offers, which makes it easier to achieve your goals. 

How to Price Your Startup Strategically

1. Refer to the Multiples Report

Getting a beat on the market is your first step in pricing strategically. To date, over 2,000 acquisitions have closed on Acquire.com. As of April 2024, over 1,400 startups are listed for sale, and over 120 of those are under offer. Every closed acquisition feeds into our multiple reports. Check the latest report to find the average multiples at which startups like yours got acquired to establish a baseline.  

2. Ask Your Advisor for an Opinion of Value

Next, ask me or whomever you’re working with for a professional opinion of value. We’ll examine your baseline and acquisition goals (timing, cash, deal structure, transition period, and so on), narrowing your valuation range while still maximizing your exit. 

3. Set an Asking Price Slightly Below Market Value

If cash and timing are important to you, and they usually are when you need to take chips off the table or move on to something new, ask for 5-10 percent below what similar startups sell for. This will instantly draw buyers to your listing, start conversations, and encourage indications of interest (IOIs) and letters of intent (LOIs). How you manage these offers will set the tone for your acquisition.

4. Manage the Offer Process Fairly

Pricing strategically does NOT mean shopping buyers around. It simply means drawing enough interest to start conversations from a position of confidence. One or two buyer’s views of your business are unlikely to be objective assessments since there’s always the risk of them exploiting the lack of interest. Pricing strategically defends against this. After all, if buyers consider multiple startups, it’s only fair that you consider multiple buyers. But this process only works if you’re fair and transparent to everyone. 

First, ensure your deal schedule or timeline is clear to every interested buyer. Give everyone the same information. Treat every buyer as if they were THE buyer until they’re not. That means sharing everything they need to underwrite the deal and value your business. Tell them when to send offers, get on calls, and set expectations for follow-up meetings and decisions at each stage of the process. 

When You Play Buyers Against Each Other, Bad Things Happen

I’ve seen too many sellers get greedy at the last minute, ignoring good offers now in favor of better offers that may or may not materialize. Or they never counter-offer and instead sit on multiple offers for weeks, leaving buyers in nomansland. What happens then? Buyers pull their offers and go elsewhere.

If you keep moving the goalposts, you end up in a never-ending holding pattern where offers come and go without landing anywhere. That’s why you must set goals before entering the M&A process. If an offer achieves those goals, you should probably take it. Don’t let the what-ifs distract you. 

5. Choose the Right Buyer

Under the Guided by Acquire program, we talk to every buyer who submits a bid. We know their backgrounds, offers, deal structures, valuation methodologies, transition plans, escrow intentions, due diligence processes, and acquisition timelines. Then we create an offer summary that stack ranks buyers and offers and walk you through each one. You then choose which buyer best matches your goals. 

So many factors impact which buyer is the right buyer, so consider backups if your chosen buyer falls through. Did you manage the offer process fairly? If so, the goodwill you created may be enough for backups to uphold their offers. If you were dictatorial or dismissive, you’ll get little quarter in the rematch. You might have to accept a lower price or worse terms to close the deal.

Is Pricing a Startup Strategically Always the Best Option?

Yes, if you want the most cash and a fast transaction. Pricing at or above market expectations will usually take longer to find a buyer. They’ll want to reduce the higher price risk with seller financing, earnouts, and holdbacks, with less cash upfront. They might also want you to stay on in the business longer to help boost performance. 

However, strategic pricing isn’t a panacea. For example, you might not get enough offers to nudge the price into your target range. Maybe your startup’s performance has stagnated during the acquisition process or buyer appetites have changed. If you’ve had three or more offers below your target range, maybe your starting valuation range was wrong or the multiples report wasn’t current. Always refer to the most recent report for the most accurate valuation baseline. 

What About Pricing at Open to Offers?

Pricing your business as “open to offers” is a losing strategy in most cases. Why? Because buyers seldom value the business in line with your expectations. With no asking price to guide them, they’ll value it at the market price. Then, after all that time spent looking at your financials and doing their homework, they’ll get on a call with you and discover a vast difference in expectations. As a result, buyers tend to avoid listings that are “open to offers” unless there’s a compelling reason to pursue them. 

In other words, your business must have a unique benefit or advantage that makes applying a multiple inadequate. Even then, we’ll usually recommend we test the market using a wide multiple range to account for your and the buyer’s expectations. Within two weeks, you’ll know where your asking price should be even with the unique benefit and can start to zero in on an offer. 

If timing and cash upfront matter when selling your business, seriously consider strategic pricing. Buyers love startups that are priced to sell as it cuts a lot of friction to closing a deal. To discuss a pricing strategy that achieves your goals, contact me (rainier@acquire.com) or your acquisition advisor.


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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