Acquire.com Webinar - How much is your startup worth?

Foreign. Welcome, everybody. I can see people joining. This is awesome. We'll give it a, a couple minutes and then we'll obviously kick this off. This is great. Lots of people joining. Thank you so much for attending. Before we get started in the chat, let me know where are you attending from? I'll go first. San Mateo. Ottawa. The lovely state of New Jersey. I love the optimism. That is a beautiful state, Edward. Dublin. Nigeria. Kaluana. I don't know where that is, Todd, but it sounds beautiful. I know. Winnipeg, British Columbia. Cape Town, South Africa. All right, so it seems like we got a nice global crowd here. Keep it coming. I want to know where else people are in the world. Johannesburg, Portland, Washington, D.C. all right, we're all good, Roger. All right, so 60 more seconds and we'll dive right into startup valuations. But if you, if you want to keep mentioning where you're from, because this is awesome. We have people from all over the world attending this webinar. All right. Rayleigh, North Carolina. All right, I'm gonna, I'm gonna kick this off. Is everybody ready? Hi. From Santa Barbara. I love Santa Barbara. That's a beautiful town. Okay, so without further ado, I'd like to again thank you all for attending this webinar. And in the chat, if you can, you let me know if you could see my screen and then we'll get going. All right, so thank you everybody for attending this webinar. This is a topic that I have on a daily basis, my team does, and it's all about startup valuations today. So diving right in in terms of a quick agenda on what to expect today. So going to give a brief introduction of myself for those that may not know me. Also talk about how we help you get acquired. Then we're going to dive into the fun stuff. We're going to dive into M and A valuations, one on one, M&A for those that don't know, that stands for mergers and acquisitions, and then valuations by the numbers. So using real market data that we have collected and then also other third parties have collected to give you a full picture view in terms of what is a realistic valuation, how are startups being valued today and how can you use that information to help you get acquired? And then we're going to show you some real case studies where we use this data to successfully facilitate life changing acquisitions. And then also how do you increase your valuation? I'm sure that's a huge question for everybody here. Everybody wants to maximize their acquisition and so I'm going to Go over some tips on how to do that as well. So quick introduction of me. My name is Andrew Gazdecki. I'm currently the CEO and founder of Acquired. Com if you haven't noticed. But I have previously started two other companies, both acquired specifically my first company, Business Apps. I bootstrapped that to about 10 million in recurring revenue, had that acquired by a private equity firm with about 100,000 raised. Won some awards for that. The 30 under 31 made my mom real proud. But I like to bring this up because I've been on the acquisition side in terms of meeting with buyers, understanding the process both with financial buyers and strategic buyers. And I'll go into more depth later in the presentation. But I know what it's like to get acquired. I know the emotions, I know how difficult it is, I know how confusing it can be and leading just to the next slide. That's why I started acquire.com to really build the world's most founder friendly startup acquisition marketplace in the world and really empower you as a startup founder to maximize your acquisition when you're going to market. And so with that being said, in terms of progress, we've been in business almost four years. We turned four January of 2024. But we've helped over a thousand startups get acquired. We facilitated over half a billion in closed transactions on the platform. Today we have over 350,000 registered buyers. So every month we see between 10 to at times 20,000 buyers, new buyers register each month we have over 2,200 listings with combined total revenue value of over a billion. And then we've also facilitated acquisitions on every continent with the exception of Antarctica, we're still working on that one. So if anyone's from Antarctica, let me know. But my point there is we are true, truly global company. So whether you're located in the United States, United Kingdom, any continent on the planet Antarctica, we're still working on that. We can help you find buyers for your business and that's our goal with acquire.com we've also been featured in a number of different publications ranging from Forbes, Business Insider, Fortune, Axios, Entrepreneur, Crunchbase, any Hackers. And this is obviously huge, just credit to my team in terms of really what we're trying to accomplish in the industry. And that's really to make acquisitions easier and more efficient and most importantly help you maximize your exit. And a big part of that is valuation. So we're going to be diving into that now. Before I get there, I want to just briefly go over how do we Help you get acquired? How do we add value to the process? And what is acquired.com really done to make acquisitions more efficient for startup founders all across the globe? So I like to think about it in really three different buckets. So it really starts with your listing on our marketplace. So we have a team@acquired.com that will go through your listing, and we'll help prepare your listing in a way where you really capture the attention of a buyer from first glance. And then we also prepare you for when you go live. And what I mean by that is, do you have a P L for buyers to read? Do you have additional information that buyers are probably going to ask? Do you have documents such as a sim, a confidential information memorandum, which is a fancy word for basically a pitch deck, but geared towards buyers? And then we market your listing to hundreds of thousands of buyers. And now this is all really, really important because you can't get first impressions back. So as a typical private equity analyst, as an example, they're looking at hundreds of businesses per day, literally per day. And so when they look at your listing, it's absolutely critical that it showcases the best parts of your business. It outlines the potential growth opportunities. You have your metrics connected, and then also you have items that buyers really need to make a decision on whether this is an acquisition opportunity they want to pursue, such as a P and L transition guide, having your profile completed in terms of your seller profile as well as your listing. And then we'll even give you a scorecard. So when you create a listing on acquire.com, we'll review that with you, and then we'll give you ratings and tips on how to improve that, just based on the thousands of startups that we work with on a regular basis. So putting you in the best position to get acquired based on everything that we see within the market. And then in terms of how do we market your startup? So there's a saying, if you talk to one buyer, and if. If you're talking to one buyer, you have no buyers, you have no leverage. Because what a buyer can do is they're having a singular conversation with you. They can take their time. And so what we do is we market your startup to hundreds of thousands of buyers very quickly, so you can really maximize the amount of offers that you get from buyers. Because when we market your listing, we drive a lot of buyer interest all at the same time. So you can have these conversations all at once. Because again, if you have one buyer, you have no buyers. And our job@acquire.com is to drive as many interested buyers to your listing to really start those serious buyer conversations, which leads to more serious offers on your business, which allows you to negotiate up on terms and valuation and all those fun things. And I'll touch on that further on in this presentation as well. And one other thing to note too is if you have any questions, feel free to chat them into the webinar. And I'll be doing some Q and A at the end, so feel free to ask questions as I go through this. If anything, you'd like me to clarify. So how does this all culminate in terms of our performance? In this year alone, we facilitated about 700 transactions and we've done about 221 million in closed deal volume. And then as of today, we have over 200 startups under offer that are moving towards close, going through due diligence. So we see a lot of activity on our platform on a daily basis. So if you're looking to sell your business and you're looking to get in front of as many buyers as possible and also be presented in a way that really catches the buyer's eye, acquire.com may be a good fit for you. Now moving on to why you all came here. So valuations one on one. So valuations can seem kind of confusing. You get multiple different sources of information. So I'm going to be going over how we view valuations and really the importance of correctly valuing your startup. So taking a look at this slide here, this slide is an indication of really how to attract the most serious buyer interest as possible and really outlining just how important it is to correctly market and price your listing when you go to market to really maximize serious buyer interest. So if we look at fair market value, if you price your startup within the ranges that we typically see in the market based on data not just from us, but also third parties, you'll see about 60% of serious buyer interest. Now, if you go just 5% above that asking price in relation to fair market value, that number drops to 30%. And then if you go 10% above that, that number drops to 2%. Now what's the reason for this? Again, going back to what I was saying, if you're an analyst at a private equity firm or you're the head of Corp Dev at a strategic company, you're seeing a lot of different startups on a daily basis, hundreds. And so you really want to make sure that you fall within the realistic valuations or fair market value valuations. So a buyer at Least has the opportunity to speak with you and really understand more about your business. Because if you see something that's just outrageously priced, you're not going to take it seriously. You're going to assume that the gap for the buyer and the seller is just too big to close. And you're never going to have that opportunity to really get a buyer interested. So that's why valuations and pricing your startup correctly is absolutely critical. And I would go as far as saying the difference between getting acquired and having minimal interest in your acquisition opportunity. So really kind of diving deeper on that. So why is getting your asking price right so important? First of all, it increases your buyer pool. So the more buyers you bring to the table, the more potential offers you can get on your startup. And that helps you maximize not only just your valuation, but also terms. So second point is maximizes the cash component of your deal. And that's important because if you get an all stock offer and it's in a private company and it's illiquid, the valuation might be higher. You may never see a dime from that. And so by having as many buyers interested in your startup and speaking with them all at the same time, what you're able to do is create leverage so you can negotiate on terms, cash on close deal structure and also valuation. And also it helps you sell faster. So if you're looking to sell your business quickly and maybe you're concerned about macroeconomic risk or just whatever it may be, having a realistic asking price drives again the most buyer interest. If you price too high, then you're going to be missing out on a lot of serious buyer interest. And then my favorite one is number four, which is just plain and simple. It increases the chances of your startup successfully being acquired. No one wants to overpay for a business. No one wants to feel like they're getting a bad deal on a business. And so your job as a startup founder is really to close that gap and really help buyers see the value in your business. But also understand how are buyers valuing your startup or other similar startups today so you can get within that range and then have productive conversations that lead to offers that lead to successful acquisitions. And another great point is fewer closing conditions when you price super high and you have a buyer come in. And this is another point I'll touch on later in the webinar as well is typically the higher the valuation. So one example I'll give is when you read the big headlines of these massive acquisitions, it's not all cash. It's generally a large component of stock. Ideally it's public stock, so you can sell it on the free market. But if it's private stock, either way you're going to be on a four year vesting schedule in a company. You're going to have an earn out that may be not realistic. And so again, getting your asking price. To summarize all of this, it gives you leverage with buyers so you can get the asking price that you're looking for and then also the terms that you're looking for as well. And I'm going to tie in a personal story of how I navigated one of my acquisitions where the focus was heavily on terms. Cash at closing is king. So again, when you price above fair market value, you're going to see less cash on close. And what that means is cash on close is the amount that you will receive when the acquisition closes. So what buyers will do to reduce the risk of the acquisition, if the acquisition price is an outlier price, you're going to see things like an earn out. You're going to see things like conditional holdbacks. You're going to see things like seller financing where maybe 30% is cash on close and 70% of seller financing. And really what you want is a clean break where you're not in the business for years at least. This was important for me. And this also leads less risk to you because you don't have an earn out or some types of payments that you may never receive or equity in another business that may be worth nothing. And then for me as an entrepreneur, no four year earnout. So I don't have to be at a big company for four years just to get paid and then you can use that capital to start new ventures. And this has kind of been sort of the journey of my career where I've sold two businesses and it's led me to acquire.com to really help you achieve that same outcome. Where you can sell a business and then go off and start another one, maybe a smaller one, bigger one is completely up to you at that point. And then also typically a faster close as well. Because when you're working with financial buyers, the due diligence process can typically be 30 to 60 days and instead of a drawn out year process that you'd see with a strategic buyer as an example. So how should you value your startup? There's tons of different ways. These are kind of the three main ones that we see. So we have SE E and then revenue. So SE stands for seller discretionary earnings. This is Generally best for owner operated businesses that are seeing consistent growth, but they're not at scale yet. So you've reached product market fit, you're generally bootstrapped. And what you're able to do is you're able to take expenses that'll be removed once the business is acquired and a new owner steps in and add those back onto your net profit to show a number that aligns more with the true profitability of the business. And then we have ebitda, which is basically another form of how profitable is your business. This is also reserved for typically when you have a team, you're growing at a higher rate. The business is really capital efficient and it's also bootstrapped and then finally revenue. So this is when you have little to no profit. Ideally you're growing at a really fast clip, you have recurring revenue and a low churn rate and then you have some sort of novel product or market advantage or brand advantage against others in your market. And then typically these businesses usually have investors because you're kind of growing at all costs. But one big shift that we've seen@acquire.com is really most buyers are looking to buy capital efficient business, profitable businesses. And the two valuation methods in terms of most attractive would be obviously ste ebitda, net profit and actually not revenue. And so I'll explain that in a little bit as well. So how do buyers value your business? So there's really two types of buyers. I mean there's a myriad of different buyers below this, but I like to put them into two common buckets. One is going to be financial and then the other is strategic. And strategic acquisitions are the ones that you hear about the most. These are the billion dollar outcomes. This is when Figma was acquired by Adobe for 20 billion or at last Ian acquired Loom recently for a billion dollars or Intuit acquired Mailchimp for I believe it was 1.2 billion. Now focusing first on financial buyer. These are by far the most common buyers in a market and probably the likely buyer of most startups. And the reason for that is they're in the business of buying online businesses. So some private equity firms will acquire businesses one a week or one every other week, one a month. The firm I specifically sold to would acquire a new business and it was a multi billion dollar fund and they would literally acquire a startup every single week. So in terms of how they value businesses, they are very, I would say they have a very, very strict mandate in terms of how they value businesses. And it's typically on a financial Multiple, and that's going to be either by sde, EBITDA and sometimes revenue. But generally it's always going to be a profit multiple. And really what their goal is is they're buying a business. So putting on your buyer hat. So every time a company is acquired, there's always an analysis of how are we going to see a return on this investment or a return on this acquisition. So they typically look to see a return on their investment within three to five years, typically from another exit, or they hold the business for profitability to repay what they acquired the business for. And these examples include high net worth individuals, whole cos, private equity firms, and then also startups. And so just examples of businesses that we have specifically sold to financial buyers would include my revenue accelerator and then also business apps, which was again my previous company. So I had the opportunity to sell to strategics, I had the opportunity to sell to financial buyers and I specifically chose private equity because the terms are great. I was able to negotiate all cash on close. My Transition period was 90 days. Valuation was reasonable and that was really what I was looking for. And so financial buyers also are the ones where you're going to see the most interest when you list on acquire.com and just in general. So if you're running a startup right now, you probably have received emails from private equity firms looking to potentially have a conversation. And that's really because again, private equity firms are in the business of acquiring startups. And that's why we work with so many. But we also work with a lot of strategic buyers as well. So they typically have a different valuation methodology and the simplistic way that I like to think about how do you really get a strategic acquisition done? The number one factor is your business needs to be more valuable to them than it is to you. And so what I mean by that is your business needs to have an opportunity for them to expand into a new category, expand into a new market. And these acquisitions typically take way more time because they're not typically looking to acquire as many businesses as say, financial buyers. And when they do make these big, big bets, the valuations will be typically higher. But they're also generally looking to acquire startups that are at scale with revenue, generally over 10 million in revenue. So once you get to about 10 million in recurring revenue, that's when your buyer pool completely changes and strategic buyers tend to lean in a little bit more. So examples of strategic buyers include public companies, competitors in your market. These are all great people to reach out to, even if they're not on acquire.com, one strategy that I love is you list on acquire.com and then you reach out to strategic buyers just to see if there's any interest. And you're able to really say that you're engaged in a conversation with other buyers because you truly am. You truly are when you're listed on fire.com so now moving over to the data. Okay, so valuations by the numbers so far.com valuations and multiples. So we put this into three different buckets and I put profit multiple at the top because one big shift that we really seen as a company and then also the marketplace as a whole with acquisition is profitability is king. People, companies, private equity firms, they are looking to acquire profitable companies and not revenue losing companies. Those businesses are extremely hard to sell. And then also justifying a revenue multiple without a really high growth rate is really, really hard to do. So I want you to focus the most on the profit multiples, which if you're below 100k in profit, the multiples that we typically see is 2 to 9 and the revenue multiple is 1 to 5. This first category is kind of a crazy category because it's really hard to apply a specific type of multiple or valuation methodology on these businesses because the buyers are really viewing these as there's a lot of growth upside and I'm looking to grow this business. And then once we move into more stable businesses or larger businesses, that's where we start to get valuations that are grounded in reality or have some sort of specific reasoning for the valuation. So 100k to a million, we're seeing about three to seven in terms of probably multiple. And this isn't to say we don't see higher and we don't see lower, but this is generally what we see. And then on revenue multiple 1 to 4 and above million in revenue for a profit multiple, you can expect about 4 to 8 and then for revenue 1 to 3. Now if you price outside of these numbers, your acquisition odds go down pretty dramatically. I'm going to outline that in just a second. So in terms of the profit multiples, so I want you to take a look at the listings we have up here at the top. And so you can see the multiples that we have at 6, 8, 10, 12, some are pretty crazy in terms of 20, but then when we actually look at the sold buckets, you can see that the 14 multiples, they start to drag down. So again, moving back to what I was saying earlier is this is kind of the Range of what you're going to see based on your business size. And this is data of listings live on Marketplace. Some of these have not sold. And then moving down to the ones that have sold. And then if we move over to this graph here, this is a scatter plot where we can see that sometimes we do see a 10x multiple, sometimes 9, 8. But it's not the average, it's the outliers. Because there's so many different factors when you're valuing your business. Again, like your churn, your net revenue retention rate, how fast are you growing? Do you have logo customers? How happy are your customers? What is your NPS score? There's so many different factors. So these are kind of just the ranges that if you're looking to sell your business, if you price within these ranges, you will have immense, immense buyer interest. On acquire.com now moving over to SaaS Revenue Multiples, you can also see that there's a lot of really optimistic sellers in terms of pricing at 7, 8, 9, 10. And then when we go down to again, live on Marketplace here on the top and then sold down here at the bottom, this is generally what we see. Some startups do sell at 1x and that can be caused by lack of growth, no profitability, maybe it's in a really saturated market, it happens. But then other businesses, right here, this is generally kind of the sweet spot that we see 2x, 3x, 4x, but pricing beyond that, that's when you start to see a decline. Because again, like I was saying previously with the other side, the buyer interest goes down dramatically. And so that's again, I just want to reiterate just how important it is to price your startup within fair market value. So you can really close that gap of buyers in terms of their expectations and your expectations. So you can at least have a conversation. Because the more buyers you bring to the table, the more opportunities you have to increase your valuation by having more offers and really running a process with again, the more offers that you receive, you can negotiate not just on terms, but valuation as well. And then in terms of average SaaS revenue multiples as well, here's another scatter graph just showing. We do see again some outliers in terms of ADEX and above 5x. But generally all acquisitions are happening in terms of a revenue multiple from 1 to 5, 1 to 4, 1 to 3. So understanding these is absolutely crucial. We'll be sure to share these slides as well. But now you might be thinking, okay, that's your data. What is what do others in the market say? So we did some research on that as well. So other marketplaces, from what we've seen, these are the multiples based on buckets below 50k. You can just read kind of the numbers. And then we did some research into other brokers and how they're valuing SaaS startup specifically. So below 2 million, 3 to 6 times EBITDA, above 2 million, 3 to 10 times EBITDA. So that's a wide range. I don't know what to make of that. And then also the fee is 10 to 15%. So really, when you kind of compare our multiples against the market, we're right in line with others in the market as well, except minus a 10 to 15% fee. Now, okay, let's forget marketplaces, let's forget other brokers. Let's see what public markets are saying. So during the year 2020 and through 2022, we saw market multiples go crazy. SaaS companies were trading upwards of 30x forward in recurring revenue. Now, if we look at this graph here and shout out to Jason Lemkin for providing this, but what we'll see is public companies that are doing hundreds of millions in revenue, best in class, essentially growing year over year, are currently valued at 6x forward arrow. So that's kind of a good sort of benchmark in terms of how other buyers are going to be looking at your startup, because they're going to be looking at public company comps. So another good graph too is in terms of if your startup is growing, that's a huge driver in terms of your valuation. So if you're at 2 million and growing 50% year over year, you could probably anticipate a 10 million acquisition. But these are all just theoretical in terms of you still have to find the buyer. And the best way to find the buyer is to speak to a lot of buyers all at once. Now, moving forward into what does a 10x business look like? How do you get a 10x multiple? Where does that even come from? Okay, so in terms of finances, you have high revenue, high profit margins, high net revenue retention, high cash flow. In terms of business metrics, high year over year growth, low churn, large tam, which stands for total addressable market, high NPS score, so lots of happy customers. Then high product usage as well. And then in terms of attributes, multiple years in business. So it shows that you have a stable business rather than you've been in business route a month, which let a pause because they don't. They aren't able to predict into the future, the performance of the business, then also a dominant brand, things that are defensible, also strategic partnerships as well. And if you're in this bucket, let's definitely have a conversation because these are the businesses that basically this is an exceptional business and people love to buy exceptional businesses. And we have a lot of buyers that are definitely interested in those. Now just going over real case studies in terms of when you list on acquire.com is this actually achievable? How do we facilitate, have we facilitated multimillion dollar acquisitions? And the answer to that question is yes. And one company here, growth bar. So they listed with us and we were able to find them a buyer in about two months. They had 45 NDAs. This is an all cash transaction. And the revenue multiple on that business was 3.6. And so that was a life changing acquisition. And then my works, so my works took about four months for my team to successfully secure a buyer which was with a wonderful private Equity Group called SAS Group. They had 44 NDAs and ultimately sold at a 2.5x revenue multiple. And again, keep in mind these are our seven figure and our largest acquisitions as well as examples. And then another business called Conch, this one sold for just below 2x in terms of a revenue multiple. Timeline was 3 months over 100 NDAs. Majority of cash was cash had closed and then they had a 15, two month holdback. And when you work with acquirer.com too, these are all terms that we help with. So if you receive an LOI and you don't know what a conditional holdback is, you don't know what an earnout is, you don't know if the offer is fair. We have a team that's here to support you and really help you understand what offers are good and which terms you should definitely stay away from. So just a special note there and then faucler. So this was a more recent one. Founded in 2011, price revenue multiple was 3x on this one. Timeline was 6 months, 37 NDAs and again majority cash on close. That's what you want. Majority cash on close. And 10% of that was a 12 month conditional holdback and also sold to another private equity firm that we can't recommend enough Relay commerce. Now how do you increase your valuation? So this is probably what a lot of people are thinking is I'm thinking about taking my business to market. I am. How do I get the best price? How do I maximize my acquisition? The name of the game today with acquisitions really is about capital efficiency and profitability and so the first thing is increase your profit and or revenue. So increasing your profitability or your growth rate or ideally all three and really a great way to do that is to find parts of your business that you can automate, that you can drive efficiency into. And that really adds so much value to a buyer because that's what they're looking to acquire is a capital efficient businesses. The growth of the growth at all cost days are kind of over. Unfortunately people do not want to acquire businesses where you're spending $3 to get $1 back. They want to see businesses where you're spending $1 and getting $5 back. So your CACT LTV ratio is much more healthy and is looked at way more closely than it was in the past and for good reason. And also just some really basic things but I just have to say them. So preparing early for an acquisition, so having your materials available. I would go as far as saying that taking a business to market, especially if it's going to be life changing transaction, without the proper material, without guidance from my team, without understanding the process of an acquisition or understanding how to properly value your business is so detrimental and so critical to having a successful acquisition. So prepare early. You're on this webinar, which is a great start in terms of understanding how to value your business. But then also you want to speak to as many buyers as possible because again, if you have one buyer, you have no buyers. And the reason for that is they have all the leverage. And you want to put the leverage in your control where you're speaking to multiple buyers, you're fielding multiple offers, and that allows you to ultimately negotiate the highest price as well as the best terms that fit whatever is most important to you. And that could be someone who's going to be a good steward of your business after you sell it, or you want to exit the business as quickly as possible, or all cash on close, whatever it may be, you are able to negotiate those terms and shameless plug work with acquire.com we're here to help you. We've helped again a thousand plus startups get acquired. So we've seen every deal structure. We've seen hundreds of thousands of buyers, we've seen more Lois than I can count. And so we can definitely help navigate this process for you and really help you maximize your acquisition. So with that being said, again, thank you for attending this webinar. I hope it was educational and helpful in terms of how to think about your valuation, but most importantly how important it is to understand that how you price your business is really the difference between maximizing, maximizing buyer interest, which then leads to more offers and a successful acquisition, or just not selling your business at all. And so with that being said, let us guide you through your acquisition. So feel free to create a listing on acquire.com meet with our team. We're happy to discuss the scenarios and where we think that your business should be priced or how it should be valued. And we're happy to help you get acquired. And with that said, I'm going to be taking a little bit of Q and A. I hope everyone enjoyed that. So I'm looking at the questions now, so if you have any questions, feel free to post them and I will answer them in just a second. How did everybody like that, by the way? And then also we're starting to do these webinars once a month. So if anybody has ideas for topics for the next one, I'd love to hear that too. Oh, thanks, everybody. Okay, I'm going to pick out some questions right now. I don't want to. I'm going to, I'm going to try to pick the hard ones. Okay. All right. Do industry trends and market demand play a role in valuations at all? What about tam? I would definitely say so. There's definitely situations where as an example, AI right now is very interesting in terms of the amount of demand for that type of business. But there also are businesses that just are always great. Like we see a lot of traction with just having a good business. I guess if that's kind of a cop out answer, but it's the truth where if you have a healthy business, healthy metrics, you're prepared, you understand the acquisition process. But there are markets that do perform better. Typically Martech always sells really fast. And actually the boring industries sell really fast. There was a business recently that was a CRM for pet groomers. And that business had a ton of interest on it and I thought that was really interesting. So any sort of CRM having this source of truth for your customers, those businesses always do command a typically higher multiple. And that's just off the top of my head. Okay, so next question. How do I value the individual assets of my business that aren't exactly the core business itself? For example, my business Instagram account has 300,000 followers. This is a great question. So this would be, you would basically put, you would take this and add it as an intent, intangible asset included in the sale of your business. So yes, this definitely has value that you can add on top of your Valuation, because an Instagram account with 300,000 followers and let's say you're. And there was a recent example of this that I spoke to an individual about, but just for kind of an illustrated example, they were selling pet products and they had a pet Instagram account and that was a main driver of their go to market. So that can be a really capital efficient way to acquire customers rather than spending ads and you're going against pets.com and stuff like that. So that can actually be not only an additional asset to add to your valuation, but also a huge selling point to a buyer by showing that you have this adjacent go to market strategy that essentially costs zero to continue. Were any of the businesses shown in the case study profitable? Yes, all of them were profitable businesses. So that really drives home the point of if you're not at profitability and you're losing money at this point in time, it's really hard to sell those types of businesses and buyers are really looking for profitability. I've said it a few times now, but that's the biggest shift I've personally seen since starting acquirer. Is really the interest from buyers dramatically shifting over towards really just healthy capital, efficient, profitable businesses. Does the current state of the economy impact valuation? Should I wait for interest rates to drop before considering selling? This is a great question. In my opinion, you can't predict what's going to happen in 6 months, 12 months. I don't try to do that. I always think it's a great time to sell if you have a great business, if there are certain things that you can do today to improve your business, to maybe go to market in one to two months, I would think in that way. But I have seen more founders than I can count that turned down amazing acquisition offers thinking it would get better and they always regret it. So if you're just thinking about selling, if you're on this webinar today and you are thinking about selling, I highly recommend going to market, speaking to buyers and really starting that process. Because there really is never a perfect time unless you're Mark Cuban and you can sell. What do you have? Broadcast.com and he sold at the peak of the Internet bubble. Okay, moving on. What, what's one business or finance metric or what? One business or finance metric is the most important to determine valuation. So in terms of business, there's a lot I would say probably just general going back to capital efficiency. In terms of business, how are you acquiring customers? Do you have a competitive advantage? For example, when I sold business apps One of our competitive advantages was our, our distribution strategy. We worked with a number of different white label resellers and we partnered with public companies or other web agencies. And so we had a really capital efficient model that allowed us to create hundreds of thousands of mobile apps for businesses. With having a very, very small sales team, I would also tie in just basic things like low churn and really having a product that's sticky as well because no one wants to buy a business where as soon as they buy it, all the customers cancel and then financial metric. I'm just going to keep eating the drum. It's, it's profitability. Here's another question. Isn't it a rule of thumb to just anchor towards a higher valuation, expecting buyers to negotiate down in, in theory that makes sense but I've never seen it really work that well. Really what you want to do is and it sounds counterintuitive but you, I recommend my personal opinion is you want to price lower than your typical. Like the price that you have up here, it's not real. And really what you want to get to is you want to get a real offer in hand. And the way that you do that is you speak to as many buyers as possible. So if you're going to market and your price is all the way up here, I hope you can see my hand illustrations. This isn't real. This is your imaginary net worth. And so to draw a buyer in, your the best approach is, and this is what happened to me, I used to think I'll just take your revenue times by 10 and then when buyers ask if you're for sale, no, I'm not for sale. But maybe if you like, tell me the right price. But the point I'm trying to get at is when you price realistically, you draw a lot of buyers in. When you draw a lot of buyers in, you're able to really start to have conversations around helping them see the value of your business. Because when they just take one look at your price and just a quick glance of your profile on they may be missing some of the great parts about your business and you're not even giving them a chance because again, they're looking at so many different businesses. If you're pricing yourself too high, they're just going to think this gap is too big to close. I'd rather focus on the other businesses that are priced correctly. Actually I would go as far as just kind of simplifying that statement. The best way to get a higher valuation isn't to price your startup high. It's to get as many buyers at the table so you can get more offers, so you can negotiate against buyers to get a higher valuation and then ultimately maximize your exit. That was a great question. And okay, moving on. If I wanted to pay someone to value my business properly, what's the usual cost? It really depends. There are some valuation experts and this would fall under something what's called a 409A. So maybe Google 409A and they can provide a valuation based on different methodologies. But I don't have the cost of that on the top of my head. Okay, this is, I know we're getting on on time here. So can I possibly increase my sale price if I make it known that I'm open to an earn out and seller financing? If so, how much do you think I can increase my valuation as a result? I love this question. Okay, so when you're speaking with buyers, one of my, my biggest recommendations is be open to offers. Let buyers know that you're, you're letting the market price your business. You're letting buyers submit offers how they value your business because that'll really give you insight into how buyers are valuing your business rather than how you're valuing the business. And so again, your valuation may be up here, but when you receive that valuation or that real offer, it's real. And all you have to do is close the acquisition. There's a lot of steps in between that. But it happened to me, I had this thought in my head that my company was worth this and ultimately receiving an offer that was, let's say like right here. And once it became real, that offer became real, everything changed for me because it's real. This is a real multi million dollar acquisition opportunity and this is going to change my life. Do I really want to kind of push for 20 or 30% more? Like there's a term a bird in the hand is worth more than two in the bush. And to get the bird in the hand, what you want to do is be really flexible with buyers and let them know that you are open to seller financing, you are open to an earn out, you are open and entertaining all offers. And all this does is really lets buyers know that you're serious about selling your business. And then you're not going to hold firm on this price here because you may never get to an actual offer. I really like that question. Okay, we got, we got five more minutes here so I'm going to try to answer two more questions and then we'll wrap it up. In terms of what's a reasonable churn rate for SaaS businesses? This is a great question. So this, this depends on industries. So if you're selling to SMBs as an example, the standard is about 3% churn per month. If you're selling to enterprise, and this is where you get that those 10x like 20x multiples is you have negative churn. And what that means is people buy your product and you're selling a B2B SaaS into a large organization. Zoom is a great example of this. They had a bottoms up strategy where a couple people would buy a Zoom account and then all of a sudden the account will grow over time, so they have negative churn. So in terms of just like a general, like, what's a healthy churn? I think anything over 3% and SMBs will churn because they go out of business. Lack of resources. But anything over 3% can be worrisome for an acquirer. All right, that was a ton of fun. Again, appreciate all of you. If we didn't get to your questions, we'll be sure to answer those as we get the recording out. But thanks again for everyone's support. I can't say how much I appreciate all of you taking time outta your day to hear me talk about valuations. And I hope this was helpful. And if you have any additional questions, feel free to reach out to my team. We're here to help. We wanna see you maximize your exit. We wanna see you get acquired. I wanna see you go lay on a beach, if that's your thing, or start another company, really just reaching whatever goal that you have and looking forward to hopefully seeing you all in the next webinar. Happy Wednesday en the rest of your week and thanks so much for attending. Cheers, everybody.