The Science Behind Your Valuation Multiple w/ Andrew Gazdecki and Christian Steverson

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We're going to go ahead and get started and if you have any questions as we're going through this presentation, feel free to put them in the chat. We will have Q and A at the end, so we'll try to get to those without further ado. Let's get started. All right, can everyone see my screen? Okay. Yep. Okay. All right. The science behind your valuation multiple, how to make the biggest decision of your exit. And to kick things off, we're going to go through a quick agenda. We're going to be doing introductions. I'm going to be talking about multiple and valuation myths and we're also going to be diving into how to choose a multiple and how selling your multiple to buyers, the importance behind that and really how to make sure you nail that. So brief introductions. My name is Andrew Gazdecki. I am the founder and CEO of Acquire.com in a previous slide life I had founded a company called Business Apps and a crypto company as well, both of which were acquired. And below that are some fun awards that made my mom really proud. And without further ado, I'd like to hand this over to Christian.

Hi everybody. I see some familiar names that I've been working with. Good to see you. Good to meet everyone else. New. I'm Christian. I'm our director of acquisitions. I have over a dozen years leading sales tech SaaS divisions. Today I'm mainly focused on helping you all our founders get set up. We know this process can be little bit equal parts nerve wracking, exciting, anxiety ridden. Our goal is just to make sure you can go to market cool, calm, collected, knowing what documentation to prepare, knowing what expectations to have, learning more around the acquisition journey. So that's my my goal. You'll see some notable transactions that I've been very fortunate to be a part of of late down below and excited, really excited for this topic and for you all to be here.

Yeah, and fun fact too. Me and Christian worked at Business Apps together so we went through an acquisition with that company together and now we're helping other entrepreneurs with their acquisitions. So Christian brings a wealth of knowledge. So excited for him to go over more details and as a company we are building the world's most founder friendly startup acquisition marketplace. And in terms of our impact, we've been in business about four years. We've helped over a thousand different startups get acquired which has totaled over half a billion in closed transactions on our platform. Today we have half a million registered buyers. So we give you access to one of the largest pools of buyers in the world. And then currently on the Marketplace today, there's over 2, 000 listings totaling over 1 billion in combined revenue. And we are a global company, so we've served over a hundred different countries. We've had acquisitions close on every continent except Antarctica. We're still working on that one, but regardless of the country and we can help you now. Diving into the presentation. So when you're thinking about the valuation for your startup or the multiple that you should pick, there's a few myths that we hear pretty often that acquire.com starting at the top Bigma got 50 times annual recurring revenue. Why can't I or my Buddy sold his SaaS company for a 10x multiple or another one is I'll use any multiple that gets me to the valuation I want or the multiple reports that I could get 5x. So thinking through these, the way I like to position these is for a lot of valuations and the ones that you hear about with acquisitions, sometimes these are the outliers and not the norms. Especially when you hear 50 times recurring revenue for a company like Figma, which is a strategic acquisition or you heard your buddy selling for 10x. When I was running a company, that's typically what I would do. I would just take my revenue, I'd multiply by 10. But when you go to market to sell your business, especially with private equity groups or high net worth individuals, the valuation you're going to see is much different than usually the ones that you hear about in the press or the big headlines. And I always like to say our job@acquire.com is to tell you what you need to hear, not what you want to hear in terms of valuation. So when you go to market you have the correct expectations so you don't price yourself out of an acquisition. It's one of the number one things I see with acquisitions on closing, you scare away buyers. You ask too high of a price, buyers just can't get behind it. You aren't able to justify it. And before you can even have conversations about selling your business, you just never get even going. So we're going to dive into, you know, more of this. I'm going to hand it over to Christian to really help you get the correct multiple for your business.

Yes. Thank you Andrew. You said it best is that if you go and have the approach of being stagnated with listing, it's just not going to be a fun experience. You have to be malleable. That's the motif you'll really see us discuss. Today is being able to be flexible in the process. So when you want to list at the very top, tip top, maximum and say, hey, I'll negotiate down from there, it's actually usually not the best strategy. Getting your multiple right right from the get go is crucial, really. Pricing at a way where you have a little bit of room for upward and downward mobility is typically the way to go. So when you list initially, when you start to go down your acquisition journey, if you're seeking obviously a quicker exit, a cleaner process, a line I was still from Andrew is if you have one offer, you have none, right? You have no leverage. So if you're pricing so high and maybe you get one offer in, it's not really going to necessarily help you and being able to really raise not only your purchase price but to get favorable deal terms. We know there's some first time sellers and founders on this call as well. So if you need a little bit more education on certain terminology and strategy around that we can have, we're more than happy to help our M and A team here as well. If you don't price the right way early on, that's when you get a lot more of those savvy buyers that say, well, I'm going to maybe place a heavy earn out or conditional holdback on these. This offer that I give you, you may get less offers, you may get less cash. So it's a balancing act between yes, you want to of course sell in a quick time and quick fashion for the most amount of money, but at the same time, if it's several hundreds of thousands of dollars, maybe multi millions, you don't want to rush it, you need to be methodical in the right manner. So we're happy to help in getting that. And that's what obviously we'll talk about today is making sure you know how to properly evaluate the business, how to factor in a lot of these different elements and then obviously going to the market with your best foot forward.

Agreed. And one thing you said, Christian, that I love is yeah, if you have one buyer, you have no buyers and it's counterintuitive. But when you price correctly or within market expectations from buyers, you're able to draw in more buyers. And your goal from there should be to get as many offers as you can. And by doing that, you create a competitive process when you're selling your business. The more offers you get, the more you can negotiate on price and also terms. And that's how you ultimately maximize your valuation.

Now as far as the clock ticket on your exit. This is big too, you know, Andrew said it best earlier. Hey, my exited for this number three years ago or I was looking at the multiples report in 2023 looked a little bit different than now. That's just the market. Things can change quick. So you may. Your natural inclination may be maybe I wait a little bit. Maybe I'm looking for this large whale to come in in this deal and then I want to sell. Or how does this affect my evaluation with a lot of this emerging technology coming up? Or maybe I'm dependent upon a third party. How does that affect me? A lot can shift. And so again, being able unique value adds of your business, why it's unique in the space and then obviously not waiting for the perfect time. Another line that I always like to take from Andrew is that it's true. If you have a great business, a great business model, and you can justify the ask, people will buy it. Whether it's summertime, whether it's holiday time, a good business will sell. So waiting and waiting and waiting for that perfect time is not the best approach. Just be sound in your approach and obviously be able to speak to why it's such a good opportunity end of the day.

Yeah. Another thing that's, that can be counterintuitive for entrepreneurs is there's no perfect time. There's. You really can't time the market. If we did, I think every entrepreneur with a startup would be selling their business three years ago in 2020 and 2021, when multiples were crazy, they were absolutely insane. But during the time, everybody thought, hey, let's, you know, see where this goes, and obviously went in another direction. And that could sometimes happen with your business. Things can change that can devalue your business or increase it. Um, I personally have seen all these things affect acquisitions that we've been working where there's a sudden shift and the offer that you had, you know, maybe even just a couple months ago is starting to seem really good compared to the one that you're able to get today. So great points on that, Christian.

Now, as far as how you're choosing your multiple, that's obviously the, the big question here. So on that, that next slide, Andrew, is step one, start with a multiple report, our evaluation tool. And starting is the keyword there. You may see it, you may find, oh, wow, that's going to say it's. I'm at this number. That's your starting point. That's just the early. Okay, what's the most common range? We have a lot of data on recent transaction trends. So you'll see these updates quite frequent. You'll we know what's happened the last couple of quarters as well. So if you can get a good start of a realistic baseline, okay, I know relatively speaking, it's between this and this range and now it's on maybe me to add in some of the other aspects that can be maybe justify a higher multiple or at the same time, maybe I know there's a certain aspect of my business, if I'm being very honest and transparent, that could be seen as a risk. That all has to be factored in. So understanding the market demand as well, your level of competition in the space, your longevity in the space, has it been a flash in the pan, maybe six months, less than a year? Has it been through the pandemic? Has it been a transfer of ownership? There's a lot that can be played and factored into. But you start with the multiple report, speak with our team, use our evaluation tool, get a baseline understanding, and then learn some more of the intricacies which we'll discuss here as we progress, that can help to influence that number up or down.

Agreed. And I think the word that stands out to me here is realistic. You know, being realistic with the valuation initially and understanding that could go up or down. Ideally you increase the valuation as you speak with more buyers. But again, it starts with being realistic on the multiple and the valuation to get there.

Absolutely, absolutely. Step two, this is the fun part here. Evaluate your goals and business. What's most important to you that I cannot stress enough? Have a good understanding of what you're looking to get out of this. Of course you want the most money, you want the most favorable terms, but what are you using that for? Is it a new venture? Is there a partnership dissolution? Is there a reason you're needing this money sooner than later? Are you willing to wait? Do you just want to gauge the market? Once you have a good idea of that, then you get a better idea of what factors can play into your approach. So typically, if you're valued a little bit higher than the most common multiples, you have some unique aspects. You have a great ip, proprietary IP that has certain value to it. You have been in the SaaS space. Typically, if you've been around for three or years longer, you actually have longevity in the space. So that can be a value add to you. If you have low churn, high lifetime value, that means that you don't have a high customer concentration where a buyer might say, you know what that may be A little bit too risky for me to put so much cash at closing. So when you have a good diversified user base in the that regard, low competition, the space, high logos, those are all seen as strong ads for a buyer to potentially feel much more comfortable not only extending an offer to you, but one that has more favorable deal terms to you. Now, just understand with the higher valuation and maybe the higher pricing, you want to go to market again, it's going to be a little bit of a slower sale. You may have additional terms that are involved in that as well. Versus hey, I'm looking to sell quick. There's a reason for it. This is my pride and joy for one reason or another. I need to get out of this quickly. Well, okay, that can be facilitated. But just understand you might have some terms that may not be as more favorable. You may obviously sell for a little bit lower. Being upfront transparent about the reason for selling, you'll see in our listing process as well, is very key. I will stress that throughout this call as well, is surprises will ruin deals. It's surprises in time, right? If you don't make the bandwidth to prepare and share the right documentation or you're maybe hiding certain things that will eventually come up during due diligence, a savvy buyer will find that and they'll retrade during due diligence. And that's the most difficult and most frustrating position to be in as a founder and seller. So we really stress being proactive about really being clear about what's a great value add for your business and what may be seen as a risk.

100%. I want to point out on here too, a lot of entrepreneurs, when you think about the final exit price, it's just the valuation or the top number. But terms are just as important in my opinion. Are you getting all cash? Are you getting a big burnout? Is there a delayed payment? One example that comes to mind is we're helping an acquisition right now where the founder already has another business, he wants to sell quickly, he wants to move over to that because, you know, time is money and he's selling at a discount to make sure that deal goes through quickly. And that's more important to him than waiting six months to find a buyer going through a lengthy due diligence process, having some sort of delayed payment. So really thinking about all these things, like you said, Christian, is. Is critical.

Yes, absolutely. Now, as far as step three, how to choose a multiple, it's always a tough one too. Buyers usually will look at your profit margin right they'll want to look at your trailing 12 months. That's typically a pretty big factor. Obviously yes, you're trailing 12 months in revenue, but your profit, your EBITDA, your discretionary spend, you'll want to make sure you calculate and are able to speak to that. There are some documents that our team is more than happy to share as far as some examples that give a good start on knowing how to prepare those. But having good profit margins are going to be very key. If you do have strong margins typically then buyers will use a profit multiple and that's what you should use when looking to list on the marketplace. We have our multiples report speak with our M and A team. We can give you a better idea of most common ranges and of course we'll factor in some unique ads that you have as well to that. That's typically the most common approach that we see. When it's a revenue multiple, usually your profit margins aren't great. Right? Hypothetical, if you have a 500k trailing 12 month revenue and call it a 10 profit margin, maybe a 50k and trillion 12 months profit, are you going to sell for 3 to 5x off of your profit? Probably not. You make that already in the course of a year, less than a year. Right. So you'd probably default to a revenue multiple. So as you'll see throughout this too, that's a starting point. That's what you should probably defer to to begin with and then you can factor in other aspects that will be able to potentially assist in that. But normally that's how you would approach if you can integrate margins, use the profit multiple. If you don't have that, you'd probably default into a revenue multiple.

I think another way to think about this too is understanding how the buyer is going to recoup their investment. So let's say they buy your business for $5 million, $2 million, whatever the number is, most buyers are going to want to recoup that investment within three to four years. So if you, if you have a high growth business, they're going to be betting on that. If you have a really profitable business, they're probably going to see if they can get that money back within a time period that isn't too lengthy. Three, four years is, is probably there. But just understanding how the buyer is going to see a return on investment can help you put yourself in in their shoes and better position your business.

That's such a great point Andrew, is that sometimes I'll get founders that will come to me and say hey I think that my IP is so dynamic and so unique. My financials aren't great, but I think a strategic is going to buy me solely based on ip. But the truth is those strategics are still going to want to see some returns in a relatively quick fashion. So again, back to the common misconceptions or multiple myths that come up. Your process, your approach to this really needs to be able to touch on multiple aspects, not just hey, this part of my business is so great, really is going to be in your best favor if you'd be able to speak to obviously what you've done and the growth opportunity and obviously the great ads that you have and currently and then it works.

So yeah, 100. I think it comes down to again, the execution. How much is your, how much traction has your company been able to to obtain based on where you are? Another example that I hear is I spent $2 million developing this software. Can I sell it for $2 million? The answer to that is typically no because it's not worth $2 million to a buyer, maybe some buyer somewhere. But that's not how most buyers are going to value your business. And the better you understand that, the more confidence you can give buyers when you speak with them.

Such a great point. That, or hey, I have this great marketing list that I can go and can be tapped on and can convert. Well, that may not be valued as such, right? They may not be able to be converted upon. So it's just yes, you'll have high value and of course there can be certain parts that will be seen as such, but not always in that way. And buyers have to be looking at the right time too. So just keep that in mind as you go to market. Now we transitioned over to selling your multiple right now. How are you going to be able to justify it? Right on that next slide too, Andrew, is step one. So prepare evidence in advance that I am the biggest stickler here at Acquire about and that is preparing the right documentation. If you have multiple assets feeding into one entity or one accounting software, make sure you can speak to it, parse it out, take the time to do it. Hire an accountant if you don't have one, make sure that that is very, very clear. Building trust and credibility is param you're selling your business. This is something new, obviously to a buyer. They have to feel very comfortable not only in what they're buying, but in you. You're really selling you as the owner operator for this as well. Make the job and the vision easier for the buyer. Right? So Making sure you have great financial documentation, able to speak to some of the market trends, some of the experiences and experiments you tried in terms of this type of scalability and maybe it didn't work or be be honest, hey, I'm a designer, I am a builder. I'm not really a great salesperson or a marketer. I think in these areas I have the infrastructure that with your experience, you can take this to the moon. So making sure you're able to speak to all of those early on and not being reactive, the amount of deals that unfortunately Andrew, myself, some of our other M and A team members have had to step in later on and find out. Oh man. The founder went to market, it didn't have this document or maybe their data room wasn't very clean so they were being reactive. And how trying to scrounge up things last minute. Well again, back to time is money. Buyers may be evaluating you and another business at the same time, potentially in the same space. So the cleaner you have your documentation, the better well prepared you are and able to speak to it. The easier you make it for a buyer to feel comfortable extending an offer to you, the better the process will be for you. And just the same, I will stress this as well. For you all is for buyers, it's a two way street. Don't think that you're solely selling just your business. You're evaluating the buyer. I'm sure this is, you know, very again pride and joy for a lot of you all. So make sure they have the right plan in place. Do they have a due diligence schedule? Do they have the right team to support when they're reviewing your documentation and reviewing the business. That when you go to market and you have done your proper diligence in your homework, you have that power to really have that conversation with the buyer so you don't feel that you're so underhanded and sort of having to bend at their their whim. So that's something that our team is, is able to help you out with as well.

Yeah, great points. Another one is does the buyer even have funds? Do they have the capital to even buy your business? But Christian, what I love about what you just went over is when you're speaking with buyers, your job as a founder is to de risk acquisition because the easier you make it for one buyer, the easier you're going to make it for other buyers to potentially submit offers. Going back to my first point, which again is you want to create as much interest of buyers so they submit multiple offers so you can negotiate against those to get better terms and ultimately a better price. And if you are going to market and you're not prepared, buyers are going to immediately devalue your business, unfortunately. So preparation is absolutely crucial when going to market.

Absolutely key. That is, that's if there's one thing you take away from that, that is going to market and not being reactive. Making sure you have your documents prepared as as far as some examples of what we highly recommend, a trillion 12 months P L is an absolute must, bare minimum broken out monthly if you can, and you've been in the space for three years or trailing 36 months is highly, highly valued. And asked by the majority of buyers that we find on our marketplace, we do a lot of sourcing as well. So we get an idea on what is most important to our buyers and our goal is just to transfer that knowledge to you. So if you have, you know, metrics, obviously that can be. We have a direct connection with Chart, Mogul and Stripe. So if you can connect, great. If you don't have that some, no, no shame here. Some people will track via, you know, spreadsheets and Google sheets and things like that. You know, just attach any, any metrics that can validate the manually submitted metrics that you've done. Recasted financials, as I mentioned a bit earlier, is going to be very key. A lot of savvy buyers will like to see not just trailing 12 months, but also your EBITDA and your discretionary spend and potentially you have certain add backs that may be able to increase your profit margin and then therefore justify a higher multiple. Right. So there's documents like that, your data room, a lot of your sensitive information will live in one particular area. Not to go live on the marketplace or anything like that, but start to work further and further down the acquisition journey. You want to have your technical documentation in a row, your product roadmap, your client contracts, all that stuff you want to have really well prepared. And one other aspect that I really stress to our founders is that record a video. I know not everyone is maybe charismatic or comfortable in front of a camera. It's worth it. It's really, really worth it. It can be short, three minutes, five minutes, but. But it doesn't have to be necessarily solely about a product demo, so to speak. Sure. Would that be helpful? Of course. But talk a little bit more around why you created the business. What is the unique market fit for it? Who's the ideal customer? What are the unique value adds to it. Why is your business worth acquiring. Adding a little bit more color commentary and context around that and then pairing that with the documentation, it just makes a process go that much smoother and it speeds it up. That way you're not having to hop on and have so many salutation calls and repeat your yourself again and again you can say, hey buyer, you've been able to watch this, you've now looked at my financials. Let's get down to the heart of the matter. It should make your experience on the platform that much more in light really in your favor, I would say.

I love that last point. Recording a video of yourself, an introductory video, because potentially thousands of buyers are going to see your listing on acquire.com and again, the more materials you can put together, even if it's something as simple as letting buyers get to know you through a video where you're over reviewing the documents you have or the opportunity that your startup solves the customers that you serve, that alone will save buyers a lot of time. And you're getting them interested to want to set up a call with you to dive in to learn more. Because again, I'm going to sound repetitive, but you want to get as many buyers as interested. So you speak to a number of different buyers and you're able to get a number of different offers for your business and that's how you're ultimately going to maximize your acquisition.

Absolutely. And we have such a vast buyer pool you may get reached out to by someone that's in the space, an experienced owner operator that wants to bolt this onto their tech stack. Great. They may get it right away. But we have a lot of buyers that may be first time buyers that just are so enamored by your business, but they're not in the space and they don't know if it's really going to be a clean application for them to take it over or not. So if it is, talk about that, talk about the element of how you can maybe sell to both parties. Maybe it's an investment group that wants to look into you. You want to be able to address those questions and the ability to be applied for really wherever the Persona or wherever the buyer is coming from. Now, in terms of step three, price strategically for max offers, this is key as well I mentioned a bit earlier, but leaving room for upward and downward mobility. It will be a negotiation, right? Very rarely do you sell for the least listed price because you have to net the right type of interest. And of course you want to get more favorable deal terms. So work with our advisor Rainier Our colleague actually wrote an article that discusses this as well. We can share in the chat, but pricing strategically, pricing low to get a bit more interest, being able to speak to it. Once you have those videos, as mentioned, some of the documents and talk about such, how great the opportunity is for the buyer will help to raise that number. Especially if you're looking to obviously sell for majority cash. But this also goes back to figure out what's most important to you. If you're not really that inclined to sell today, you may just want to test the market at that point then then all right, you maybe need to factor in a few different things on what that multiple looks like versus if you have a really strong need. But usually the, the best approach is finding a pretty good middle ground and then working the, the, you know, the deal from there.

I think those are all really, really great points, especially the point about pricing below market. There's even statistics around that where if you price even, I believe it's 10 to 20% below market range, you can see up to 50% more buyers. And we have those stats if you want to see them. But again, the more buyers you get interested, the more offers you can get. The way you're going to maximize your acquisition.

And then closing thoughts before we get to some Q and A is just as you can see, there's just so many factors that go into this. So take it in bite sized chunks. That's always the first fear I get from founders as well. This aspect of my business is great. Can we just focus on that and maybe shoe this one away? No, we have to really factor all of that and just know that maybe there's certain things that you don't value that buyers can value. So through our process, we turn over every rock. We effectively start to approach your business as if we were the buyer. Look through that lens. Where's the strong ad? Where's maybe the risk? Where's the market going? Is there anything that could impact the business? We factor all of that in and then we like to give you a pretty good idea of a range. And then based on that range, we can talk about what type of structure you're open to. We can talk about timeline, what's realistic. We can talk about even the type of buyer you're looking for. Do you want to be a part of an Aqua hire as, as part of this? Are you looking for a clean transition and transfer because you have a new venture that you've already started? I had a, a founder actually recently that was buying commercial real estate and they already had the, the down payment ready to go in 60 days. So they were like, oh, man, I have to sell and I'm willing to sell for a little bit lower. Okay, well then our approach and how we position your listing in your business will be very different from someone that says, you know what, I'm looking to maybe go a little bit above, and I'm willing to wait six months for that too. So just know the process cannot be approached as one. Every deal that we work with is very nuanced and very particular. So based on that, we'll help shape. And as you see on screen, a lot of that can factor into it. Just know you have a bite size start and then from there we'll work to get more granular based on your needs.

Couldn't agree more. Again, with valuations, it's not as simple as just taking a the number and putting it on your business. Every business is different. Businesses are growing faster, they're in different markets. Churn is higher. Your customers are different sizes. There's a lot to factor in and we do that@acquire.com and to round this out, if you want to take the guesswork out of your valuation, we do have a free SaaS valuation tool. And you can check this out@acquire.com free SaaS valuation. We'll put the, the link in the chat here, but check that out and that'll give you a starting point for, for how you should be thinking about the valuation and the multiple which you could potentially sell for on inquire.com and I think at that point we'll go ahead and take some questions. Christian, great job on that. That was very informative. I learned a lot.

Oh, I'm passionate about it. I'll speak to this until I'm blue in the face.

So I know you will. And everybody, just so you know, Christian does this all day, every day. So he's seen quite a bit different business types, different business sizes.

So.

So really great stuff. Christian.

Yeah. Please feel free. Reach out to me. I'm, I'm here. Our whole M team, we're, we're happy to, to assist.

All right, well, let's start with this question. How can I reassure buyers who are driving my valuation down due to a third party dependency? Do you want to take this first question, Christian?

Yeah, that's, that's always a big one that comes up too. I mean, if you've been in the space for some time, that's always the first one as well, right? Hey, I've been in the space case and that I've worked with this third party for X amount of years. There's been no form or fashion that I think this is going a different way. But also, hopefully you've built the model of your business where it's not solely dependent on one aspect. And if you fear that that might be the case, it may be time to start looking into diversifying your approach to the business. Same way I talk about being malleable when it comes to being listed on the platform. You'll have to do the same thing with your structure of your business at the end of the day. I have it a lot of times too, where I have a founder that maybe have one particular business model or even pricing structure from the beginning and all of a sudden it's, oh man, I don't know if it's going to be valued the same way. I may pivot. Is that going to be seen as a risk? Give it some time. Show that you've been able to be successful where maybe it wasn't so dependent on that third party and you'll be able to balance out some of the perceived risks in that way. But Andrew, I'd love to hear your opinion on what you've seen.

I think you hit the nail on the head in terms of how to think about it.

It.

There's always going to be a third party where. Depending on the business where, especially if it's platform risk, it's. Let me think of a specific example. Let's assume that the business is dependent on maybe, I don't know, the App Store or something like that. And there's different changes that happen to the App Store, if you remember this, Christian, which actually happened to business apps, the SaaS company that we were building. So it's a risk. I mean, buyers are going to view, you know, whichever platform that's powering your business as something that could change and that you're not fully in control of. I would just, you know, keep in mind that, you know, depending on how long you've been using, whatever the dependency is, has terms changed? Has any other companies had issues? But just be aware of it when you're in the sale process and be able to speak to it confidently is the main piece of advice I'd give. All right, next question. What advice would you give someone who wants to sell quickly but still get the highest purchase price? You care if I take this first one, Christian?

You got it.

All right. So again with. With speaking with buyers. The name of the game, in my opinion is always getting as much buyer interest as you possibly can and being able to facilitate as many offers from different buyers as you possibly can. And one of the the best ways that I've seen this done is using something called a deal schedule rule. So if you want to sell for the highest price and you want to do it quickly, you want to start by pricing your startup correctly. So if you're overpricing, the strategy probably isn't going to work because you're not going to get a lot of buyers interested. You don't get a lot of buyers interested, you're not going to see a lot of offers. With the deal schedule, you're able to essentially time gate each stage. So to start, you're going to tell buyers they have, you know, 30 days to schedule a call with you. If they don't schedule a call, they're out of the sale process. Then within two weeks of the initial setup call, they need to at least give you an indication they're going to submit an offer and then two weeks after that a formal offer. And the benefit of this is you're telling buyers that you want offers to all be received in a certain time frame. So you don't get one week number one or week number 14 where there's too big of a gap in time. And that allows you to review the offers and then again negotiate better terms or for a better price. So put more simply is put all buyers that you speak to on a specific timeline, be clear about it, communicate it, and make sure that you aren't overpricing your startup so you never get buyers interested in the first place. I don't know if you'd have anything to add to that, Christian, that.

That was well said. I would say just within that deal schedule as well. You can always talk about transition terms. Typically if you're looking to move quickly, that normally means you're not able, or for whatever reason be able to give longer than certain amount of weeks, months or potentially days, times of transition. So you can be very clear about, hey, I'm willing to, as a part of this transition and this sale, give you this amount of time, this amount of work. This goes back to having a lot of documentation and lock and step. If you have that, that'll only help assist the buyer to feel more comfortable saying, okay, that the seller or the founder is willing to give this amount of transition, but they also have the supporting documentation to help me out with those two. Okay, I can feel comfortable and that that I will distress too. Usually if you're looking to sell for the highest and we're talking about the quickest time frame. Those usually are butting heads. But Andrew's suggestion is the best approach. If you are wanting to take that and for a certain reason you need to sell quick but are really of course striving for your top line value.

Yeah, great points. Just having, you know, an open conversation around what you're willing to do for a transition can be huge because you're de risking the acquisition for buyers. So if you need to sell quickly and exit to go focus on another business or something like that, just letting buyers know what you're open to, again de risk the business so they're going to be more excited to potentially submit offers. So I love that point. All right, next question. If I'm in no rush to sell, would you recommend I wait for someone to make an above average offer? A strategic buyer, for example? You want to take the first crack of this one?

Yeah, this is a fun one. So for us, just as a general practice, we're never going to push you into accepting a deal. This is. We know how much hard work you put into this. You want to make sure it's the right terms on the right buyer, the right fit. That's my favorite type of sale too is when of course you want to make the most money, the best terms. But hey, I care about my business tremendously and I want to make sure it goes to a good home. Buyers can understand and value that. So do you. Should you wait? Sure. We want to make sure you get the right terms. Do I say and do we recommend you wait on a strategic buyer? I wouldn't say that. I think if you provide the most amount of value you'll get and we have a large buyer pool where we have a vast amount, we have financial and strategic. But you want to make sure that your value add is clear to see. And I think if you're starting to just test the market and see what's out there. Yes. And no rush. I would wait. But I will stress this again. What you may value and think that a strategic is going to value may not be the case. There's a lot of factors that have to line up up time wise of them. Looking for an acquisition of this particular type, this particular margin, this ip, this team size, this is where I can see I can scale at. I mean Andrew has some experience being able to speak to that as well. So I would say yes, you want to wait until you start to see some more of the market realities and not just purchase price, but also structure and transition. You may say you know what I want to make, make $2 million off of my business, but I want to make sure it's mostly cash. Well, okay, if that's the case, then it may take, you know, a little bit of time based on some of your, you know, arguments for and justifiable reasons for it. But Andrew, I know you can speak to that a little bit more at length as well.

Absolutely. So if you're waiting on a strategic buyer, I mean, the first thing I'd, I'd recommend is understanding how a strategic buyer will even be interested in submitting an offer for your business. You need to essentially be on their product roadmap or have a business that is going to be more valuable to the strategic buyer than it is to you. So these relationships and these types of acquisitions, they take much more time than say a financial buyer or private equity firm or high net worth individual. And if you're looking to sell to a strategic buyer, most of the time the best approach is to get to know the corp dev person, get to know the BP product at XYZ company, get to know the CEO. Start building these relationships now because it can take sometimes years, sometimes even longer than that. So if you're in no rush to sell and you're looking to wait for a strategic buyer, I would do it, but I wouldn't count on it is kind of what I'm saying. Again, it's every entrepreneur's dream to sell to a strategic buyer for 50 times revenue or 100 times revenue. But it's the outlier, it's not necessarily the norm. One of my friends who's an entrepreneur who runs a company called startups.com he told me once that entrepreneurs in his opinion should really think of their acquisition buckets in like this, where 90% of the time you're gonna sell to a financial buyer, you're going to sell to likely a private equity firm or again, a high net worth individual like him. He bought startups.com he bought zirtual.com he bought a number of different startups and that's what he's running now. And then 10% are going to sell to a strategic buyer for all the crazy reasons that you think you will. So your product is perfect, your customers have alignment. But again, thinking in realistic terms, it's going to take time, it's going to take a lot of effort and I wouldn't bank on it is the short answer there. So I hope that was helpful. All right, moving on to the next question. What would happen if I adjusted my Multiple. After listing my business, I'm going to hand it to you on this one, Christian.

Yeah, I mean, it goes back to the process of being malleable. You may have had an infusion of. Of revenue. Hey, I. The month of July was just outstanding. I tried this new marketing effort and it doubled the revenue that I've seen the last trailing twelve months on average. What do I do now? Do I shift that? The process is going to be, I kind of call it like a dance. You're going to be dancing back and forth and making changes accordingly on some factors. You know, valuing growth rate and projections of where you can go. Sure, certain buyers will value that, but they also want to factor in what you've done to the date. So it's going to be a combination of a little bit of both. By no means do you have to necessarily say, I'm going to stick at this price. And I don't think that's really a good approach anyways. You'll take market feedback. Hopefully you'll take some of our M and A team's expertise and then make, you know, a play to start there and then adjust accordingly. But if you change too frequently and too quickly, you may be seen as almost fish in the water. For certain buyers that may just say, well, okay, day. We're not really sure if this founder is dedicated to selling or if, hey, I'm dropping my price continuously early on. Maybe I just sit back and I wait and I'll wait until I see the lowest model go and maybe at that point I'll reach out. So that's why we stress a lot about yes, do your research, get an idea of common range multiples, factor in some of the unique value adds, factor in some of the risks, and then from there our team is happy to assist with this too is get a good idea of what we think a range that is most common. And then from there, try to try your best to be a bit steadfast, at least to start with. Hey, I find this is a good, reasonable, fair market number I want to stick to and then get buyer feedback. There's a. There's a document that we always recommend too, called a living question and answer document that factors in once you start to have more meetings. Well, this question came up where the buyer felt it was a perceived risk, but I was able to justify it and answer it. Okay, I added that into my, my document, my rolling list document to. To other buyers that may have also seen this as a perceived risk. And also I didn't think that this buyer maybe factored this into their evaluation in me and Element. Well, I'm going to add this to the document too. So being able to just. It's. It's a living process. This process is just as much about you. Yes. Preparing and listing as much as it is being able to be flexible and make adjustments there. So that was a very long way of saying you can make the adjustments, but when you do do, just make sure you have a justifiable reason to do it and don't necessarily do it immediately if you feel and you've talked to the team and we've given you some advice that it is justified.

100. I think the name of the game with this question is you got to be able to justify it. If you don't have a justifiable reason and you're increasing your multiple, Christian, you hit it on the head where the buyers might just not take you seriously. If you can't say, you know, we had a record month for July or growth is really picking up something to justify the new asking price, buyers just might look at it and wait. But again, we're. We're happy to provide guidance on, on that one as well. All right, we got two more questions here. How do market conditions influence the choice of evaluation multiple? And how would I know that it impacts my specific business? Christian, you care if I take this one to start?

Yeah, go ahead.

So, a lot. So the short answer, market conditions, they definitely influence the valuation multiple. For example, right now, the name of the game is profitability. Things changed. Interest rates are higher. Four years ago or three years ago, interest rates were zero and revenue multiples were anything buyers were talking about. So things do shift according to the market. So being aware of that is. Is key. And then in terms of the specific business that you run, going back to what we were saying earlier, every business is different, but most of the time, valuations will be within some sort of ballpark. And what I mean by that is, again, three years ago, multiples were a multiple of revenue, and they were very high. And it's rare to see that today. And today what we mainly see is profitability multiples. But, Christian, I'd love to get your thoughts on this one, too.

Yeah, that's. That's the name of the game is just being able to stay very close to your market. I discussed recently with some founders that were in the AI space that were a day late on the WWC announcement by Apple, and they didn't understand, oh, this was the announcement. Now, how is it going to impact me oh, you know, I did some further research. There's an open source version of what my business is. There are certain things that can really change and shift your valuation and how you're viewed. That's why it's always really smart to just do a full analysis of saying, okay, great. Even if there is something that impacts my business, this is what's unique to it. This is something that I have maybe in terms of the diversification of the customer base or in terms of the proprietary tech. There's other elements to it that can say, hey, even despite some of the market conditions, I think I'm justified and being valued in this manner. But being realistic I think is key. We talked about it pretty much all day. Today is just being very real about how markets can shift. That's another reason why don't wait for that perfect time. Don't wait for that perfect necessarily buyer find one that aligns very closely with your core values and maybe your asks of not just purchase price, but terms and transition and your elements of being able to be maybe involved in the business, moving, moving forward, factor that into it and then you know, obviously make the, the proper adjustments accordingly.

Yeah, great points. Okay, last question. How do we include other factors in the valuation other than revenue, Things like brand, social media, presence, reviews, number of customers, region we operate in, etc?

Yeah, it's huge. It's huge. I mean, yes, we talk a lot about the profit and revenue and certain ip but there's other elements. But it's also key to no know the certain buyer you're talking to. Right. If there's a, a large entity that maybe has experience in this space and they have a lot of this already, they might say okay, you know what, maybe I don't value this highly. Maybe it's someone that's new again to the space that says wow, it's a lock and loaded, ready to go business. They have such a great brand name, their SEO is fantastic. I maybe know I don't have to invest as much marketing dollars to drive in clientele that I can capitalize on. I have an expertise in converting from trials to paid or from just the clicks click through rate. I know maybe I can factor in my element and maybe I'm maybe willing to that aspect. I kind of considered I was going to have to save for marketing dollars. Maybe because I love this business so much of the way you built it, I'm going to maybe put that into my offer. There's a namesake in the business reviews as mentioned, you've been in the space for multiple years versus maybe I have a very high customer concentration of just a few enterprise customers. Maybe they're on one region and element that I have no expertise in. I need to now hire someone that I can staff. I maybe need to your time maybe to pay you a little bit of a consulting fee to help me to learn that market that may influence how much I'm willing to give you top line on my offer. So there's a lot that can be viewed there. It's obviously it's not just going to be one particular answer there. There's a lot of factors into it really. It'll depend on the buyer Persona and how much you're going to be able to convey to them that not only is it a good value but you're de risking the acquisition. That is a methodology that I will stress to a lot of founders I speak with is a lot of time. It's a hey, my value is this, this, this and this. And you may not think through the buyer's lens. So before you go to market, poke holes in your business. Poke holes in it. See if I have a risk here in the region I operate poke holes if hey, if this goes down here, I can totally see how you can make a justifiable argument that my business could potentially tank. Try to be able to address that ahead of time. I have that living Q and A document that I mentioned as well. Leverage that and you will be in a much better position if it were to come up and you'd be surprised. Things that you see that may be a perceived risk that you can get out in front of early on and then further double down on the strong value adds of your business can make a world of a difference in terms of not just how quickly you get the good terms you're looking for, but also maybe how clean your process will go during due diligence because you've uncovered some of those perceived risks early on.

100 I loved what you said in terms of is it valuable to the buyer? For example, if you're selling to someone that is really skilled at converting customers from social media, that's going to be really, really valuable to that specific buyer. If they have experience with enterprise sales or SMB sales, whatever it may be, it has to have value to the specific buyer. So understanding what is important to the buyer is also huge. So great points there. Christian.

Yeah.

All right. Well that's all we have for today and I just want to thanks thank everybody for joining this webinar and also point out again if you have questions about your valuation or you want to speak to the acquire.com team, you might have a chance to speak with Christian if your business is a SaaS business with more than a hundred thousand in revenue. But go to acquire.com and check out the free SaaS valuation tool that we built. And this really takes a lot of the data that we've gathered from the number of acquisitions we facilitated. And if you have questions, we're here to help. We'd love to assist with, you know, really working through these questions because we know that valuations and multiples can be one of the biggest factors when selling your business. So with that being said, I hope you all enjoyed this webinar, and we hope to work with you in the near future. Cheers, everybody.

See you.