11 Considerations To Properly Position Your Startup For An Acquisition

For many startups, an acquisition is an ultimate goal, but it can also be an overwhelming process. 

Selling your startup can be a full-time job. There are too many things to do, and you need to be prepared. Trust me, and I’ve been there.

That’s why I created a list of steps you need to follow to sell your startup and make the process as smooth as possible.

1. Be clear on goals 

The first step is to set your goals and a vision of what an ideal scenario looks like. What do you want to get out of the acquisition? What does success look like beyond monetary value?

This is the opportunity to understand the impact of a potential acquisition and the steps you need to follow to finalize a deal. 

2. Start with an internal audit. 

The best way to prepare your business for an acquisition is to do your own due diligence early. Look at your financial state, your taxes, and any outstanding issues that may come out. 

There’s always something coming up in this process if you’ve been in business for more than a year so make sure you review everything to prevent potential delays during the acquisition. Put yourself in the mindset of a buyer and think about what details you would look at when buying anything that has a lot of moving parts where any one component can deem it a good or bad purchase.

3. Bring experts on board.

Having support from a range of experts can speed up the acquisition process. Attorneys, tax advisors, financial consultants, and investment bankers can help you make way for your exit easier in areas where they certainly have more experience than you do.

Although platforms like MicroAcquire are making it easier to find a viable buyer, if you’re planning to sell your startup for life-changing money, it’s always worth the extra time and cost to get the right expert to help secure your desired outcome. You don’t want to leave anything to chance, right?

4. Demonstrate value

What makes your business stand out? This is a crucial question, and you should know the answer before you start any negotiations. It gives you both leverage and differentiation from the competition.

You need to demonstrate tangible value to the potential buyer so make sure you map out what makes your business appealing to prospects.

Whether it’s your product, brand, team, growth trajectory, customers, or the market fit, all the numbers and statements should be in place to tell a good story.

5. Know your numbers

I can’t stress enough how important it is to own your financial metrics to increase your chances of acquisition. Your numbers can indicate strength, ambition, and resilience. Take a moment to practice speaking about your numbers without needing to check your notes. As a founder, you know you’ve lived through the fire of building your business every day but adding that extra impression to the buyer provides a level of confidence that reverberates positively through the deal talks.

Strong growth metrics can make it easier to start a conversation about an acquisition, especially when they indicate a healthy state for your startup and a good return on investment.

When it comes to specific metrics to focus on, here are the ones you can’t ignore.

    • Monthly Recurring Revenue (MRR)

This is the revenue you generate every month from your existing clients, and it should be growing from one month to another. Many SaaS businesses rely on their MRR to communicate growth, especially at the earlier stages.

    • Annual Recurring Revenue (ARR)

This is the annual revenue you generate from subscriptions. You can also calculate it by multiplying your MRR by 12. In order to scale your business, you want to see stable growth in your ARR from one year to another from new contracts and up-selling opportunities for existing clients. 

    • Customer Lifetime Value (LTV)

This is a more specific metric that indicates the revenue your customers generate over time. A high LTV is a promising sign for your business, so it’s important to explore the best ways to improve customer loyalty and cross-selling opportunities.

    • Churn rate

This is another important metric, and it has to do with the customers you are losing at a set period of time, whether it’s a month or a quarter. This is a worrying indication for any business, and you want to spot any such trends as early as possible. Growth should always outpace churn, so make sure you look at the growth tactics that will balance any churn.

    • Customer Acquisition Cost (CAC)

This is the cost of acquiring new customers, and you want to keep it as low as possible. A low CAC combined with a high LTV indicates that you’re making the most out of each customer, and this should be your end goal.

You don’t want to spend a fortune to acquire new customers that don’t lead to profit, right?

Once you get all your numbers right, it’s time to tell a story and bring them together.

Look at all the numbers, find what they have in common and make your business case through them. Remember, numbers mean nothing if you can’t own the narrative of how you’re on the way to scale.

6. Keep your customers close.

Your customers can also tell a good story about your business. A long-term relationship with your biggest clients guarantees future success, especially if they have already signed multi-year contracts.

Having big clients tied to your business for several years proves that you’re financially stable to expand and feel secure during the growth phase. All buyers would be happy to hear this.

Even with the smaller clients, it’s important to explore all the different ways to increase their LTV. What do they want from you? How can you get them to use your services for a longer period of time?

Be proactive with customer feedback and make sure you always deliver the best customer experience to secure long-term engagement.

7. Keep your team closer.

Your team makes your business stand out. Talent and dedication can accelerate your business growth, and this is an important story to communicate to all potential buyers.

When it comes to working towards an acquisition, you need to keep your team in the loop. While they still need to work on the day-to-day goals, they also need to feel involved to make the transition easier. You don’t want to lose any of your employees during the process simply because you didn’t communicate the change on time, right?

8. Learn how to communicate your business value

This is the time to freshen up your pitch deck. No, this is not just another sales pitch.

A potential buyer wants to see more than that and – use the metrics that prove your business worth but be prepared to own your narrative.

How does the business stand out in the market? What can you achieve in the future?

The more you practice your elevator pitch, the easier it will be to sell your vision.

9. Align your key stakeholders

Right before the acquisition process, you need every help you can get. Involve your co-founders and senior stakeholders early in the process and update them on the progress.

Your management team has played a big role up to now in growing your business, and you don’t want to lose them for lack of transparency. They might even be able to help you in the process with a previous experience they might have had. Don’t be afraid to ask for help and trust what others can bring to the table.

10. Find out what your prospective buyer wants.

What does your prospect buyer want from you? 

The obvious answer is that they want to see the return on investment.

Now you need to work all the way to the desired outcome and what you need to do to reach and present the return on investment.

Why should someone buy your startup? 

Think of the key metrics that make your business stand out.

Communicate what makes you different from all your competitors.

Is it your product? Are you appealing to particular demographics? Does a competitor want to buy your startup to grow their business?

Use your strongest selling points to your advantage to use them as leverage in the acquisition process.

Do the work on your own for your prospective buyers.

Make it easy for them to find all the answers they need. 

Talk to other founders who sold their businesses. Research publicly available information to find out tips and tricks that make your business more appealing to buyers.

11. Find out what you want.

Last but not least, it’s time to find out what YOU want. What does success look like? Why do you want to sell your startup, and what would be a good outcome?

The answers to these questions will determine the success of a sale. Think carefully about what you want to get out of an acquisition. What’s important for you to consider an acquisition?

    • Level of involvement. How involved do you want to be in the process during and after the acquisition? What would the buyer expect from you, and what are you willing to accept?
    • Determining the team’s future. Will your employees continue working for the company? How important is this for your negotiations?
    • What’s next for you? Do you know what you want to do next? Is there a new business idea you want to pursue? Are you planning to take a break? What’s the best time to plan all these? 
    • Purchase price. Needless to say, an acquisition should come at a price that you’re happy with. Do you have a ballpark figure in mind? Do you want to plan the acquisition as soon as possible, or would you rather wait for the right price? 

A startup acquisition process can be time-consuming. You need to balance important conversations that will affect your startup’s future on top of your daily tasks. 

There will be times of questioning, frustration and uncertainty. Don’t lose hope, though.

This can be a very rewarding journey with lots of valuable lessons and hopefully a successful story of acquisition.

Good luck with the process.

Andrew GazdeckiAndrew Gazdecki

Andrew Gazdecki is a 4x founder with 3x exits, former CRO, and founder of MicroAcquire. Gazdecki has been featured in The New York Times, Forbes, Wall Street Journal, and Entrepreneur Magazine, as well as prominent industry blogs such as Axios, TechCrunch and VentureBeat.


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