What negotiation power do SaaS founders have when an experienced buyer comes with an interesting offer and 10 lawyers on their team? And you don’t have experienced lawyers or M&A advisors helping you?
SaaS founders can have a lot of leverage, as it turns out.
They own all the cards–but only if they aren’t desperate to sell anytime soon.
The ultimate leverage for founders when a buyer doesn’t give you a great enough deal is saying this:
“No, thank you. ”
“That doesn’t work for me right now. Let’s talk next year when we grow into a more valuable company with more potential buyers.”
They aren’t typically competing with other potential buyers.
They are competing with you building a more valuable business they will have to pay more for in one or two years.
This only works if you have a healthy, growing business that will keep growing.
Even 10% growth with low churn makes your business more valuable next year.
30% growth doubles your revenue in 2 years, doubling your value at the same reasonable revenue multiple.
And it only works if you aren’t desperate to get a deal done.
- If you don’t have impatient investors pushing you to sell sooner.
- If you won’t run out of cash.
- If you aren’t leaking customers with high churn.
- If you aren’t burned out and tired and can’t imagine another year.
Practical founders know their OPTIONALITY is their most valuable asset.
Optionality is the ability to say “No thank you” to a bad deal (and sometimes a good deal) to get the deal you want.
Optionality is the ability to keep going just fine and grow the businesses steadily.
Optionality is the ability to change your mind when things change. To sell now or sell later, raise a little funding, buy out angel investors, pivot your company, take profits, or invest more.
Founders often need to be reminded that “You are the prize” when potential investors or acquirers start pushing you around.
They are there because you have something valuable that they really, really want.
Most founders refuse their first real offer, which is lowball or just “good.”
Buyers expect this. They are simply checking to see if you need to sell right now.
But this works only when you run a tight business, manage cash efficiently, have happy customers and happy employees, and can stay sane in this crazy growth game.
Founders should expect lots of markdowns after an LOI is signed, for various reasons.
The deal is never done until it’s done, so don’t lose your ability to say No until the end.
The ultimate superpower for SaaS founders in this game is your optionality–your ability to say “No thank you.”
Until you can say, “Yes, that works for me.”
Your up-and-running SaaS business is already valuable.
You can make it more valuable.
