5 ways to make your startup more attractive to buyers

You might build a business, even a profitable one, but it’s unlikely to be your big payday.

Your big payday comes when selling your business.

That day might seem distant, but for the biggest return on your hard work, there are things you can do now to make your business more attractive to buyers later.

When I built my previously acquired business, Bizness Apps, a mobile app builder, I knew I wanted to sell it from day one. That ended in a multimillion-dollar acquisition ten years later.

But you don’t need to wait as long as I did. Smaller acquisitions – even in the tens of thousands – don’t just free you to work on new projects but can also fund them.

Today I help 1,000s of founders get acquired as CEO and founder of Acquire.com.

Here’s what I’ve learned about what makes a business attractive to buyers.

1. Automate everything

Buyers hate busywork. Admin. The little chores that demand more of your time as your company grows.

Admin takes buyers away from the work that earns a return on their investment, like acquiring and retaining customers. If your company more or less runs by itself, buyers can pursue growth.

For example, at Bizness Apps, we used to need 10 people working on uploading apps to the App Store because it was a 45-minute job each time.

Then we built software that automated the delivery of these apps to the Apple Review Team, freeing our teams to focus on more fulfilling and rewarding work.

Here are some other areas you could automate:

  • Calendars and scheduling: Apps like Calendly save you time fiddling with calendars to secure a time to speak to a customer, partner, or vendor.
  • Customer support and ticket management: Self-service helpdesks with answers to common questions, chatbots, asynchronous webinars, and other tools can enable customers to help themselves.
  • Product renewals and upgrades: Email automation on product renewal dates or notices of approaching higher plan tiers can save you or a marketing team from chasing or retaining revenue manually.
  • Customer onboarding: Videos, demos, chatbots, and webinars are all possible automations that free customers to onboard themselves without consulting you or your support team.
  • Social media management: Schedule your tweets months in advance and get notified of social media mentions of your business without manual input.
  • Employee onboarding: Create templates for pre-start forms and a three-month onboarding plan with all the guidance new starts need in written or multimedia form.
  • Accounting: Pull together your payroll, income, expenses, and so on into one system or platform that automates basic admin and sends reminders for anything it can’t automate.

Automation shows buyers you run a lean, agile company that values scalability and efficiency – two maxims of every acquisition strategy.

2. Create recurring revenue

This might be a “well, duh” moment, but not all recurring revenue is alike.

First, lifetime subscriptions are great at getting customers through the door. But their lifetime value drops to zero after that first payment. The revenue only recurs if you upsell them.

“What about monthly revenue then?” The golden standard, you might think, and for some customers, that’s true. But the annual subscription:

  • Reduces customer churn by up to half
  • Attracts high-quality customers who need your product
  • Gives you more upfront cash to reinvest

We helped scale Bizness Apps by charging a yearly upfront fee, which allowed us to reinvest more cash into growing the business in a shorter timeframe.

That’s why you’ve probably noticed software vendors offering annual subscriptions cheaper than monthly ones. They can do more with the cash upfront than spreading it over 12 months.

Buyers might review your recurring revenue as part of a quality of earnings report. Especially on bigger acquisitions.

Monthly subscriptions are fine, but you need to work harder to convince customers to stay. You have less time to demonstrate the full value of your product.

Persuade customers to pay annually, and you’re not in such a mad rush to retain them. You must consistently check in and listen to them, of course, so you’re always improving, but by committing to annual subscriptions, they’re already pretty convinced you’re the company for them.

And engaged, high-value customers are a big asset to buyers.

3. Focus on sustainable growth

If you’re running a profitable yet growing business without any outside funding, congratulations. You’ve found the holy grail of acquisitions. The ultimate buyer fantasy.

Why? A revenue-at-all-costs approach, the kind of hyper-growth strategy venture capitalists might encourage you to pursue, often comes with unpleasant side effects.

For example, you could stress yourself silly, end up hating the job, and easily burn out. Imagine the impact on your employees and company performance.

Also, it can encourage the wrong behaviors. With piles of investor cash in the bank, it’s tempting to spend on another ad campaign rather than work out why growth has plateaued.

I bootstrapped my first life-changing exit. Every dollar counts when bootstrapping, so we relied heavily on storytelling and press to scale Bizness Apps and find customers. We were featured multiple times in just about every publication you can think of, from TechCrunch to Forbes.

When we acquired new customers, we did everything possible to make them happy. Happy customers are your most sustainable source of revenue. Delight them and they’ll return time and again.

Stay lean, agile, and responsive to the market and you’ll not only profit when your VC-backed competitors are burning cash, but you’ll attract plenty of buyer interest too.

And once you’ve built and sold a company, you’re infinitely wiser as to how to spend investors’ cash should they offer it to you in the future.

4. Write the book on how to run your business

Never underestimate the power of convenience.

Buyers are attracted to turnkey businesses. Those that can run with little effort because they’re automated and documented. They want you to make it easy to earn their return.

Amazon, for example, isn’t always the cheapest, but it’s one of the easiest shopping experiences. With a massive product range, free delivery, and a seamless checkout experience, it’s little wonder why so many people love shopping there.

Apple, too, has gone to great lengths to make buying decisions easy by designing products that “just work” out of the box.

Can you make your business “just work” after acquisition?

Yes, you can. Not just with automation, but also by writing the book on how to run your company. A buyer will excuse a little extra work if you’ve given them comprehensive and lucid instructions of what needs doing.

Attack this project like writing a training manual:

  1. Identify everything you do to run your business. Include people, technology, vendors, partners, and more. What bricks is your business built from and what keeps it standing?
  2. Document every process so that it’s easily repeatable. It’s okay to assume some prior knowledge from buyers, but generally, assume you’re drafting a manual for someone new to the industry.
  3. List your people, customers, partners, and vendors. Keep your HR records, customer lists, partner profiles, and vendor information in one place with contact details so buyers can find what they need fast.

I was fortunate enough to have a management team when I sold Bizness Apps in 2017. They helped me prepare documentation that explained every aspect of my business, including:

  • Internal wikis
  • Employee handbooks
  • Sales guides and processes
  • Customer support templates
  • Helpdesk articles
  • Tutorial videos

A benefit of this exercise is that you might spot areas to improve – knots of inefficiency you could unpick and increase your profit margin.

After all, if you can’t explain how your company is run – or why you’ve chosen to run it that way – you stand little hope of convincing a buyer to acquire it.

5. Write playbooks for future growth

Think of your business as a ship and each port is an exit event where the captain changes. You, the old captain, have arrived at port, ready to disembark for a new adventure.

The arriving captain wants a ship that’ll go the distance, a vessel that’ll carry them to the next exit event in a few years. To help the new captain succeed, you might share navigational charts, introduce them to the crew, and give them a tour of the ship.

It’s the same when selling your business. You want to equip the buyer with realistic playbooks for success as well as help them understand your business and the people running it.

Financial buyers, the most common type you’ll encounter, are primarily interested in your company’s performance:

  • Profit (EBITDA or SDE)
  • Revenue (MRR and ARR)
  • Churn rate
  • Growth rate
  • Customer acquisition cost
  • Lifetime value of customer
  • And lots more…

Buyers will use these metrics to forecast performance and calculate your valuation. The more evidence you share with buyers to justify your valuation, the likelier they are to pay it.

For example, identify growth opportunities and strategies to achieve performance targets. Research trends and macroeconomic factors that might impact the metrics above. How could buyers exploit or defend against such changes?

Example playbooks might include:

  • Updating marketing messaging to focus on power users
  • White-labeling your product to other businesses
  • Building a feature customers have been begging for
  • Introducing new or updating pricing tiers and plans
  • Embracing SEO and content marketing

Before I hired my CFO, Brian Cross, at Bizness Apps, we had a rough idea of where we were headed financially, but not nearly enough about why. We didn’t understand churn or have a roadmap for future growth. But when Brian arrived, that all changed.

Once we understood how our business performed, it became much easier to scale because we knew every dollar spent earned a return. And Brian provided the complex financial models that helped sell the business to a financial buyer.

When listing your business, outline potential growth levers and their impact on your financials. Give buyers a chart to that buried treasure. Whether they find success or not is up to them – just show what’s possible and how to achieve it.

The days of building one business for a multimillion-dollar investment followed by an IPO are over. For most founders, they never really began. They call them unicorns because they exist only in dreams for 99 percent of founders.

Instead, think of entrepreneurship as an investor might, as a portfolio of simultaneous or successive bets on yourself. Each time, you get better, multiplying your chances of a life-changing exit. I hope the tips above help you find yours. Good luck!

  1. 4

    Appreciate this Andrew!

    I know you’re biased but can you share any thoughts on using MicroAcquire in tandem with going outbound to certain buyers that would be a more natural fit?

    1. 1

      I think it's a great idea! Anything you can do to increase your buyer pool the more you can increase your chances of being acquired!

  2. 3

    To make your startup more attractive to buyers, focus on demonstrating growth potential, establishing a strong market position, building a scalable business model, fostering strategic partnerships, and showcasing a talented and experienced team. These factors increase the likelihood of attracting potential buyers and securing a favorable acquisition deal.

  3. 3

    Great piece of content loved it! Helped me a lot with my idea of a startup. I want to sell a SEO tool that helps people design a perfect piece of content according to E-E-A-T. 100 user have already started using its premium version but I still need investment for marketing it to the right audience.

    1. 1

      You probably don't need investors and I'm rooting for you!

  4. 3

    This is super helpful Andrew! Do you think it is possible to sell a tool that has about ~1000 users, a strong customer acquisition market but a conversion rate of 0.5% for paid customer?

    1. 1

      Absolutely! List it on Acquire.com and we can help!

  5. 2

    Those are some great tips Andrew!

    Profitable & sustainable growth is definitely not the only thing buyers are looking for.

    Still, I believe a big part of getting there is thinking about your business model, monetization model, and pricing strategy as early as possible. When that is part of the entire process of building and growing your startup, you're much better off in handling the rest of the points you mentioned.

    I really think pricing & monetization is not talked about enough in the SaaS startup community.

    What percentage of the startups you've seen have been actively working on pricing? In terms of iteration, trying different monetization models, testing packaging, etc?

    1. 1

      I completely agree Mike. As for price testing, I'd say about as much as other startups which is not often enough.

  6. 2

    Wow, talk about a treasure map for entrepreneurs! You've cracked the code to the "acquisition enigma". Automation, recurring revenue, sustainable growth - it's like the holy trinity for an attractive business.

    And who knew? Apparently, writing a "business book" is not just for bestseller lists, but also for wooing buyers. Smart! Plus, the idea of entrepreneurship as a personal casino where you're the house - love it! Betting on ourselves is truly the best bet we can make. Thanks for this goldmine of tips!

    1. 1

      Glad to you enjoyed the read!

  7. 2

    YES to all of this. I dipped a toe into selling one of my businesses last year through a broker. I quickly learned what turns buyers off. The BIG thing is nobody wants to buy a JOB for themselves. They want a well-oiled machine with systems, automations, and formal agreements in place. Unfortunately for me, I had none of those.

    1. 1

      I wouldn't say no one as we see many of these types of acquisitions ourselves, really depends on the buyer and what buyers you're marketing your startup to be acquired to. We have a lot of "job buyers" on acquire.com but I agree with your sentiment.

  8. 2

    Pretty good article, thanks.

  9. 2

    What's your experience with pre-revenue projects?

  10. 2

    Thank you for the insights @MicroAcquire I'll look into it.

    1. 1

      Glad you enjoyed the read!

  11. 2

    It turned out to be quite an interesting article. A lot of this needs to be noted down.

    1. 1

      Glad you enjoyed the read!

  12. 2

    Great insights! Thank you Andrew!

  13. 2

    This is a very insightful framework to follow. Thanks a ton for writing it!

    1. 1

      Thanks Braden I appreciate you!

  14. 2

    Thanks, I'm selling my app through this platform, hope everything goes well.

    1. 1

      Awesome to hear! I'm rooting for you!

  15. 2

    I believe that these guidelines should be followed regardless of your intention to sell, as they can also be useful for onboarding new employees as your company grows.

  16. 2

    that's great guide. I think one should follow all these even if you don't plan to sell. It would also help you in onboarding employees as you grow.

    1. 1

      Thanks I'm glad this was helpful!

  17. 2

    @MicroAcquire, this is interesting. So if I do all this, roughly how much higher would I be able to set my price? Like, as a ballpark, could increase it from a multiple of 3x to 4x? 6x?

    And how would I make it clear to potential buyers at a glance that I did all of that, so that I can avoid them dismissing my listing out of hand due to the higher price?

    1. 1

      This is a good read: https://blog.acquire.com/acquire-com-biannual-acquisition-multiples-report-feb-2023/

      I would say these items will increase buyer interest but it's hard to say how much it would increase your valuation as most acquisitions are valued on traction.

      But without these items, creating buyer interest will be much more difficult.

  18. 2

    Super helpful, thanks! Really interested in selling one day and trying new things - glad to see that there are things I can do now (other than growing the business) to help with the acquisition later. Now I just need to find the time... 😅

  19. 1

    Hey Andrew! Loved your tips on making a startup more attractive to buyers. The advice on value proposition and building an online presence was spot-on. Thanks for the insights, Keep up the great work! 👍

  20. 1

    Wow. Awesome article! It's packed with valuable insights, highlighting the significance of automation, recurring revenue, sustainable growth, documentation, and providing playbooks for future growth. These factors can really amp up the value of your business when it's time to sell.

    Oh, and here's a cool tip for you! If you're thinking of expanding your business globally and reaching a wider audience, you should definitely check out ConveyThis. It's a game-changing multilingual solution that seamlessly integrates with your website, making it super easy to translate and localize your content for different markets.

  21. 1

    Enjoyed this to the best Andrew!!
    Being a 2-time founder myself, I could relate to a lot of stuff that helped me during the journey and I learned the hard way!! Wish I got my hands on this previously! Gold Stuff!!

  22. 1

    Making your startup more attractive to potential buyers is crucial for a successful exit strategy. Check out these 5 effective ways to enhance the value of your startup. And if you're looking for additional resources and tools to optimize your startup's attractiveness and streamline the selling process, be sure to explore the offerings at 𝟏𝐭𝐨𝐨𝐥𝐬.𝐜𝐨. From growth strategies to valuation techniques, they provide valuable insights and solutions to help you position your startup for a lucrative acquisition. Don't miss out on maximizing your startup's potential!

    1. 1

      I'm rooting for you my friend!

  23. 1

    how do you bookmark?

  24. 1

    This comment was deleted 4 months ago.

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