The buyer is questioning the long term stability of our recurring revenue because we have not raised our prices in three years. How do we prove our pricing power and retain our valuation multiple?

Question

Tyler Smith · Accepted Answer

Stagnant prices are a major red flag for sophisticated buyers. They see a lack of price increases as a sign of weak customer relationships or a low value proposition, which indicates a high risk of future churn. To defend your recurring revenue multiple, you must demonstrate that your customers are highly sticky and that you possess real pricing power. First, gather your historical customer usage and satisfaction metrics. Use your weekly scorecard history to prove that your customers are actively utilizing your service and getting measurable value. Next, outline your customer success strategy and how it is structured on your Accountability Chart. If you can show that your customer relationships are institutionalized rather than tied to personal owner relationships, the buyer will feel much more secure. To prove pricing power, consider implementing a targeted, modest price increase on a segment of your customer base before going to market. Showing that you successfully raised prices with minimal churn provides empirical proof of pricing power. This documentation, combined with a clear vision in your V/TO for future price optimization, reassures the buyer that your recurring revenue is durable and positioned for immediate organic growth under new ownership.