Evaluating Pricing Power
How To Tell If A Business Has The Ability To Raise Its Prices
Happy Thursday folks!
Thanks for joining us for another edition of Atlasview Insights. We use this newsletter to share our strategies, philosophies, experiences, and lessons we’ve learned along the way. Small bite-sized insights for business owners, dealmakers, and investors.
In this newsletter, we cover:
Join Our CEO/Operator Network
Our Investment Criteria
Evaluate Pricing Power
News: Atlasview Completes Successful Exit of Viostream
ICYMI - Popular Previous Issues
Our Deal Process
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Join Our CEO/Operator Network
Atlasview Equity Partners is on the lookout for talented CEOs and experienced operators to drive growth at our portfolio companies. We are seeking professionals with an impressive track record and an abundance of ambition. If you're eager to leverage your leadership skills, build a lower-mid market business into a market leader, and generate significant personal wealth, we want to hear from you.
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By joining our exclusive list of top-tier candidates, you'll be the first to know about exciting CEO and operator opportunities within our expanding portfolio. We currently have an exciting pipeline of new opportunities, so join our network ASAP.
Have An Opportunity For Us?
Before we jump into this issue, a quick reminder, Atlasview Equity Partners is a private equity firm acquiring and investing in software, business services, and other asset-light B2B businesses. For platform investments, we look for:
Business Model: software, business services, other asset-light
Business Size: minimum $1.5m EBITDA or $10m revenue
Business Profile: sticky B2B customer base
Business HQ: US & Canada
For add-on acquisitions for our portfolio companies, we have no size/geography criteria. We’re actively seeking add-ons in the library, archive, legal, and government niches.
Whether you’re a business owner interested in working with us, or an intermediary with a deal to share, always feel free to contact us!
Evaluating Pricing Power
At Atlasview we are huge fans of businesses that can consistently raise their prices. In fact, pricing power is the first thing we look for when assessing a new investment. As the Oracle of Omaha best put it:
We often find that many businesses, particularly owner-operated ones, haven’t priced their products/services to reflect their true value. Price optimization is one of the first value-creation levers we pull once we acquire a business. It’s one of the fastest and most effective ways to grow revenue, profits, improve cash flow and create value (assuming the business has pricing power).
Here are 5 key elements we look for to determine if a business has pricing power:
1 - Product or Service is Mission-Critical
When a product or service is mission-critical, it means that customers depend on it for their essential operations or daily activities. This dependency makes customers more willing to accept price increases.
2 - Switching Costs Are High
When a product or service has high switching costs, customers face significant expenses, time, risks and or effort to change to a competitor. This creates a barrier to switching, allowing the business to raise prices with less risk of losing customers.
3 - Price Represents Low Share of Customer Wallet
When a product or service represents a low share of the customer's wallet, it means the cost is relatively small compared to the customer’s overall budget. Additionally, the smaller the contract or order value, the less likely it will be negotiated or put through an RFP process. This allows the business to raise prices without much adverse reaction.
Bonus points: the customers have large & growing wallets!
4 - Value is More Important Than Price
The value a customer derives from the product or service is far greater than the price they pay for it. This makes a customer far less sensitive to price increases, since there would still remain a large delta between value and price, even after the increase.
5 - Little to No Alternatives
The product/service is specialized to a specific niche and there are very few, or no, comparable alternatives. Niche markets are usually relatively small, so they don’t attract much capital or ambitious start-ups. This is one of the many reasons we love vertical niche businesses.
It’s rare that a business possesses all of the above, but even just a couple of these factors can give a business significant pricing power.
News: Atlasview Completes Successful Exit of Viostream
Atlasview has successfully realized its investment in Viostream through a sale to Banyan Software. Banyan is a leading acquirer of great enterprise software businesses globally.
Founded in 2002 Viostream offers a highly secured, scalable video content management and streaming platform. The comprehensive software suite is designed specifically for government departments and large corporations.
Atlasview invested in Viostream in 2021 and helped navigate the company through transformational initiatives. We are excited for the new owners to shepherd the business through its next chapter!
In Case You Missed It
Here are some of our previous popular issues:
Why We Love The Porter's 5 Forces Analysis
5 Value Creation Levers To Increase Revenue
Why We Love Vertical Niche Businesses
Our Process at Atlasview
We pride ourselves on having a simple and transparent process. Our streamlined process enables us to move quickly to get you answers fast.
Step 1: Contact Us
Step 2: Execute NDA & Schedule Call
Step 3: Receive Offer & High-Level Terms
Step 4: Execute LOI & Complete DD
Step 5: Close Deal & Receive The Cash
Step 6: The Fun Part Begins!
Whether you’re a business owner interested in working with us, or an intermediary with a deal to share, always feel free to contact us!
About Us
Atlasview Equity Partners is a private equity firm acquiring and investing in software, services, and other asset-light B2B businesses. We combine patient capital with proven strategies to deliver predictable results for our stakeholders.