I think the best place to start is your startup's net worth which includes all assets, the salaries of your staff, and total sales. Say for instance, your business' net worth is $300,000. That's a good middle ground starting point, but your price to this other company can rise or drop from there.

The next step would be to study your competitors and see if you can estimate their approximate net worth. If you can research about 3 to 5 companies in your competition and space, take the average, so the average could be $450,000 for instance.

Next, have several meetings with this company and see how bad they really want you and how far they are willing to go to acquire you. When I say several meetings, you need to really see what they are willing to pay and compare it to your net worth and average net worth of your competitors. You may be able to go higher from there and let this company negotiate your price down.

Be prepared to show them the average net worth of your competition and yours, but only show them the higher figure so they can negotiate your price down. Have an absolute lowest price that you are willing to go to sell.

Good luck.

Bruce

If you have steady positive cash flows, expect them to value you based on a discounted cash flow with an expected terminal value. Typically a 5 year model is a good starting point. The good news is that those include a lot of assumptions, specifically around growth rates for revenue and expenses.

If you'd like to talk through common valuation techniques and get an idea of your company's worth, let me know. We can find a time to meet.