How to Sell a SaaS Business

Valuation multiples on a software as a service business have a very large range. Are you at a 3X multiple, 7x multiple, or 20x multiple? Let’s examine what you can do to build your business for a more successful company sale. We have helped many Tech companies through the M&A process and have picked up many tips along the way as an experienced SaaS Business Broker, here we will show you exactly how to sell a SaaS Business.

Our SaaS Exit Strategy

 

What Makes Your Company Desirable for Buyers?

Strategic Moves for SaaS Owners Preparing for an Exit.

What moves the needle for a technology business valuation? Here’s what makes your SaaS company attractive to potential buyers:

  • Strong Recurring Revenue (ARR): Predictable, recurring revenue is a key driver of valuation. Focus on increasing your Annual Recurring Revenue (ARR) through customer retention, upsells, and new customer acquisition.
  • High Customer Lifetime Value (CLTV): A high CLTV indicates you’re retaining customers and generating long-term value. Strategies to improve CLTV include excellent customer service, product development aligned with customer needs, and subscription models that encourage long-term engagement.
  • Low Customer Acquisition Cost (CAC): A low CAC indicates efficient customer acquisition. Explore cost-effective marketing channels, optimize your sales funnel, and leverage strong customer testimonials to attract new customers efficiently.
  • Scalability and Growth Potential: Demonstrate a clear path for future growth. This could involve expanding your product offering, entering new markets, or developing new revenue streams.
  • Strong Team and Company Culture: A talented team with a strong company culture is a valuable asset. Invest in attracting and retaining top talent, foster a collaborative and innovative environment, and clearly communicate your company vision.

Real-Life Example: I recently advised a SaaS company in the HR space that implemented a customer success program, resulting in a 20% increase in CLTV. This, coupled with their impressive ARR growth, significantly boosted their valuation during the acquisition process. Read more about our experience as a technology business broker.

Hand holding a controller that is drawing on a laptop.

What Do I Need to Know to Sell My SaaS Company?

How to Choose a SaaS Business Broker / M&A Advisor:

  • Proven Experience in the SaaS Sector: Experience in selling similar SaaS companies ensures they understand the specific valuation metrics, buyer landscape, and leveraging your vast operational data to negotiate a company sale. Clean data to paint a great picture of your company is essential.
  • Strong Network of Potential Buyers: A broad network of strategic acquirers and private equity firms increases your exposure to the right buyers.
  • Negotiation Expertise: Your advisor should be a skilled negotiator, able to advocate for your best interests and secure a favorable deal. Understanding your technology, marketplace, and business model is essential to confidently, and successfully, negotiating the best terms for a sale.

Pricing Your SaaS Business:

Several factors influence SaaS company valuation, including ARR, growth rate, profitability, and customer base. A good M&A advisor will leverage industry benchmarks and financial modeling to arrive at an accurate valuation. We commonly do Technology business valuations as owners look to sell or want to know the full value of what they own.

Leveraging Networks and Brokers:

A reputable M&A advisor will have a well-established network of potential acquirers. They can create a blind competitive bidding process, ultimately driving up the sale price and acquiring great deal terms.

 

Wide screen showing a runway and a fake plan using the simulation

How to Maximize Current Profits and Exit Take-Home for a SaaS Company Business Sale

The Right Time to Sell:

There’s no one-size-fits-all answer, but some indicators suggest it might be time to sell:

  • Strong Market Conditions: A hot M&A market for SaaS companies can lead to a more favorable sale price.
  • Clear Growth Trajectory: Demonstrating consistent, sustainable growth makes your company more attractive to buyers.
  • Achieved Business Goals: If you’ve achieved the goals you set out for your business, selling may be the right next step.
  • Personal Reasons: Perhaps you’re looking to pursue a new venture or retire.

Preparing for Negotiations:

  • Know Your Value: Have a clear understanding of your company’s valuation based on market data and financial performance.
  • Prepare Negotiation Strategy: Work with your M&A advisor to develop a negotiation strategy that aligns with your goals and priorities. Remember, if you have only one buyer, you have no buyers!
  • Understand Buyer Motivations: Identify what motivates potential buyers and tailor your deal term negotiation strategy accordingly.

 

Exit Equity as Your SaaS Business Broker and M&A Advisor

What are the Critical Factors Exit Equity Will Use to Negotiate a High Price and Great Terms for My SaaS Business Sale?

At Exit Equity, our team of brokers and M&A advisors serves clients across all of Washington and Oregon. We prioritize personal connections by traveling to meet clients, view their operations, and attend in-person management meetings. Whether you’re buying or selling a business, we’re dedicated to providing expert guidance and support. Exit Equity, we understand the unique challenges and opportunities presented by selling a SaaS company. Here’s how we help you achieve a successful exit:

  • Valuation Expertise: We leverage our extensive experience and industry data to accurately assess your company’s value and ensure you receive a fair market price. We are NOT shooting from the hip when we go to market.
  • Strategic Deal Process: We create a structured and confidential sales process that attracts qualified buyers and maximizes your leverage.
  • Network of Acquirers: We have a vast network of strategic acquirers and private equity firms actively seeking high-growth SaaS and technology companies.
  • Negotiation Powerhouse: Our team has a proven track record of securing favorable terms for our clients, ensuring you achieve a successful exit.

Preparing Your SaaS Business for Sale:

  • Financial Housekeeping: Ensure your financial records are clean, accurate, and up-to-date. This includes preparing historical financial statements and projections.
  • Organize Due Diligence Materials: Prepare essential documents like customer contracts, segmentation, retention, acquisition, intellectual property information, and key employee agreements to streamline the due diligence process.
  • Develop Growth Narrative: Articulate a compelling story that showcases your company’s past successes, current traction, and future potential.

 

Wires hanging out of a server.

SaaS Business Sale FAQs

How Long Does it Typically Take to Sell My SaaS Business?

The timeline for selling a SaaS company can vary depending on several factors, including market conditions, the complexity of the deal, and buyer interest. Typically, the process can take anywhere from 6 to 12 months.

Should I Sell My SaaS Business Online?

While online marketplaces can connect you with potential buyers, they may not always attract the most qualified buyers for your SaaS company. A reputable M&A advisor can target strategic acquirers and private equity firms willing to pay a premium for your business. Negotiating a business sale on you owner requires you to learn the entire process from scratch and distract you from your normal management duties.

What is the Process to Sell a SaaS Business?

The M&A process timeline typically involves the following steps:
Preparation: Financial housekeeping, organizing due diligence materials, and developing a growth narrative.
Marketing & Deal Generation: Engaging your M&A advisor to identify potential buyers and generate interest. Typically we reach out to over 5k potential buyers between our 20 year plus curated buyer list, bespoke strategic buyer list creation process, and network of high net worth individuals, industry experts, wealth management professionals, M&A CPAs and attorneys.
Negotiation & Due Diligence: Negotiating term sheets, conducting due diligence, and finalizing the sale agreement.
Closing: Completing all necessary paperwork, transferring ownership of the company, and most importantly transferring payment into your bank account!

Selling your SaaS company can be a life-changing event. By understanding the key factors that contribute to a successful sale and partnering with the right M&A advisor, you can ensure a smooth and rewarding exit.

Ready to discuss your SaaS company’s exit strategy? Contact Exit Equity today for a free consultation.

About Exit Equity

Since 2005, we’ve helped hundreds of business owners make the biggest change in their career—shifting from owning a successful, privately-held business into a relaxing, passion-driven retirement. Meet the experienced team behind the work.

Learn More