The Best SaaS Business Brokers to Help You Sell Your Business for Maximum Value
SaaS (Software as a Service) platforms are thriving in both consumer and business markets, and in 2023, they’re poised to keep doing well:
Statista reports that, by 2023, the SaaS industry is projected to reach $195 billion in value.
According to SkyQuest, the industry will grow to be worth $720 billion by 2028.
With millions of consumers and vast numbers of companies relying on SaaS applications every day, you might wonder whether it’s a good time to sell or buy a SaaS software business.
It could be — but this decision is best made with input from a professional broker in many cases. A SaaS business broker will know what to look for on your behalf and can help you secure the best possible deal and the biggest financial upside.
Why Sellers Should Work With A SaaS Business Broker
Many factors can affect the value of a SaaS software firm in a buyer’s eyes. These can include Key Performance Indicators (KPIs), such as customer acquisition cost (CAC), revenue growth, churn, and operating costs, as well as qualitative factors like your product, brand awareness, and target market.
As a seller, you’ll want to ensure your business excels in all the metrics that matter before approaching buyers. It helps to have an experienced SaaS broker who knows the landscape, as well as all the intricacies of the business sale process, on your side.
Here’s some of what an experienced broker can do for you:
Value Your Business Appropriately
SaaS brokers will look at an array of metrics and financial data points to come up with a value for your business. Once you have that figure, you’ll be in a better place to negotiate confidently with qualified buyers.
Brokers may use various valuation formulas, including EBITDA (earnings before interest, taxes, depreciation, and amortization) and SDE (seller’s discretionary earnings). A multiple is then applied to determine a dollar amount your business can sell at. SaaS companies can fetch valuations as high as 4-10x SDE.
In addition, brokers often consider the Rule of 40 in SaaS valuations. The rule states that the profit margin (or free cash flow rate) plus the revenue growth rate should ideally be equal to or more than 40%. If the sum falls below this amount, your business is likely having trouble with cash flow. If above, the firm is likely poised for continued profitability.
Beyond these formulas, many intangibles and fast-moving tech market trends can affect any given SaaS platform’s dollar value. A seasoned SaaS broker will know the most relevant ones to consider as they evaluate your specific business.
Increase Your SaaS Business’s Value Before The Sale
Long before you engage with buyers, you’ll want to have increased your company’s worth. A broker can help you achieve this by helping you improve in crucial areas such as your customer retention rate, average customer lifetime value (CLV), and product-market fit.
Your broker might employ any number of value-boosting strategies months to a year or more before you enter the sale process. These approaches can help you reach a higher, more sustainable rate of recurring revenue months before you put your business on the market.
Help You With Due Diligence
Proper due diligence is crucial for matching with a qualified buyer and ensuring the sale goes off without a hitch. Nonetheless, it can be overwhelming.
A good SaaS broker will be familiar with all the necessary documentation, and every step needed to shore up your financial, operational, and legal standing. Their guidance through the due diligence process will enable you to focus on daily business operations in the run-up to the sale.
Ways That A SaaS Business Broker Can Help Buyers
Business brokers in the SaaS industry are particularly savvy about qualities that make potential acquisition targets valuable in both the short and long term. That makes them go-to professionals for any investor or enterprise seriously looking to add a good SaaS platform business to their portfolio.
Ways in which SaaS brokers can assist buyers include:
Evaluating Businesses Beyond Performance Metrics
Brokers can spot problematic signs in small SaaS companies, such as an increase in customer churn or a decrease in sales activity over a given length of time.
Some buyers might underestimate these issues and end up with a bad acquisition. On the other hand, buyers might unfairly write off businesses that are going through a temporary crunch, only to miss out on a great chance to turn around the fortunes of the brand or product in question.
A broker in the SaaS industry can help you distinguish bad potential targets from good ones, and provide a clear-eyed assessment of opportunities based on your current strengths and long-term goals as a buyer.
Choose Potential Targets With Product Integration Opportunities
Many potential buyers are software firms that would benefit from integrating a target acquisition’s technologies with their own, in part or in full. This can help increase your appeal to customers and sharpen your competitive edge.
A seasoned SaaS business broker will be able to see the possibilities where you may not and put you in touch with SaaS businesses that fit with your strategic vision.
Avoiding Pitfalls Related To Data Privacy And Security
SaaS software businesses often store huge amounts of proprietary information and customer data in the cloud. If there are breaches or faults in the cloud infrastructure, the whole business can be compromised.
Any SaaS business buyer should be wary of potential targets that are at increased risk of such a fate. An experienced broker can help evaluate a promising SaaS company’s compliance with modern security and data handling standards, and ensure there’s minimal cybersecurity risk before you go too far into negotiations.
What To Consider In A SaaS Business Broker
Both SaaS business buyers and sellers have many variables to consider before signing a deal. A SaaS business broker will be knowledgeable about and sensitive to all these issues.
Additionally, you’ll want to look for one who is:
Ethical and conscientious. A SaaS business broker must take the confidentiality of their clients seriously, especially when sensitive “big data” likely exists and can easily be compromised.
Knowledgeable about evolving software industry trends. The world is only becoming more and more reliant on software innovation every day, and brokers must stay on top of the trends to guide clients toward a worthwhile deal.
Savvy about marketing. A seasoned SaaS business broker will be able to boost a seller’s leads and sales well in advance of a deal or detect product integration opportunities to help a buyer capture a bigger share of the market.
A reputable broker can only help in the process and will employ their expertise to produce a win-win deal.
Why Work With Raincatcher?
The SaaS business brokers at Raincatcher have deep experience in the industry and are attentive to the ever-shifting trends.
If you’re selling your company, a Raincatcher SaaS broker will help you fetch the highest valuation for your SaaS platform business and ensure a lucrative sale.
On the other hand, if you’re a buyer, our brokers will help you identify the very best targets based on where you are and where you want to go, both in terms of near-term profitability and growth ambitions for the future.
Are you ready to capitalize on this booming software sector, and profitably sell or purchase a SaaS business? If so, get in touch with Raincatcher today!
