4 Top Tips For Selling Your SaaS Business
It is well documented that SaaS valuations have fallen over the past 12 months. Whilst there is still a strong appetite for acquisitions in this market, buyers are increasingly picky with their targets. Having a long-term plan to gear your business towards your exit is key, instead of simply launching into a sale process. Here are our four top tips on how to build your SaaS business to exit:
1) Scale your revenue
Scalability has always been key in SaaS. As a rule, increased sales will drive higher interest from potential buyers and a higher multiple. However, the business must also put into place mechanisms that will enable the buyer to continue scaling revenues at minimal cost. An effective way to achieve this is to cut onboarding times and make it easier for customers to access the service. A true SaaS model, therefore, involves customers being able to sign up through a website without the need for a dedicated sales team, thus increasing both the scalability and profitability of your offering.
2) Control your costs
Many buyers are now expecting profitability, alongside scalable revenues. With the exception of development expenditure, SaaS businesses should be lean on costs. Reducing wage bills by keeping tabs on headcount is important as these are costs which directly impact the bottom line. Buyers don’t like to see unnecessary expenditure that doesn’t contribute to overall business growth and performance.
3) Carefully plan your development expenditure
One of largest costs for SaaS businesses is development expenditure. Obviously, your core product needs to be cutting edge. However, without a careful plan, this expenditure can quickly run out of control and deliver no commercial benefit to the business. Getting this wrong can be an expensive mistake that derails the business plan. Ensuring that commercial and feasibility studies are carried out before signing off on projects is therefore vital in helping to control costs as well as to increase your sales. For example, bringing your development team in house can help you to keep better track of projects and is also more attractive to a buyer as the technical knowledge is in the business. However, this has to be matched against your profitability.
4) Concentrate on what you do best
Many SaaS businesses make the mistake of trying to diversify their product in too many ways. Whilst this can sometimes open up new markets, it can also be a value drag. Shifting focus away from your core product will divert valuable resources away from what makes your business attractive to a buyer. A lack of focus and strategic direction may even prevent a buyer from pursuing a deal.
Planning an exit for your SaaS business is difficult, but by following these tips and seeking advice early you can increase your chance of a successful outcome when it comes to the eventual sale.
If you'd like to discuss how we can help you fund, sell or buy a business, please contact me or book an informal chat via our website
Myles Hamilton is a Director – M&A at Shaw & Co.
In October 2021, GoProposal, a major supplier of accounting and bookkeeping software, was acquired by Sage, a leading provider of finance, accounting and payroll solutions to SMEs.
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