Your Guide to Finding SaaS Businesses for Sale

There are many benefits of purchasing an established SaaS business, making it no surprise that they’re in high demand among savvy investors. However, to acquire the right company, you need to know what to look for when seeking SaaS businesses for sale. 

In this article, we answer several key questions related to acquiring SaaS businesses, including:

• The benefits of buying SaaS businesses
• Where to find great deals
• How to evaluate acquisition opportunities
• Strategies for maximizing your success after acquisition

Benefits of Buying SaaS businesses

As an investor, there are several key benefits to acquiring a SaaS business. Some of their attractive features include: 

• Recurring Revenue
• Scalability
• High Customer Lifetime Value (CLV)
• Distributed work teams

Recurring Revenue Model

One of the most appealing qualities of SaaS businesses is recurring revenue. 

Most SaaS businesses focus on attracting subscription customers whom they bill each pay period. Often, these periods are monthly, quarterly, or annually. As long as the SaaS business maintains a low churn rate, each existing customer can provide years of consistent revenue.

“One of the most appealing qualities of SaaS businesses is recurring revenue.”

Because recurring revenue is relatively predictable, it provides SaaS businesses with a level of stability that many other business models don’t experience. From an investment standpoint, this can significantly reduce risk.

SaaS Businesses Can Be Highly Scalable

Because SaaS businesses can access vast markets of repeat customers, they often have the potential to be highly scalable through an effective SaaS sales process. As a buyer, this provides you with the opportunity to substantially grow your investment following the acquisition.

Of course, each software business is different, so it’s important to examine each opportunity on an individual basis. The market, user engagement, specific SaaS sales model, cash flow, competition, sales cycle, customer service requirements, SaaS marketing, and SaaS product each play an important role in determining scalability.

“Each software business is different, so it’s important to examine each opportunity on an individual basis.”

Customer Lifetime Value

Many SaaS businesses enjoy a high average Customer Lifetime Value (CLV), so each potential customer is extremely valuable. This is due in large part to their recurring revenue model generated by acquiring each new customer.

“Many SaaS businesses enjoy a high average Customer Lifetime Value (CLV)”

There are many advantages to having a high CLV. Particularly it allows SaaS companies, especially B2B SaaS, to invest heavily in customer acquisition activities that fuel annual recurring revenue growth. It also means that even a modest increase in conversion rate can lead to significant revenue growth. 

Distributed Work Teams

Many SaaS companies utilize distributed work teams to manage operations and support growth activities. This enables them to access a larger workforce and eliminate the need for costly office space. Not to mention, as a business owner, it can be nice not to be tied to a geographical location.

Where to Buy Your SaaS Company

There are a few different routes you can go when trying to find SaaS businesses for sale. Three of these include: 

• Online platforms
• Your Professional Network
• A Business Brokerage Firm

If you’re seeking to acquire a small online Business (>$100K), you can try looking at listings on various online platforms. While you may be able to find a few deals, it can also be difficult to vet sellers and feel confident that you’re acquiring the right small business.

“When you work with an established Advisor, you can access a wide pool of pre-vetted SaaS businesses.”

If you have a large network of entrepreneurs, you can also ask your friends and colleagues if they know about any SaaS businesses for sale. Although it may be easier to establish trust when connecting with sellers through your network, you’re still operating alone. Unless you’re an expert when it comes to SaaS valuation and structuring deals, this route may still feel intimidating.

Working with an established business broker or Advisor is a third route that many experienced investors and venture capitalists choose.

When you work with an established Advisor, you can access a wide pool of pre-vetted SaaS businesses. You can also have all your questions answered by a knowledgeable and trusted third-party Advisor. This provides many buyers with added confidence and clarity when navigating the acquisition process. 

How to Decide Which SaaS Business to Buy

As in any purchasing decision, it’s important to establish effective criteria when finding SaaS businesses for sale. A few key components to consider include:

• Your budget
• Your skillset
• Growth opportunities
• Risks
• Transferability
• Documentation

Establish Your Budget When Finding SaaS Businesses for Sale

Just as there are vast differences in price between various homes or vehicles, the range of prices for SaaS businesses is significant.

Before approaching the marketplace, take some time to establish your budget. To a large extent, your budget will be based on your net worth and available funds. In addition, it’s important to consider what percentage of your total worth you’re willing to invest in a given business.

There are no clear-cut right or wrong answers here. Some investors are willing to invest a majority of their funds in a single business, while others prefer to have a significant diversification of equity.

What is Your Skillset?

When finding SaaS businesses for sale, many investors seek to acquire companies that align with their skillset.

In addition to examining the standard SaaS metrics (growth, risk, etc.), it’s also smart to think about what kind of business is the best fit for you. If you’re experienced in a particular industry, you may want to look for a SaaS company that will allow you to leverage your knowledge in that area.

The Four Pillars of Value

There are four distinct elements that determine the desirability of online businesses, and thus, their value. These include growth, risk, transferability, and documentation.

In general, it’s best to look for SaaS businesses that demonstrate a high probability of growth. This could be through expanding to new markets, improving its pricing strategy, or any number of other activities. Similarly, it’s typically smart to avoid businesses that are fraught with risk, unless you have a clear strategy for mitigating or eliminating those risks after acquisition.

“There are four distinct elements that determine the desirability of online businesses, and thus, their value.”

When finding SaaS businesses for sale, pay attention to how transferable they are. If everything is highly systematized and the business provides passive income, that could make your life a lot easier. 

Additionally, look at the business’s documentation practices. If everything is clear and organized, that’s a great sign. On the other hand, if a business’s recordkeeping practices are fragmented and sloppy, tread with caution. You don’t want to be cleaning up someone else’s mess.

Tips for Turning a Profit with Your Purchased SaaS Business

There are numerous strategies for improving the profitability of a SaaS business following the acquisition, but many of them fall into the following categories:

• Optimizing all business processes 
• Pursuing growth opportunities

Optimizing business processes refers to improving the efficiency of a given business. If you can identify ways to eliminate wasteful spending or improve IT architecture, that can quickly and dramatically increase your profitability. Often, optimization opportunities can be identified by carefully examining each SaaS metric and looking for those that can be improved.

Additionally, pursuing high-leverage growth opportunities is another way to boost profitability. If there is any low-hanging fruit such as implementing a particular social media or marketing strategy, be sure to take advantage of those opportunities as soon as you’re in charge.

As mentioned, each SaaS business is unique, so it’s important to evaluate each opportunity on an individual basis. However, if you apply this framework, you’ll be well on your way to skipping the SaaS startup grind and acquiring a business that you can continue growing for many years to come.