Bootstrapped SaaS Founder Insights: Deciding When to Sell Your SaaS Business

If you’re deliberating about whether it’s time to sell your SaaS business, you may also be experiencing conflicted emotions about whether you’re truly ready to pass your hard-earned SaaS on to new owners. As a bootstrapped SaaS founder, you've dedicated years of your life to developing and nurturing your technology. You want to sell your SaaS at the right time while also finding a buyer who shares your vision and can drive your business toward greater success.

Having acquired over 40 SaaS businesses, our team at SureSwift is well-versed on the variables that come into play while deciding when to sell your SaaS. We’ve created a helpful guide to help you determine where your business stands when choosing whether it’s time to step into the SaaS acquisition arena and make a successful exit.

Let’s get into it. 

Table of Contents

• ‍What to consider when deciding whether it’s time to sell your SaaS

• ‍How do you know when you’re ready to sell your SaaS business?

• ‍Laying the strategic groundwork for an early exit plans

• ‍Conclusion

What to Consider when deciding whether it’s time to sell your SaaS

If you’re on the fence about whether it’s the right time to sell your SaaS, these four key considerations can help guide your decision.

Market conditions

Pay attention to whether current market trends are favorable or not. Despite a slowdown in revenue growth and an increase in churn in the SaaS industry during 2023, Paddle reports that the first quarter of 2024 had a more promising start, with a 20% increase in B2B SaaS sales and an 18.5% increase in subscription sales in the month of April alone. 

Translink reports that SaaS M&A transaction volume has also increased by nearly 28% over the last two quarters, indicating a promising future for the SaaS industry and opportunities for founders. With global SaaS market profits in 2024 forecasted to increase from 2023 by over 60 billion dollars, now may be an ideal time to consider selling your SaaS. And with profit margins continuing to increase, it seems likely that market conditions will also continue to trend upward. 

SaaS business performance

High revenue growth, strong customer retention, and a competitive market position will entice potential buyers toward your SaaS business, which may result in a higher valuation. If you choose to sell your SaaS while it’s thriving, you’ll have greater luck maximizing your return on investment. Plus, strategic buyers will be looking to acquire a business that demonstrates steady growth and profitability, facilitating a more streamlined negotiation process. 

Still, it’s important to think strategically about whether you’re ready to pass on the future growth potential of your SaaS. Make sure to weigh the pros and cons of continuing to drive your business toward further success versus securing a better valuation by selling at its peak.  

Case Study: Vitay Founder, Poya Farighi

When Bootstrapped Founder Poya Farighi made the decision to sell his SaaS company, Vitay, it was growing at 300% YOY, thanks to his implementation of a robust direct outreach sales strategy. Farighi’s past experience in sales and as a partner in a recruitment firm provided him with an acute understanding of how to address his audience’s needs through his SaaS product. The result? Exponential growth. 

Even with revenue growing rapidly, Farighi made the tough decision to exit. His reasoning was solid. Though he had invested all he had into a business that was continuing to grow, his intention had always been to exit at what felt like the right time. Now that the business was finding success while being managed by a team that Farighi himself had chosen, he felt ready to shift his focus elsewhere. Farighi decided it was the right time to step back from the intense demands of being a bootstrapped founder and enjoy a slower pace back home in London before embarking on his next business venture.

Vitay was courted by multiple prospective buyers, but Farighi had previously taken a call with SureSwift in Vitay’s first year of revenue, long before deciding to sell. When the time came to finally make an exit, Farighi reached out again to SureSwift and was duly impressed with SSC’s Founder-friendly sales process. In the end, he went with his gut, and Vitay became a new SSC acquisition. 

Economic projections 

Alongside M&A trends, note the state of national and global economies. The significant downturn in SaaS market growth in 2022 was brought about by geopolitical unrest and a weakened economy, leading to a sharp decline in customer retention rates. However, despite the economic effects of the pandemic, 2020 also yielded significant growth in the SaaS sector, with increased demand for digital solutions and remote work tools driving substantial revenue gains and market expansion. 

While the state of the economy can provide key insights about the future SaaS sales climate, it’s important to give equal weight to historical data and the level of market demand for your particular SaaS product. 

Individual goals and ventures

Consider whether your long-term goals are aligned with continuing to run your SaaS business. Will selling your SaaS provide you the financial freedom to pursue exciting new opportunities or ventures? Weigh how much time and energy you’re willing to continue investing in your SaaS instead of diversifying your business interests. If you no longer feel as committed to your SaaS business as in previous years, ask yourself why. 

The life of a bootstrapped founder often requires unwavering dedication, relentless effort, and the ability to navigate constant challenges with limited resources. If your desires lie elsewhere, it may be the right moment to consider moving forward with an exit strategy.

Case Study: MeetEdgar Founder, Laura Roeder

Bootstrapped SaaS Founder Laura Roeder started her first business at 22, as a freelance designer of websites, logos, and business cards. Her focus then shifted to social media after coaching clients through managing their social accounts on multiple platforms, and the idea for her social media management SaaS, MeetEdgar, was born. 

Rooeder built MeetEdgar with the intention of creating an asset that could eventually be sold, and once the SaaS had reached a point where it was successfully maintained, Roeder decided it was time to move on to new ventures. Rather than allowing the business to get stagnant, she reached out to SureSwift by email, and MeetEdgar was acquired within the year. With the funds from the acquisition, Roeder was able to launch her new SaaS, Paperbell, which processed over $10 million in profits to coaches in 2023. 

How do you know when you’re ready to sell your SaaS business?

There are a variety of financial, operational, and personal factors to consider when it comes to making the decision to sell your SaaS company. While you might feel pressured to sell only under perfect conditions, many bootstrapped SaaS owners choose to sell even when circumstances aren't as ideal as they hoped. 

Fortunately, you don’t need every star to align for your business in order to undergo a successful exit. Here are several reasons why bootstrapped SaaS business owners might choose to exit even when conditions aren’t perfect:

• Personal need - Life happens. Sometimes family obligations or major life events can influence your ability to run your business at the level required. Rather than compromise on leadership, it can make for an ideal time to transition your SaaS business into new and qualified hands. 
• Burnout - A whopping 53% of startup founders experience burnout, due to long hours, lack of work/life balance, and the stressors of scaling a small business with a lean team. There’s no shame in choosing to sell your SaaS in order to prioritize your health and to focus on attaining career longevity over immediate advancement. 
• Co-owner discord - Sometimes working relationships come to a standstill, and it’s necessary for all parties to part ways. In this case, selling your SaaS can bring closure to strained working relationships while helping to prevent a business from floundering under clashing leadership. 
• Limit on expertise - Many businesses eventually reach a plateau in their efforts to expand their SaaS beyond its current level. When this happens, it can be quite beneficial for a SaaS business owner to choose to sell to a qualified buyer. 

There are also positive reasons to consider selling early. Perhaps you’re ready to make space for other business pursuits. Or maybe a larger competitor has offered you a compelling buyout. Whatever the case, the opportunity to sell early may present itself when you least expect it. Whether you feel ready or not, it’s wise to organize your business data as if your exit may be impending, even if it isn’t. 

Laying the strategic groundwork for an early exit plan 

Even if you haven’t come to the conclusion that it’s time to sell your SaaS, you’ll benefit from building an exit strategy ahead of time. It can take time to get your proverbial ducks in a row when it comes to organization, security, compliance, and reporting. Take time now to ensure that technical issues won’t prevent you from selling to your ideal buyer. Follow these five steps to give your SaaS business a solid foundation for a successful exit. 

1. Keep comprehensive records of your financial data.

The first thing a potential buyer will likely want to know is if your SaaS business is in good financial standing. They’ll want to review your MRR, monthly expenses, and yearly revenue, typically dating back three years. To prepare for potential buyers, it's important to start collecting data now, so you can guarantee the availability of at least 36 months of financial information. 

Your SaaS business will also benefit from implementing monthly profit and loss (P&L) tracking methods. Not only will it help you better understand your profit margins and expenses in the interim, but it will also allow you to promote your revenue potential to prospective buyers more effectively when you’re ready to exit. Remember, the more organized you are, the better impression you'll make on potential buyers, and the quicker your sale will be.

2. Build an acquisition data room.

An acquisition data room is a space where company data gets stored so that it’s shareable with potential buyers. With a SaaS data room, your prospective buyers gain entrance to a secure, virtual workspace where they can see all your relevant business information, such as financial records, legal documents, contracts, licenses, and customer information. 

With a data room, you decide which business information gets showcased, which can strengthen your position in negotiations and even speed up the due diligence process. Just make sure to attain a signed NDA from all prospective buyers before they access your sensitive data. 

3. Strengthen your security measures. 

A recent report from CyberArk showed that 93% of organizations had two or more identity-related breaches in the last year. With AI and bot-powered cyberattacks on the rise, it’s essential for every SaaS startup to shore up their security operations before starting the SaaS sales process.

To maintain compliance and avoid a costly surprise in the midst of sales negotiations, SaaS companies should conduct regular security audits to assess and address any potential vulnerabilities before they can cause problems. Businesses can also improve their security by creating strong, unique passwords and employing MFA (multi-factor authentication) for all company assets. Companies can further improve security by investing in a password management system like 1Password to keep all passwords in one secure place.

Security measures will certainly be reviewed as part of your buyer’s due diligence process, so it’s essential that you invest in better security ahead of time, so you can avoid delays once the process begins. 

4. Scale up reporting and revenue analytics

Business analytics play an important role in the due diligence process, so ensure that your current reporting processes are detailed enough to set you up for a successful exit. You’ll want to track sales metrics and KPIs (key performance indicators) like:

• MRR (Monthly Recurring Revenue)
• ARR (Annual Recurring Revenue)
• Renewal rates
• Churn rates
• Growth rates
• CLV (Customer Lifetime Value)
• LTV (Loan-to-Value)
• Revenue retention

Invest in a revenue analytics software like ChargeBee or BareMetrics, or take advantage of a free software like Paddle. You’ll also benefit from implementing a web tool like Google Analytics (GA4) to help measure and report website performance, advertising ROI, conversion rates, and customer demographics. 

5. Ensure compliance

Before you receive an LOI (letter of intent) from a prospective buyer, you’ll likely need to prove that your tech SaaS is compliant with industry standards. This means you’ll need to show the type of personal or confidential information that you collect from customers, as well as how it’s stored and kept secure. Before you undertake the exit process, perform a data inventory, so you can document every bit of data that your business takes in. You’ll also need to share any formal security certifications and whether your tech is compliant with GDPR and CCPA. 

Conclusion

When it comes to selling SaaS, the decision to make an exit can be particularly challenging for bootstrapped SaaS founders. Make sure to evaluate all critical factors that will influence your business's appeal to potential buyers, including your tech stack, your level of exit preparedness, and the current market trends. It's also important not to let the fear of failure or concerns about finding the right buyer stop you from preparing for a successful exit from your SaaS business. 

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If you’re a bootstrapped B2B SaaS founder interested in selling your SaaS in the next 12-24 months, check out our Founders page to learn how to connect with SureSwift for potential acquisition. 

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