Where to Sell Your SaaS Business: A Guide for Bootstrapped SaaS Founders

There’s a lot to learn when it comes to selling your SaaS successfully on a competitive market. We recently detailed our best advice for deciding when to sell your SaaS. But once you’ve determined that you’re at the right place for a profitable exit, there are more questions to consider. First, how do you determine the valuation of your SaaS before selling? And who should you seek out when deciding where to sell your SaaS business? 

In this article, we’ll intro the valuation process and provide a detailed breakdown of the different methods for selling your SaaS business. We’ll also cover key focus areas for the post-sale transition of your SaaS, so you can ensure a smooth and streamlined exit for yourself, your team, and your customers. 

Ready? Let’s get into it.

Table of Contents

• How to determine the valuation of your SaaS business before selling
• What avenues are available for selling your SaaS business? 
• Navigating the SaaS post-sale transition successfully
• Conclusion

How to determine the valuation of your SaaS business before selling

Determining the valuation of a SaaS business requires detailed research and systematic methods. While we can't cover everything needed for a comprehensive SaaS valuation in this section, we’ll give you a general overview of how valuation can be determined in our current market. 

There are several different methods for determining your business’s market value. Some of the more popular valuation methods include:

A market-based valuation, which typically examines the rates at which similar businesses were recently sold to figure out appropriate pricing. 

An income-based valuation, which might determine value from projected future cash flows. 

An asset-based valuation, which subtracts a company’s liabilities from its assets to determine value. 

These three valuation methods aren’t the only ways to determine your SaaS company’s target value. It can also be determined by looking at a number of key business metrics related to your finances and customers. There are two primary methods for determining a SaaS valuation multiple: 

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) - Your business’s profitability and operational performance, excluding costs related to capital structure, tax rates, and non-cash charges.
• Annual Recurring Revenue (ARR) - Your business’s yearly revenue

Depending on which field your SaaS is in, these metrics can be applied against a specific multiple to help determine the profitability and sustainability of your business for qualified buyers. You’ll also benefit from ensuring that you have the data to lay out these additional KPIs for potential buyers: 

• Monthly Recurring Revenue (MRR) - Your business’s monthly revenue, which may be more relevant than ARR to potential buyers
• Customer Lifetime Value (CLTV) - The average revenue expected from a customer over their lifetime
• Customer Acquisition Cost (CAC) - The marketing and sales cost to acquire a new customer
• Net Revenue Retention (NRR) - Revenue growth from existing customers over time
• Gross margin - profit percentage made when subtracting the cost of your offerings from your revenue
• Churn rate - The percentage of customers who cancel their subscription over time

Along with quantitative metrics, buyers might also use qualitative methods to predict the potential growth of your business. Figures like the Future-Proof Index help a prospective buyer to score a SaaS business on attributes like flexibility, customer loyalty, and financial history. These quantitative and qualitative factors will be combined with a look at the state of the market and current industry trends to determine a proper valuation for your SaaS. 

What avenues are available for selling your SaaS business? 

So where should you start when seeking out potential buyers for your SaaS business? Here are  4 popular methods that bootstrapped SaaS founders use to sell their SaaS companies. 

1. Work with a business broker

There are several benefits to working with a qualified business broker to sell your SaaS business. First, many business brokers already have a strong network of buyer connections within the industry to help speed up the SaaS sales process for you. Experienced brokers will be able to help you with both the valuation and negotiation processes, taking significant legwork off your plate, so you can focus on completing essential exit tasks. Brokers also bring a wealth of industry-relevant knowledge to the table, helping you to navigate current market trends and ensuring that you set the most competitive price for your business. 

You can choose to work with a reputable brokerage firm like FE International or Quiet Light Brokerage or work with a broker through a marketplace platform like Flippa. While choosing to work with a broker will streamline the sales process for you, it may be a more costly venture than other sales avenues, as their commission rate can run anywhere from 5% to 15%. 

It’s also important that your business broker understands your priorities for finding a buyer; otherwise, they may sell to the first viable candidate. As well, you may have to relinquish some control over the sales process, so it’s important to choose a broker with a great track record, so you avoid potential mismanagement and ensure a smooth, successful transaction.

2. List on a marketplace

Many smaller SaaS businesses choose to sell through a marketplace like Empire Flippers or WebsiteClosers. Not only is the cost significantly lower than other sales methods, but it allows you to reach a high number of potential buyers in a short period of time. Plus, many marketplaces make sure to pre-qualify prospective acquirers, guaranteeing that each potential buyer is legitimate. Some marketplaces even offer free valuation tools and legal templates to help bootstrapped founders with the process of selling their SaaS.

While using a marketplace to list your SaaS can ease and expedite the actual sales process, it can still be time-consuming and require a lot from a bootstrapped founder when it comes to vetting and negotiating with potential buyers. It may also result in lower offers across the board since you’ll be working against a crowded field of potential SaaS listings. And though you won’t be dealing with business broker commission rates, you’re still likely to be paying some kind of commission to the website on top of the required listing fees.

If you choose to list your SaaS on a marketplace, it’s of utmost importance that you do your due diligence in finding the right one. Unfortunately, there are plenty of scammers and spammers looking to part you with your money, time, and intellectual property. Avoid scammers by working with marketplaces that require a “pay to play” subscription fee from both sellers and potential buyers. Marketplaces like Acquire also use escrow services to ensure that the buyer has the necessary funds to complete the purchase. While listing on a marketplace is an affordable option for smaller SaaS businesses, it is important to consider the associated time demands and risks before choosing this route.

3. Sell to a strategic buyer

Businesses with an ARR of $1 million or more may attract interest from strategic buyers. A strategic buyer is a company that purchases a SaaS that complements or adds value to its existing technologies or product lines. This type of buyer often acquires a SaaS business in the hopes that it will assist them in increasing their market share, expanding their product offerings, and edging out the competition. While strategic buyers have become a somewhat rare commodity, it’s still worthwhile to examine the pros and cons of a strategic acquisition, especially since they’re known to bring lucrative offers to the negotiation table. 

Because a strategic buyer often operates in a similar industry to your SaaS (and may even be a competitor), they’re more likely to have the expertise to grow your SaaS to its full potential. Strategic buyers may also be able to scale your business faster by combining their expertise and business workflows with yours. However, you can assume that your business’s brand will be assimilated into the culture and vision of the buyer company, which means that you will likely end up relinquishing control of the company completely and leaving the fate of your team up to new management. 

4. Sell to a private equity firm

If you’re a SaaS company with $1m+ in ARR, then you may be a good candidate for acquisition by a private equity firm. Private equity firms are increasingly investing in the SaaS sector, with some even achieving acquisition deals surpassing $1 billion. These firms may choose to purchase a majority percentage of your SaaS business and retain your services as founder for 18-24 months while scaling business operations. 

PE firms are typically able to provide substantial capital to help develop and optimize your SaaS, but this investment may come at a price. Some firms cultivate a stringent focus on efficiently achieving a high ROI while cutting costs, which may lead to changes to the culture and vision of your company. That’s why it’s important to consider the potential impact on your company’s core values and long-term goals. Consider whether the PE firm's strategic objectives align with your vision for the company. If you’re hoping to scale the brand post-sale, then it’s important to find a firm that will prioritize that focus. 

What sets SureSwift Capital apart from other private equity firms?

At SureSwift Capital, we seek out bootstrapped founders who are looking for a team of experienced operators to scale their B2B SaaS business to greater heights. Our unique, non-VC business model prioritizes long-term growth through:

• Forging ongoing connection with founders post-acquisition 
• Treating each acquisition as a semi-autonomous business unit with its own team, leaders, structure, and goals
• Using comprehensive, systemized playbooks to help codify methods across our portfolio businesses
• Achieving proper development and execution across all businesses through our Exceptional Operator Framework and Core Values
• Prioritizing the continuity of your team, customers, and brand, including the offer of optionality to you as founder

Our goal at SureSwift isn’t to flip or erase your brand. Instead, we employ a “buy and hold” approach that fosters growth and looks out for the transitioned team and customer base. Our ultimate goal is consistent, long-term growth for your SaaS through the implementation of large company resources.

Navigating the SaaS post-sale transition successfully

The period post-sale plays a major role in customer retention and employee morale. After selling your SaaS business, take these steps to ensure a smooth transition for your team and your acquirer:

• Merge teams thoughtfully - Because any acquisition will require many operational changes for your team, it’s important to be transparent and forthcoming with them throughout the transition process. Ensure that the incoming team receives the proper training and that your current team gets the support they need to adapt to any new systems and workflows.
  
  
• Communicate well with your customer base - It’s important to prevent the focus on transitioning from overshadowing day-to-day operations, including providing exceptional customer support to your client base. Make sure customers know what changes they can expect over the coming months and communicate regularly with them about any updates to your SaaS. This will help bolster customer loyalty and prevent subscription cancellations as the business changes hands. 

• Gather continuous feedback - Your customers and team have the best insights into how the transition is progressing. Make sure to consult with them regularly as time goes on, so you can address any issues as soon as they arise.

Remember, the transition process will come with its own set of challenges. Keeping an open line of communication with your team as they work through new business processes will help avoid stressors and address problems before they can compound. 

Conclusion

The SaaS acquisition process can be a high-intensity rollercoaster for any bootstrapped founder, no matter how seasoned. Whether you choose to sell through a broker, marketplace, or directly, the SaaS sales cycle will vary greatly and require much of your time, energy, and stamina. 

Ultimately, the best buyer route for your SaaS will depend on your exit goals, business scalability, and level of preparation for the post-sale transition. Take your time determining which avenue is the right one for your SaaS and make sure you have the required sales metrics to position yourself for the most successful exit possible. By staying tuned to market trends and making data-driven decisions, you’ll go far in setting your SaaS up for a robust exit. 

If you’re a bootstrapped SaaS founder seeking a direct buyer for your B2B SaaS business, SureSwift Capital is currently growing its SaaS portfolio. With over 50 acquisitions under our belts, we offer independent founders an all-cash exit that will ensure that their team and customers are well taken care of. 

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Interested in joining the SureSwift portfolio? Get in touch with us here. 

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