Buying and Selling SaaS: Evaluating Deals Beyond the Dollars

What you need to know about buying your first SaaS

Whether you’re thinking about selling your business, or you’ve been perusing listings for a SaaS to buy, the financial aspect of a potential deal is probably top of mind. But from our experience, while valuation certainly isn’t simple, there are a lot of factors besides the dollar amount that both buyers and sellers should think about before closing.

In this post, we’re going to take a look at things from both sides of the transaction. Regardless of whether you find yourself on the selling or buying end, expect to pick up some useful tips to navigate this financial terrain smoothly.

Tips for buying your first SaaS company

First acquisitions are the hardest. No one knows who you are, and you don’t have a reputation as a buyer. Closing a small deal for a low- or pre-revenue product shouldn’t be too difficult. But if you want to buy something a bit bigger — say $5-10k in MRR — you’re going to need to build up a reputation through your early transactions.

At SureSwift, we’ve closed 40+ transactions, and talked to hundreds more Founders about their products. Based on that experience and feedback from Founders, we know there are a lot of things outside the valuation that impact a seller’s perception of you as a buyer, and ultimately, their likelihood to make a deal. Even if you don’t have a long history in the SaaS space, here are things you can do to have a good rep as a buyer:

Do Your Due Diligence BEFORE the LOI

Not having a clear understanding of the business and the technology before you write an LOI makes that LOI worthless. Shooting from the hip could tie up a seller needlessly from taking real offers from other buyers that are a better fit. It’s tempting to get excited and try to lock down a deal. But doing that before you understand that business and have a plan for how you will both buy it and run it just isn’t kind or fair to the seller, and it can hurt your reputation as a buyer.

Get up-to-date with any regulatory issues that may impact the sale

While you don't need to be a legal expert to buy a SaaS business, it's important to understand the basics and plan to bring in legal support when the sale is imminent. Unexpected issues, especially in areas like intellectual property (IP) and employment law, can pop up after all the paperwork is signed. Being familiar with these aspects or teaming up with legal professionals beforehand helps avoid surprises, ensuring a smoother transition and protecting against potential legal hiccups that could impact the success of the deal. Taking a straightforward and proactive approach to legal considerations enhances your ability to navigate complexities, making the acquisition process more secure and informed. 

Have the cash (or be up front if you don’t)

You might laugh at this one, but it’s a reputation killer, so we’re gonna cover it. If you’re raising funds to buy a business, make sure any founder you’re talking to knows that your offer comes with that contingency.

They may not want to invest their own time and money doing due diligence with you if you don’t have the funds, and that’s fair. However, being up front and transparent about your funding will increase the chance your potential seller is willing to work with you, rather than moving on to the next prospect who has cash-in-hand once you spring the situation on them as a surprise. 

Be able to close quickly.

Take your time evaluating a potential business before you write an LOI or make an offer. Once you send an LOI, it’s not cool to make major changes, or decide you’re more interested in another product. Like not actually having the cash, these are bad karma moves that will follow you to your next deals. At SureSwift, we engage in a consistent process that allows sellers to move on to their post-sale plans quickly and with confidence.

Be able to share your plans for the product, customers, and team.

Whether it has 1 customer or 10,000, Founders have generally put a lot of time into a build, and they’ll be curious about your plans for it. Being able to clearly articulate what you like about their product (beyond cash flow), and why you think you’re a great fit as a buyer for them will make a difference.

Having a plan for a product’s team can be especially important, and bringing the team along in a transition is also a huge benefit to you. We understand that there’s no replacing the knowledge and expertise of an original startup team at SureSwift, so we always strive to onboard as much of the original team as possible.

Have a clear transition plan and expectations for the founder during transition.

Transitions for pre- and low-revenue products can be pretty quick, but there’ll always be some kind of transition. Be super clear about what you’ll need from the Founder post-sale, and lay it out in a timeline. Make sure to cover: transfer of accounts/passwords, email boxes, walkthroughs of code, availability for questions, etc.

Be a generous member of the SaaS community.

If you’re interested in buying, be friendly on X or LinkedIn, and get to know people through online communities, courses and virtual or in-person events. You might meet your seller months before they know they’re going to sell and if they already know you to be a normal, helpful human being interested in similar things, that can go a long way.

Use your words.

Presumably, you weren’t raised by wolves. Phrases like “Hi,” “Please,” “Thanks,” and punctuation go a surprisingly long way towards making you look like a professional and courteous person.

While it can be easy to get overwhelmed, especially if you're dealing with a large volume of potential deals, resist the temptation to get lazy with your communication. Remember, you're likely going to be in it for the long haul tackling due diligence, negotiations, and a transition with one of these people. It's worth it to take the extra time and start off on the right foot.

And if you're a seller on the receiving end of a low effort message, feel free to move on to other prospects. With the growth of the SaaS market and interested buyers, you can feel safe passing on anyone who leads with "Like your biz how's 10k" (and they likely aren't the type of serious buyer who's going to result in a smooth transition anyway).

Want to sell your SaaS? Here’s how to find a great buyer, and how to be a good seller.

It takes two to make a thing go right, so here are things we think sellers can do to make a deal go smoothly, and things to look out for to find the right buyer for you.

You’re not selling a house.

Just like you should probably ignore any messages from buyers that just say “Like your biz how's 10k,” You should take some care with how you communicate with potential buyers. “Offers due by Tuesday at noon” statements are fine if you’re selling a condo in downtown Miami. The new buyer isn’t going to be your roommate for a month after you sell.

Selling a business is a bit different, so you’ll want to take some time to get to know your potential buyers and let them get to know you, too.

Be upfront on what’s great about your product, and what needs work.

Things like under-investing before a sale to boost perceived profit margins, and stats that don’t line up between your metrics dashboard and your payment gateway are generally uncovered pretty quickly by any buyer who does their due diligence. Bootstrapped SaaS products all have strengths and areas that can be improved on by a new buyer. Be up front about yours.

Audit potential security and privacy issues in advance.

There’s no denying that data security and privacy concerns have gained huge visibility in recent years. As an early-stage startup or solo-Founder, it can be easy to file these issues under the “worry about later” label – but For SaaS sellers, prioritizing robust data security and privacy practices is non-negotiable in today's acquisition landscape. Neglecting these crucial aspects not only jeopardizes the sale but may result in adverse consequences, including bad press, fines, and reputational damage. Sellers must conduct a thorough audit of their data security protocols before listing their business, addressing any vulnerabilities proactively to prevent deal-stopping issues during due diligence. By aligning with industry best practices and compliance standards, sellers not only enhance their business's marketability but also mitigate legal and reputational risks. Transparent communication about these measures builds trust with buyers, expediting the due diligence process and positioning the business as a secure and trustworthy investment in the competitive SaaS market.

Choose a buyer you want to actually work with.

If you have a transition period spelled out in your deal, you’ll definitely want to be sure you’re selling to someone you can see yourself working with for that length of time. Six months can feel like a breeze or an eternity depending on relationship quality, so it’s worth considering. Even if you don’t have a transition period, you spent time and sweat equity building your business and you’ll want to feel like you’re leaving it in good hands.

Do your due diligence on your buyer.

It’s not a great feeling to announce a deal to your team and have it fall through. This one’s easy to avoid with a reputable buyer. If they’ve closed deals before, ask to talk to a previous founder who sold to them. If it’s their first deal, that doesn’t mean they won’t do a good job, but it’s okay to ask for things like proof of funds.

Understand the deal terms.

When will cash be transferred, what duties you’re expected to perform during a transition, and whether there are any clauses or fine print that would cause you to take a haircut in the 9th inning are all things you should be looking out for.

A $1M LOI sounds great if you just say the dollar amount. If it comes with a 2-year transition period before that money actually hits your account, you might feel less thrilled. It’s your deal, so make sure you fully understand all the details.

Ultimately, buying or selling a business is a complex process with a lot more to consider than the number on your check (though that's definitely important). For Founders in particular, selling a business can have deeply personal considerations, including how a close-knit team will be managed, whether customers will continue to be taken care of, and if a business that took huge effort to get off the ground will continue to grow. Don't be afraid to take all those things into account when evaluating a deal, and you'll be well on your way to a successful exit – and if you're interested in selling to SureSwift, you can get started right here.

Related articles

When It Comes to Your SaaS Tech Stack, Keep It Simple

April 11, 2024

When you’re starting a software business from scratch, there are a ton of options for how to build it. While acquiring and operating a full portfolio of SaaS businesses, we’ve learned a lot about what to do and what not to do when it comes to your SaaS tech stack.

Read More

Why B2B SaaS Businesses are Our Favorite Acquisition Targets

April 4, 2024

Since 2015, SureSwift Capital has acquired over forty businesses. While not all of those businesses are in our portfolio today, over the last nine years, we’ve refined our ideal acquisition target and perfected our growth strategies.

Read More

Unveiling SureSwift Capital’s Fund C: The Next Chapter of our Innovative Serial Acquirer Model [2024]

March 28, 2024

2024 marks SureSwift Capital’s return to B2B SaaS investments with the launch of Fund C, following a two-year hiatus from acquisitions. With two successful funds behind us since our establishment in 2015, we're proud pioneers in B2B SaaS investment, consistently delivering profitable returns to our Investors.

Read More

Cookie Settings

By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.
cross icon