Table of Contents
How do you value a startup SaaS company?
Three types of SaaS company valuations
- Revenue-based valuation (ARR Multiples)
- SDE-based valuation.
- Revenue – Cost of Goods Sold – Operating Expenses + Owner Compensation.
- EBITDA-based valuation.
- Net Income + Interest + Taxes + Depreciation + Amortization.
- Average net profit for the last year x multiple.
When to sell a SaaS company?
If you have not yet reached a positive economic model (i.e., CAC is greater than LTV), then you should sell as soon as possible, as every month of spending is actually eroded value. If your churn is so high that you are barely replacing revenue with new bookings, then high churn will eventually erode value.
How do I sell my business to SaaS?
If you want to sell your SaaS business, the first step is often to contact a broker who can help you value your business and attract buyers. Interested parties will work with the broker and hand over information. The broker will then suggest your business to buyers they consider to be suitable.
What is the rule of 40 SaaS?
The popular metric says that a SaaS company’s growth rate when added to its free cash flow rate should equal 40 percent or higher. The rule has become a favorite of SaaS industry watchers, including boards and management teams, because it neatly distills a company’s operating performance into one number.
How is SaaS sales different?
SaaS sales cycles vary depending on price, customers, and product complexity. A product that’s $100/month will have a faster sales cycle than a product costing $50,000/year. The more expensive your product is, the more stakeholders will be involved, which can lengthen your process by weeks or even months.
What is the rule of 40\%?
In recent years, the Rule of 40—the idea that a software company’s combined growth rate and profit margin should be greater than 40\%—has gained traction as a high-level metric for software company success, especially in the realms of venture capital and growth equity.