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How can you evaluate your business correctly?

Welcome to the pivotal phase of your listing: the evaluation. Employing a comprehensive approach, I will guide you through two methods, both quantitative and qualitative, which are often amalgamated to determine the final price of your SaaS.

Key Metrics: The Quantitative Approach​

1. Using Numbers:​

The easiest way to find a price for your SaaS business is to use this formula:

VALUATION=MRR*12*MULTIPLE

This means you multiply your Monthly Recurring Revenue (MRR) by 12 to get your Annual Recurring Revenue (ARR). Then you multiply that by a number that depends on your industry. For example, most SaaS businesses on Acquire have a multiple of 5 based on their profit.

Buyers care more about your profit than your revenue. So you need to keep your costs low and your margins high to get a good price.

The multiple can vary depending on your industry. Here are some common ones:

  • SaaS: 2-3x revenue or 5x profit
  • E-commerce: 1-2x revenue or 3x profit
  • Marketplace: 1-3x revenue
  • Agency: 1x revenue or 1-3x profit

2. Using Other Factors:​

The formula is not enough to find the perfect price for your SaaS business. You also need to consider other things that make your business unique and valuable. Some of them are:

  • Number of users: How many people use your product? How loyal and happy are they?
  • Technological sophistication: How advanced and innovative is your product? How easy or hard is it to copy or improve?
  • Time invested in coding/building: How much time and effort did you spend to create your product? How much do you need to maintain and update it?
  • Automation level: How much of your business runs on autopilot? How much manual work do you need to do?
  • Competition landscape: How many competitors do you have? How do you stand out from them?

These factors can help you increase or decrease your price based on your strengths and weaknesses. You need to compare them with the numbers to get a balanced price.

Acquire wants you to get the best price for your SaaS business. That’s why we don’t accept listings that are too high or too low. We also have a tool that can help you evaluate your business in a few minutes. You can find it here: [Acquire Valuations Tool].

3. Tips and Strategies for Negotiation:​

Once you have your price, you need to negotiate with buyers to close the deal. Here are some tips to help you:

  1. Price Strategy:
    • Ask for a bit more than your price (10-15%) to give yourself some room to negotiate.
  2. Patience Pays:
    • Don’t rush to accept or reject offers. Take your time and think carefully before you reply.
  3. Confidence to Say No:
    • Don’t be afraid to say no if the offer is too low. Sometimes, saying no can make the buyer come back with a better offer.
  4. Homework is Key:
    • Be ready to answer any questions about your business. Know everything about your product, your customers, your market, and your numbers.
  5. Open Communication:
    • Be willing to talk to buyers and answer their questions. You may need to have more than one call or meeting to convince them.

To sum up, these are the three steps to sell your SaaS business:

  • Use numbers to find a basic price for your business.
  • Use other factors to adjust your price based on your business value.
  • Use tips and strategies to negotiate with buyers and close the deal.

I hope this post was helpful. If you’re ready to sell your SaaS business, check out BuyMicroStartups.com!