Based on our experience at saas.group, going from the first acquisition chat to an actual deal may take up to several years. Building with an exit in mind is not something founders often do. But when they start to consider one, it’s usually a mix of personal, financial, and strategic factors, in that order.

Planning for an exit may not be the most exciting task for a founder, but when done right, it can align timing, process, market trends, and personal goals well enough to promise a great exit you truly deserve.

The stages of a SaaS business

SaaS businesses typically move through various stages: startup, growth, maturity, and sometimes decline. Each phase demands a different skill set and presents unique challenges:

• Startup: This phase requires creativity, product development, and finding product–market fit. Many companies are sold at this stage (especially in the AI era), but this is more about opportunism than sustainability. These sales are often driven by private equity firms betting on rapid growth.
  
• Growth: Scaling operations, building teams, and optimizing systems are critical here. This is no longer the 0-to-1 journey. It’s about adding structure and processes and bringing in specialists instead of generalists. It might be the best time to sell, although it can be the hardest time to let go.
  
• Maturity: Businesses at this stage focus on maximizing profitability and maintaining steady growth. Many face challenges with efficiency and risk plateauing unless they return to the drawing board to rekindle that growth mindset.
  
• Decline or plateau: If growth stagnates, it may be time to innovate or explore new markets. Unfortunately, this is often when founders start thinking about selling, which can result in less favorable outcomes with reduced negotiation power and fewer buyer options.

Personal goals and post-acquisition plans

Your personal aspirations should be front and center when thinking about an exit. Of course, considering the future of the team, brand, and your legacy is important, but ultimately, you are the one who has to live with the decision.

• Emotional aspect: Letting go of what is potentially your life’s work is a big deal. The journey from idea to exit takes time, not because the offers aren’t good, but because detaching emotionally is hard. That said, you can find an acquirer like saas.group who will keep you involved in a different role. You may continue working on the product with your team even after the acquisition.
  
• Future plans: Do you have another project or opportunity lined up? We’ve all seen those LinkedIn posts that go from “just sold my company, heading to a remote island” to “I’m bored and unsure what to do next” within a few weeks. Not saying you need a five-year plan, but giving your next step some thought is wise.
  
• Financial needs: The bigger the deal, the better, right? Not necessarily. Are you selling to fund a new venture, secure retirement, reach a milestone, or simply to take some chips off the table? Your motivation affects the kind of exit you want. And sometimes, saying yes to the right partner instead of the highest bidder pays off more.
  
• Work–life balance: If running the business has taken a toll, exiting may help you realign priorities. We’ve worked with founders in this situation at saas.group, and one thing stands out: tell your potential buyer why you’re selling. This builds trust and sets expectations. No one wants to bring on a brilliant founder who’s totally burnt out and counting minutes until the day ends.

Business factors to evaluate before selling your SaaS company

Aside from personal goals, several business-specific factors impact your readiness to exit:

• Valuation: Know your worth. Online calculators are a decent start, but consult an M&A broker or advisor for a realistic valuation. Look for social posts and articles. Some founders are very open about their exits. Just remember that no two exits are the same, and you’ll need to be prepared for deep due diligence.
  
• Financial health: Keep clean, organized records of revenue, expenses, and growth trends. This makes due diligence far easier. At saas.group, we try to streamline this process and give rough valuations early, but that only works if founders know their numbers and can share them confidently.
  
• Operational independence: Can your business thrive without you? The more your business runs without your day-to-day involvement, the more attractive it is. Making yourself “redundant” may feel strange, but it’s exactly what buyers want. After all, you’ll be moving on eventually.
  
• Market conditions: Timing isn’t everything, but it matters. Favorable conditions can increase your sale price. Research recent transactions in your niche and check trend reports from acquirers and M&A brokers. Some founders share a lot about their sales online. Don’t hesitate to reach out and ask questions.
  
• Growth trends: Buyers want growth. If you’ve plateaued, try to revitalize growth before selling. Exiting at the peak is tough emotionally, but waiting too long can hurt your chances or lower your valuation. If an exit is on the table, maximize your return while momentum is on your side.

The power of saying no

Many founders get approached by buyers when they’re not even looking to sell. That’s a great position to be in. It gives you leverage to say “no,” negotiate better terms, or wait for a more strategic fit.

Optionality, focusing on building a great business without chasing an exit, often leads to better outcomes. But this only works if you actually have the option to say no.

That said, don’t feel pressured to sell. If it’s not the right time, it’s not the right time. Just make sure you communicate clearly and respectfully without burning bridges.

Post-sale considerations

The work doesn’t stop when the deal closes. In many ways, it’s just the beginning, for the team, anyway. As a founder, you should be aware of what happens next, especially if there’s an earnout or if you’re staying on in some capacity.

• Onboarding new leadership: Document your workflows and key processes. If there’s no clear successor in your company, the acquirer will need to install someone quickly. Make their transition as smooth as possible.
  
• Team alignment: Changes can be hard for your team. Even though many buyers advise against announcing the deal too early, you should still plan how to handle that communication. Transparency earns trust. When done right, it sets the new owner up for success.
  
• Tech stack integration: Yes, change is painful but only in the short term. Consolidating tools helps teams operate efficiently and feel more connected. It also makes operations smoother and cheaper in the long run.

Final thoughts

Preparing for a SaaS exit is a challenge that requires foresight, planning, and a clear understanding of both personal and business objectives. By thinking through your own goals, assessing business health, and staying flexible, you can set yourself up for a smoother, more rewarding transition.

Whether you’re months or years away from an exit, the best time to start preparing is now. And doing it with the right partner may even make the whole experience, dare we say, enjoyable.

The post SaaS exit readiness: when should founders start thinking about exiting? appeared first on saas.group.

What’s your personal story?

I’m Tim Schumacher, and I’m one of the founders of saas.group. We acquire and grow small to medium-sized SaaS (Software as a Service) companies. Our primary customers are actually the SaaS businesses themselves – we buy them, improve them, and scale them up. 

What makes saas.group unique is our focus on the “middle market”. We’re not chasing unicorns or trying to build the next big thing from scratch. Instead, we look for solid, profitable SaaS businesses that are often overlooked or ignored by larger investors. These are typically companies doing anywhere from $2M to $10M in annual recurring revenue. 

We are also very proud of being founder-friendly. That means we really try to accommodate every possible scenario a founder has for their exit. If the goal is to cash out and move on to the next product or just start spending more time with family, we don’t want to tie these people down with earnouts and make them stay with us even though they’re miserable. At the same time, if a founder feels like they’d like to still be growing their business with us with access to more resources and the help of a great community, we will draft the terms to make sure we work together successfully for the years to come. 

We focus on a sustainable approach for saas.group, as we do for all of our businesses, and always keep an eye on where we stand according to the Rule of 40%. That means we’re balancing our companies’ growth vs profitability so that the sum is always around 40%. For some companies that means 20/20 ratio and for some 10/30 or even 5/35 makes a lot more sense. It keeps our priorities straight and emphasises the long-term goals.

How did you come up with your business idea?

The idea for saas.group evolved from a combination of experiences and observations. I’ve been investing for a while after my own exit from Sedo.com and always enjoyed the process. I was putting the money into companies I truly believed in. But with angel investments, you have a very limited say in what is actually happening there. I wanted to be more hands-on, to really steer these businesses towards success. At this moment I already knew I wasn’t a 0-to-1 kind of founder but rather enjoyed taking solid working businesses to the next level, bringing the operations up to speed, and finding potential for optimizing.

My “aha” moment really came when I received a proposal from a broker to acquire a SaaS business for just 4X EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This valuation seemed extremely reasonable, especially when compared to the sky-high multiples you see for public SaaS companies or even real estate investments.

That’s when it clicked. There was this whole world of smaller SaaS businesses that weren’t getting attention from big investors or private equity firms. They were too small for most institutional investors, but too big for individual entrepreneurs to easily acquire. This gap in the market presented a huge opportunity. 

I realized I could combine my desire to be more hands-on with the opportunity to acquire these undervalued SaaS businesses. This would allow me to actively help grow these companies while also creating significant value through adding resources and applying my own personal experience.

To validate the idea, I dug deeper into the market for smaller SaaS acquisitions. I looked at broker listings, talked to founders who were considering selling, and analyzed the financials of various SaaS businesses. Everything I found confirmed that there was indeed a gap to be filled in this space.

My experience building and growing my own companies and investing played out pretty well here. I’d previously co-founded and sold Sedo.com, one of the largest domain marketplaces. This experience gave me a deep understanding of how to scale internet businesses, which was directly applicable to growing SaaS companies.

After the initial validation, I decided to take the plunge and start saas.group. But I knew I didn’t want to do it alone. I reached out to some trusted contacts in my network, including folks I had worked with before. That’s how I ended up with Ulrich, at first. We’ve worked together on Sedo, knew how to communicate with each other, and had really complementary skill sets. I knew that I’d be comfortable going at it with him.

We then did an early friends and family investment round to get things off the ground. This was crucial not just for the capital, but also for bringing in some key team members. Tobias was one of the investors from this round and he later ended up joining us full-time. 

There are hundreds of stories where companies failed because of the wrong co-founder dynamics and we are very lucky to nail down our core competencies, bring different strengths to the table, and also have spent quite a bit of time in SaaS already to put our egos aside to make this work. 

It’s crucial to have the right people when you have a big vision. I’m happy to say that at this moment with saas.group, the team that we’ve brought together is really something I’m deeply proud of.

What were the first steps starting saas.group?

The first concrete step was acquiring the first SaaS business. This was DeployBot, a continuous deployment tool for developers. I bought it for about $1 million, which I financed with my own money from the Sedo exit.

From day one, DeployBot was bringing in about $50,000 in monthly revenue. As I was working with an agency at the time, about half of that went to development and hosting costs, leaving me with a 50% profit margin. This margin was crucial as it allowed us to start paying back the acquisition cost immediately. Which doesn’t often happen in SaaS. It was really a revelation for me that a SaaS company could start bringing the returns right after I “started” it. 

The next steps involved improving DeployBot’s operations. The focus was on reducing churn, improving the product, and optimizing marketing. At the same time, I started looking for the next acquisition.

I then repeated this process, acquiring more SaaS businesses like Juicer, Prerender, and ScraperAPI. 

It’s important to note that not every acquisition worked out perfectly. For example, we ended up selling Sniply after it didn’t perform as we had hoped. 

We ended up selling it to the best possible buyer (and one of Sniply’s oldest customers) whom we believed could still do a much better job than we did. The idea for saas.group, however, is to buy and hold the businesses indefinitely. I prefer to stay positive but realistic in this situation, again given my angel investment experience. These things happen and sometimes even the best teams can’t take the product to the next level. 

This taught us valuable lessons about what to look for in potential acquisitions. 

Our business model has stayed fairly consistent throughout this process: acquire undervalued SaaS businesses, improve their operations, use profits to pay back acquisition costs, and grow the businesses. Unlike venture-backed startups, we need to focus on profitability from day one, not just growth at all costs. 

It’s definitely been harder than I initially thought, particularly in terms of integrating different company cultures and technologies. But it’s also been incredibly satisfying to see these businesses grow and thrive under our management. It’s a continuous learning process for the entire team. We end up buying businesses with very different setups, tech stacks, and team sizes. Staying true to what we believe in and having a very strong thesis about every business we buy definitely helps but we also want to be flexible with the terms for the founders I mentioned before and make sure teams that join us see the value of the group as soon as possible. 

How did you ‘launch’ the business?

To be honest, we didn’t have a big, flashy “launch” moment for saas.group. Our approach was much more focused and targeted. Instead of making a big public announcement, we concentrated on reaching out directly to potential sellers and brokers in the SaaS space.

We started by leveraging my existing network. I reached out to founders I knew who might be considering an exit, as well as to brokers who specialize in SaaS businesses. We also started actively monitoring various marketplaces and forums where SaaS businesses are bought and sold.

Our first “sale” was really our first acquisition – DeployBot. I already had some experience buying businesses during my time in Sedo, so in a way, I knew what to expect but it still taught us a lot about evaluating SaaS businesses, the importance of thorough due diligence, and how to structure deals.

The response to our entry into the market was generally positive. Many founders were excited to have another potential buyer in the space, especially one who understood the unique challenges of running a SaaS business. To this day, the importance of builders selling to builders is something founders mention in our conversations. There’s certain trust about working with people who’ve been there and done that over giving a company away to purely financial institutions. 

Another key lesson we learned from this soft launch was the importance of building relationships in the SaaS community. We found that many of our best deals came through word-of-mouth referrals from founders we had previously worked with. And we encourage every founder we talk to about a potential acquisition to reach out to the companies we’ve already acquired. We’re very open and honest about the way we work but having a conversation with somebody who’s been through the process can add a lot more clarity. I always say if your potential acquirer doesn’t introduce you to someone they’ve already worked with before, consider it a pretty bright red flag. 

For the first couple of acquisitions, we didn’t even have a website for saas.group. We put together something very simple (and not very pretty) but good enough to explain our model and what we were looking for in potential acquisitions. It served as our calling card in the early days, helping us to establish credibility with brokers and potential sellers.

We made sure to highlight our experience in the tech industry and our hands-on approach to growing businesses.

Over time, we’ve expanded and improved our web presence quite a bit with a strong social media presence, our own podcast, events, and keynote appearances at major SaaS conferences, but that first simple site played a key role in getting us off the ground.

How has saas.group been growing since then?

Our growth has primarily come through continuing to acquire new SaaS businesses and improving their operations. We’ve now done this about 20 times.

In terms of specific tactics, we’ve found that a data-driven approach works best. We’re big believers in the 80/20 rule – focusing on the things that really move the needle. For each business we acquire, we dive deep into the metrics, looking at things like customer acquisition cost, lifetime value, churn rate, and expansion revenue.

We then experiment with different strategies to improve these metrics. This might involve tweaking the pricing model, improving the onboarding process, or investing in customer success. We try a lot of things, measure them rigorously, and aren’t shy about stopping experiments that aren’t working.

For example, with one of our businesses, we found that improving the onboarding process led to a significant decrease in churn. We then doubled down on this, investing more resources into creating a smoother, more user-friendly onboarding experience.

There’s definitely no one-size-fits-all kind of strategy or a playbook that we use, instead, we apply different strategies to each individual SaaS business we acquire, tailoring our approach to their specific market and customer base.

For all the founders out there, I’d recommend focusing on execution rather than trying to come up with a completely unique idea. In my experience, once you start working on an idea, you’ll quickly realize there are already competitors doing something similar. What matters is how well you execute and whether you can do things better than others in your space.

I’d also advise entrepreneurs to embrace experimentation and continuous improvement. Try a lot of things, measure them rigorously, and don’t be afraid to stop initiatives that aren’t working. Then, when you find something that works, scale it aggressively. It’s a simple concept, but it’s amazing how many businesses fail to follow this iterative approach.

The post Inside saas.group: how we built a home for profitable SaaS businesses appeared first on saas.group.

But first, some eye-opening statistics

• Male-founded businesses in the Technology, Media, and Telecommunications (TMT) sectors, which include SaaS, are valued 1.5 times higher on average than female-founded businesses (Forbes, 2024).
  
• For every $1 million a female founder receives during an exit, a male founder receives $1.5 million for a similar business, reflecting a 50% disparity in exit outcomes (The Big Exit, 2024).
  
• Less than 1% of businesses that sold a majority stake were female-founded. In the U.S., this figure was 1.37%, while in Europe and the rest of the world, it was as low as 0.35% (Forbes, 2024).

• Despite the valuation gap, female-founded companies tend to exit faster, with a median time to exit of 7.2 years compared to 8.1 years for all startups (PitchBook, 2023).

Understanding the exit gap

What does “ exit gap” actually mean? It refers to the disparity in financial outcomes when businesses founded by women are sold or exited compared to those founded by men. We all have seen news and reports about great differences in funding and biases in the investment environment for early-stage female-led businesses. But it turns out, it drags on for the entire lifecycle of those companies. And it’s especially visible in SaaS. So, how do we make sure SaaS is less of a bro-land and is more inclusive with equal opportunities for all? 

“When I started in this space ten years ago, it wasn’t common to see women in the C-suite, especially at companies going through an acquisition. Though it’s becoming more typical, it’s still not the norm. There has been progress. More women are stepping into leadership roles, and more female-founded SaaS companies are gaining traction, but the gap is still there. M&A has long relied on established networks and pattern recognition, which tend to favor founders and teams that resemble those who have exited before. Unless those systems are rethought, the outcomes stay the same.

That said, some acquirers are taking more deliberate steps. I’ve seen more diversity on deal teams, which brings broader perspectives to how opportunities are evaluated. There’s also been a shift in sourcing. More firms are proactively building relationships with underrepresented founders instead of relying on traditional channels. A number of private equity firms have also introduced internal diversity benchmarks and are tracking representation within their portfolios. It’s not yet consistent across the industry, but the direction is encouraging.

I’m also seeing more women in senior roles on the buy side, both at private equity firms and strategic acquirers. More women are leading deals and influencing decisions. On the founder side, more women are building strong companies and getting in-market. Many are creating opportunities for others through hiring, mentorship, or expanding access. The change is gradual, but it’s real and becoming harder to ignore.” 

© Diamond Innabi, Software Equity Group

What causes the exit gap in the first place?

Let’s be real, it is probably a wild mix of biases, barriers, and behaviors that have been forming for years, and we can’t manage to shake off. But it’s also the fact that there are way fewer women in tech overall. If the percentage of female-led businesses is already so low, seeing those exit numbers kind of makes sense. Yet, it’s important to understand each of the factors to get an idea of how to fight them. 

1. Systemic undervaluation of female-founded businesses

According to some of the recent reports, female-founded businesses don’t get the valuations they deserve compared to pretty much identical (we’re talking early-stage here) ideas coming from their fellow male entrepreneurs. Getting back to that upsetting statistic of women exiting their businesses earlier, there might be a question of the stability and longevity of the ventures. And here we seem to enter the chicken and the egg situation of either it is less money for female-led businesses or fewer businesses due to the lack of support. 

2. Access to capital

Female founders face significant challenges in accessing venture capital (VC) funding. In 2025, woman-founded startups received just 2.3% of all VC funding (Marketing Scoop, 2025). 

3. Bias in investor networks

The investment ecosystem remains predominantly male-dominated, with fewer female investors and decision-makers. This lack of diversity just makes it harder to make the decisions that even in 2025 seem to be too bold to be true, therefore allowing the decision-makers to fall for the “traditional” patterns.

“M&A still has an old-school culture, made up mostly of men. Anecdotally, I can tell you that most M&A advisors are men. Most buyers are firms led by men. And most of the voices giving advice about M&A are male. That means women are less likely to have a friend or two who can offer casual advice through the sale process. One of our goals at They Got Acquired is to create a space where all founders, not just women, can learn about how to sell their business in a really accessible way. And my hope is that by leading this brand with a female voice, women might be more likely to ask us for support. I do a lot of free calls with founders who want to sell their business, and many of them are women. In that way, I see us as playing a tiny part in helping to close the exit gap.” 

© Alexis Grant @They Got Acquired 

Consequences of the exit gap

The shortsightedness of the investors and acquirers whose decisions are driven by biases and ancient societal attitudes is pretty remarkable. Not only does it install additional barriers for incredible talent to create beautiful products, teams, and cultures, but it also has direct implications for the entire industry and, therefore, the economy at large. 

It’s not just about the missed opportunities for investors here, but also slowing down the progress toward gender diversity in tech. 

We always talk about the importance of letting SaaS customers know the product is for them, they can relate to it, and see the unique benefits for themselves. And if founding a SaaS was a product, getting any woman to subscribe would be a pretty big challenge. 

How do we bridge the exit gap?

First of all, it’s important to emphasise that bridging the gap is definitely not about favors. It’s not about deliberately hiring women or investing in female-owned businesses to make the numbers work. It’s about creating equal opportunities and an environment where all the amazing businesses and people get the same treatment. It’s going beyond gender towards a non-subjective assessment of the idea, metrics, and overall relevancy of the business. 

1. Increasing female representation in investment/acquiring companies

It’s true that you feel more comfortable talking to a person who at least looks a bit more like you. They may not have the exact same experience, but they can relate. The M&A scene is highly male-driven, and having a female representative there may make all the difference for founders who have already been fighting the “it’s raining men” situation throughout their career, to also have to defend their “baby” in the same environment. This is not to say working with male M&A experts and advisors immediately puts women in a less favorable position, but to emphasise the opportunity to have a smoother, less stressful process.

2. Providing mentorship and support

The exit gap has been given more and more visibility lately. There’re quite a few support groups and experienced advisors who can help with guidance now. 

We, at saas.group, always encourage founders we approach to talk to anybody who has sold to us before. And yes, we have to admit (sadly), we have never acquired a company that was female-led (and are working hard to make sure that changes), but we do have incredible women CEOs who know exactly how it works from the inside. And let’s face it, that’s really what matters after the acquisition. 

“Ask every question: Many times, women feel afraid to ask “what exactly does this term mean”, for fear that they will look dumb or unknowledgeable. But the reality is, most of us didn’t start businesses because we had an in-depth knowledge of M&A. It’s very important to read every detail of the deal, and stop and understand what each piece actually means.

Ignore “valuations”: You know what your business is worth? Whatever someone will pay for it. This works in both ways– if you have something great that someone really wants for a strategic reason, they’ll blow past the multiples. If you have a business that is in a category that has super high valuations, but you’re almost out of cash and no one wants it, the multiples are completely irrelevant. Multiples are a guide, not a mandate, and folks who get stuck on how an offer compares to multiples in the market often are the ones who don’t get a deal done. 

Make sure your income is RED. I know, we are used to keeping income in the BLACK. But when I say RED, I mean Recurring, Expected, and Diversified. Not all revenue is created equal, and strengthening your revenue will definitely help your valuation.

Revenue is vanity, profit is sanity. Build a good, profitable business, and acquirers will be interested. Sure, there are tech companies that sell for huge numbers that aren’t profitable. But they are few and far between, and they sure as hell aren’t female-founded.

And finally, talk to women who’ve done it before!” 

© Carrie Kerpen  @Whisperer Group 

3. Taking action

Yes, there are a few more great initiatives that governments, banks, and holdings could implement to help bridge that gap. But it’s also about taking those opportunities. It’s not just the top-down approach. Visibility won’t happen without people who want to be visible. 

Having women on stages and in publications creates great waves. And it doesn’t have to be big. You don’t have to become Taylor Swift of SaaS to be celebrated. Building in public, sharing little hacks, putting your efforts out there for everyone (to judge, yes, there’s this side, too) but also to inspire, could make the world of difference. 

At some events/podcasts/stages, you’ll still be the only woman. But so what? Seeing you there may inspire a couple of others to join, and that’s where it all starts. 

Conclusion

The exit gap is real, and it’s a reminder of all the biases and barriers that the entrepreneurial ecosystem has been prone to for years and can’t shake off. Yet, there are already some visible shifts that are moving the tech industry to become a more inclusive space. That means investors taking action, acquirers establishing more sustainable processes and creating a safer environment for a conversation, and advisors building healthier ecosystems. It’s still a long way to go, but by addressing the root causes and implementing targeted solutions, we might just shape the landscape that, at the end of the day, benefits all. 

The post The SaaS exit gap appeared first on saas.group.

What is a data room and why is it crucial for SaaS acquisitions?

A data room is, in its essence, a secure online platform used to share and manage confidential documents during due diligence processes, ensuring controlled access and streamlined deal execution.

In my opinion, there are three main reasons why a Virtual Data Room (VDR) is essential:

First, security and confidentiality. VDRs are usually encrypted with access control storage to protect sensitive financial, legal, and operational documents from unauthorized access or release.

Second, a VDR makes the M&A process more efficient by centralizing all due diligence materials in a structured format, enabling faster document retrieval, streamlined collaboration, and reduced deal friction.

And lastly, access control and tracking. They allow granular permission settings whereby you can track activities, create audit trails, and ensure that only authorized parties see the specific information needed for them.

Do you need a specialized platform for setting up a data room or is Google Drive good enough?

It’s a good start. It all has to do with dealing in good faith. As always, we sign an NDA with any given seller, which states clearly that we will not be sharing information with any third parties.

So you can send files over email or GDrive – it really doesn’t matter in the early stages. It gets a bit more serious when you start sharing really sensitive stuff like customer contracts, etc.

What are the essential folders for your SaaS data room?

For us initially, the two core items we look for are the financials, specifically the profit and loss statement, and secondly, the customer schedule, which captures your monthly movements of MRR by customer.

Once we progress to due diligence, we would normally have several key folders including:

1. Corporate legal documents that usually contain certificates of incorporation and bylaws, any shareholder agreements, the cap table, compliance and regulatory documents, if any.
   
2. Financials and accounting. If you have audited yearly reports, we’d be happy to see those, which include balance sheets on top of the P&L I mentioned.
   
3. Customer revenue data. At its core, those are customer invoices in their rawest form. Using those, we can calculate the revenues ourselves and see what’s what versus what the seller is telling us. In the same folder, it’s also really cool to see customer contracts and subscription agreements, especially for enterprise businesses.
   
4. Product and technology, which typically includes product roadmaps, development plans, tech stack overview, infrastructure documentation, and any policies or compliance documents the company has like GDPR, SOC 2, etc.
   
5. Sales and marketing – marketing campaign performance, customer acquisition costs, acquisition channels, partnerships and affiliate agreements, and stuff like that.
   
6. The last one would be legal and tax, which is typically carried out by third-party providers in our case, so that’s something we usually don’t touch.
   

Those would be the five folders I would say have to be there.

What are the common mistakes SaaS founders make with data rooms?

First of all, founders often don’t have a data room in the first place. The usual founder to whom we speak doesn’t have a data room because that’s usually something used by larger conglomerates that treat their information as super sensitive.

For us, some minor issues include incomplete or outdated documents. By incomplete, I mean you’re showing me the last 12 months of your profit and loss statement but it’s missing a month, for example. By simply not adding it, it essentially extends the due diligence timeframe, which drags things along and makes it more complex.

And outdated documents really aren’t relevant for us. If we ask for the last four years of your balance sheet and you give us your balance sheet for the last 15 years, it doesn’t bear any meaning for us.

Another topic that’s quite common is just having too much unnecessary information that buries the key insights and overwhelms potential buyers. Luckily, we have the experience to pinpoint which is the actually important stuff versus what’s irrelevant.

What are the best practices in setting up data rooms for SaaS M&A?

It’s really being able to react fast and actually have the necessary documentation. If a seller isn’t capable of showing us how they acquire leads or where they’re spending their marketing dollars, it gets tricky for us to dig deeper because there’s simply nothing to dig into.

Just having a relatively moderate selection of documents that explain your organization really helps accelerate the process as a whole.

Do we, at saas.group have any preferences towards the data that is presented and the tools that are used?

For us, number one is core financial statements, among which are the profit and loss and balance sheet. Usually, we go for the last three to four years.

Moving on, revenue and SaaS data. These are raw customer invoices accompanied by any subscription management tools that track your MRR movements on a monthly basis so we can compare them.

Lastly within the revenue and SaaS data would be customer contracts and subscription agreements. We just want to make sure those agreements are real and we can see they are signed, confirming you have actual customers.

At the same time, a budget and forecast from the selling party would be really important for us because then we can understand how they are planning to grow and by doing what exactly. They are justifying their growth rates or profitability rates by giving us assumptions and ideas about the next 12-24 months.

Besides financials, at later stages, we also ask for operational documents or legal documents. These are necessary not only for us but also for the legal and tax advisors. Those include sales pipeline and CRM data, product roadmaps, development roadmaps, tech stack infrastructure descriptions, support and SLA agreements if any, and employee and HR reports.

For legal, it’s the quite usual stuff like company incorporation and bylaws, shareholder agreements, NDAs and confidentiality, any historical litigation proceedings, IP ownership, and patents.

The sum collection of the company’s existence should be basically in a bunch of folders. But usually, these files are quite simplistic in their nature, being one or two pages long, just showing that what you’re saying is actually true based on X, Y, and Z documents.

How long does the data room review process take?

It really depends on the size of the company and the maturity of the company. For smaller companies, literally, five minutes does it. For larger organizations having sophisticated processes and sophisticated documentation, this might take a couple of days. So it really depends on the maturity of the company.

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Understanding the key terms and concepts of SaaS M&A is essential to having a lot more clarity starting the process. Here we break down the most important terms, with examples, so you can focus on making the best decisions for your SaaS business.

1. Valuation: what’s your SaaS worth?

Valuation is determining your company’s worth for the acquirer. For SaaS companies, this is often based on revenue multiples, growth rate, and profitability.

• Example: If your annual recurring revenue (ARR) is $2M and the average valuation revenue multiple in your industry is 5x, your company could be valued at $10M. It also could be valued at $2M. There are a lot of things going into the valuation process from risk assessment to analyzing the customer base,future growth potential and EBITDA margins. We always recommend doing your research about the market situation and average industry multiples, but also possibly involving an advisor who would provide you with a realistic view of the business. 

2. Types of Buyers: who’s acquiring you?

Understanding the type of buyer can help you anticipate their goals and approach. Here are some common buyer types and real-world scenarios to illustrate their intentions:

• Strategic buyers: These are often competitors or companies in your industry seeking synergies to enhance their existing offerings.
  • Example: When Salesforce acquired Slack for $27.7 billion, the goal was to integrate Slack’s collaboration tools with Salesforce’s CRM platform, creating a comprehensive suite for businesses.
    
• Private equity: Financial firms focused on optimizing your business for resale or growth, typically within a set investment horizon.
  • Example: Vista Equity Partners acquired Marketo and later sold it to Adobe, showing how private equity firms build value before exiting at a higher multiple.
    
• Serial acquirers: Companies like saas.group specialize in acquiring SaaS businesses to hold and grow. These buyers often have deep expertise in their domain, e.g. SaaS M&A, and prioritize seamless transitions and long-term growth.
  • Example: saas.group’s acquisition of Rewardful highlighted their approach to identifying untapped potential for future growth and in this case, leveraging the power of social media and proactive partnerships.

3. Letter of Intent (LOI): the starting point

The LOI outlines the initial terms of the deal, including valuation, deal structure, and key conditions. It’s not legally binding but sets the tone for negotiations.

• Tip: Review the LOI carefully and negotiate terms upfront to avoid surprises later. At saas.group we tend to treat the LOI as a handshake agreement and try not to change the terms of it further down the road unless some special cases arise during the due diligence process. And this is exactly why we recommend having most of the details of the deal clear even before signing the LOI. You can get away but it already means time away from business and lawyer fees, so coming to this with an understanding of what’s ahead is pretty important.

4. Due Diligence: the deep dive

This is the process where the acquirer examines your company’s financials, operations, and legal documents. During this phase, SaaS M&A due diligence often scrutinizes specific documents and metrics to assess the health and potential of your SaaS business. For example:

• Financial Records: Detailed P&L statements, balance sheets, and cash flow statements.
• Customer Metrics: Churn rates, customer lifetime value (CLTV), and monthly recurring revenue (MRR) trends.
• Contracts: Review of customer agreements, vendor contracts, and employee agreements to identify any risks or liabilities.
• Codebase and IP: Evaluation of your source code, patents, or intellectual property ownership.

It’s also your opportunity to assess the acquirer’s track record and vision. Due diligence goes both ways, and founders should think about doing theirs way before agreeing to go all-in with an acquirer to ensure a fit and shared values.

Example Questions to Ask the Acquirer:

• What’s your track record with acquisitions?
• How will this acquisition impact my team and customers?
• What specific metrics or milestones do you prioritize post-acquisition?

By preparing these documents and asking the right questions, you can ensure a smoother SaaS due diligence process and build trust with potential SaaS buyers.

5. Deal Structure: how will you get paid?

This refers to how the acquirer will pay you, and each structure has its own set of advantages and disadvantages for SaaS founders:

• Cash: Payment is made upfront in cash, providing immediate liquidity.
  • Advantage: Instant access to funds that can be reinvested or used for personal ventures.
  • Disadvantage: Potential tax implications and no future upside if the company grows post-acquisition. 

• Stock: You receive shares in the acquiring company, tying your payout to their future performance.
  • Advantage: Opportunity to benefit from the acquiring company’s growth.
  • Disadvantage: Risk of share value fluctuations and delayed access to cash.

• Earnout: A portion of the payment depends on achieving specific performance goals post-acquisition.
  • Advantage: Allows founders to demonstrate value and potentially earn more.
  • Disadvantage: Stressful if goals are unrealistic or factors outside your control impact performance.

Example: An acquirer offers $5M upfront and $2M in earnouts if your company hits a $1M ARR milestone in the next year. Understanding these structures helps SaaS founders evaluate the short- and long-term implications of offers in the acquisition process.

7. Holdback: keeping some skin in the game

A portion of the purchase price is held back until specific conditions are met, such as successful customer retention or revenue targets.

• Example: The acquirer withholds 10% of the payment for 12 months to ensure a smooth customer transition.

8. Purchase Agreement: The Final Contract

This legally binding document outlines the final terms of the acquisition, including price, payment terms, and warranties.

• Tip: Work with an experienced M&A lawyer to review the agreement thoroughly. No relative who has been helping you sell your house, no matter how nice, is super helpful here. You want someone who offers wealth of knowledge about the specific deal type and also a great deal of empathy to be on your side and humanize the process.

9. EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a key metric to assess your company’s profitability.

• Example: If your revenue is $1M, and expenses (excluding interest, taxes, depreciation, and amortization) are $600K, your EBITDA is $400K.

10. Liquidation preferences: protecting investors

This determines how proceeds are distributed in the event of a sale. There are dozens of stories of deals where founders, unfortunately, ended up with nothing, or have gotten way less than they ever expected. In case you’ve raised investment for your SaaS company, understanding the investors’ preferences is a good way to avoid surprises. 

• Example: If investors have a 2x liquidation preference, they get twice their investment back before founders see any proceeds.

11. Sales Multiple: a valuation benchmark

This is the ratio of your company’s sale price to its revenue or EBITDA.

• Example: If your company sells for $10M and your revenue is $2M, the sales multiple is 5x. SaaS valuation often hinges on this metric.

Selling your SaaS business is a monumental step. By understanding these key SaaS M&A terms, you’ll be better equipped to navigate the SaaS acquisition process, ask the right questions, and ensure a deal that aligns with your goals. Remember, it’s not just about the money—it’s about finding the right partner to carry your vision forward. 

Check out our M&A course for sellers to learn more about the acquisition process, metrics used to determine company valuation, different types of due diligence, and determining the best fit with a potential buyer. 

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Founded in 2005, KingWebMaster’s main product, Advanced Shipping Manager, helps e-commerce businesses manage complex shipping calculations, such as multi-location shipments, dimensional shipping, LTL rates, shipping perishable items, and more.  Serving thousands of customers, through popular e-commerce platforms like Shopify and BigCommerce.

The acquisition of KingWebMaster marks saas.group’s 23rd successful acquisition and our eighth in North America.

Dan Rotem, CEO of KingWebMaster, commented, ”Becoming a brand of saas.group is a dream come true for the entire team at KingWebmaster.  For decades, we have been self-reliant and were blessed to reach all our goals with the hard work of our team.  Now, with the experience and expertise of saas.group we are looking at significantly upgrading our services.  Our merchants and subscribers are up for an incredible journey as we bring our company into the future!  We are very excited to join the saas.group family and look forward to working together”.

Tim Schumacher, Founding Partner at saas.group, commented, “Dan has created a great solution that solves large pain points for e-commerce customers with complex shipping needs. As our 23rd acquisition, we’re excited to help grow and accelerate this business, just like MJ took his game to the next level”.

saas.group acquires promising SaaS companies with a founder-friendly process in order to elevate their product – and their people – to the next level. Founded in 2017 by serial tech entrepreneurs, the company has acquired twenty-one companies to date, including Beekast, Crosstalent, Tower, Rewardful, Prerender, Juicer and Seobility. With over 350 team members across 30 countries globally, saas.group provides products across Online Marketing, HR, Dev Tools, and Customer Experience and more.

saas.group was advised by OptimistLegal (Omeed Tabiei and John Rosenbaum), Techminers (Kamyar Paykhan) and Dr. Dirk Koehler as our General Counsel. KingWebMaster was advised by Cross Keys Capital (Michael Schuster, Alex Brennan) and Silverman Schermer (Adam Silverman)

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Inside, you’ll find exclusive discounts on a wide range of SaaS software, including marketing, sales, development, SEO, and CRM tools.

Here’s a preview of some brands that will reveal exclusive Black Friday deals:

Rewardful, Affiliate Program Software

Rewardful is affiliate management software that’s simple. If offers deep integrations, including with Stripe.

Tower, Git Client for Mac and Windows

Tower is a native Git client designed for Mac and Windows. It is loved for its ease of use and powerful features.

ScraperAPI, Data Collection Tool

ScraperAPI is a complete data collection tool that enables businesses to collect public information at scale. Users, including Gabriel M. and Arun K., praise its effectiveness in overcoming challenges related to programmatic requests.

Juicer, Social Media Aggregator

Juicer is a social media aggregator used for its user-friendly interface and seamless integration. They’re gearing up for a Black Friday deal that promises to enhance online presence.

Pipeline CRM, CRM for Salespeople

Pipeline CRM is a sales CRM platform built for salespeople. It’s designed to improve sales operations and communication within teams.

Keyword.com, Keyword Position and SERP Tracker

Keyword.com is a SERP and keyword rank-tracking solution. It is appreciated for its speed and efficiency in keyword tracking.

Beekast, Collaborative Tool

Beekast is an online collaborative solution widely adopted for it its simplicity and reliability in making events more interactive.

DeployHQ, Code Deployment Tool

DeployHQ is a tool to deploy your websites from Git, SVN and Mercurial repositories to your very own servers.

Seobility, All-In-One SEO Software

Seobility is an all-in-one SEO tool praised for its powerful features and ease of use in website optimization.

MyWorks, eCommerce Accounting Automation

MyWorks is a powerful integration between e-commerce and accounting platforms, appreciated for its time-saving features and seamless synchronization.

AddSearch, Site Search Solution

AddSearch is a lightning fast fully-featured accurate site search solutions platform with a customizable design.

zenloop, Customer Experience Management Platform

zenloop, a CXM platform to create easy AI-powered surveys for satisfaction measurement, NPS, and beyond. 

Don’t miss your deal!

Join the waitlist to be the first to access these and many more deals once they’re live.

The post saas.group brings more exciting SaaS deals for Black Friday 2024 campaign appeared first on saas.group.

Key areas acquirers focus on

Accuracy and Completeness Acquirers will closely examine your financial statements for accuracy and completeness. They want to see that every number is backed up by solid records and that nothing important is missing. Messing this up could hurt your valuation and even cause buyers to walk away, so get it right to avoid giving a bad impression.

Consistency Buyers look for uniform accounting practices and principles. If your reporting varies significantly, it might raise concerns about financial stability or management practices. Certainly not the deal-breaker but it would make the life of a buyer significantly more difficult going through the reports that look nothing like they’ve seen before. It’s definitely not the smoothest path to streamlined collaboration! The clarity and documentation of your accounting policies and practices should align with industry standards and be consistently applied.

Current Performance Buyers are interested in how your company is performing right now—think revenue growth, profitability, and how you manage expenses. Show off your solid performance trends and strong financial metrics to give buyers a clear picture of your company’s current health and future potential. This is the part where you really have a chance to shine! Highlighting these can make your company more attractive and show a direction where value can be added with more resources and expertise.

Debt Obligations Expect acquirers to closely review your debt, including loans and credit lines. They need to understand how they affect your financial stability and future outlook. Make sure you have clear documentation of all debts and repayment schedules to ease any concerns.

Feasibility of Projections

We all know about the importance of clear, data-driven projections. In this case, buyers are interested in whether your future expectations are grounded in past performance and current market conditions. Seeing realistic, data-driven projections helps build confidence in your company’s future potential.

Pricing Strategy Impact Buyers will check how your pricing strategy impacts your revenue and profitability. Clearly explain how your pricing decisions drive financial performance to showcase the effectiveness of your approach.

Essential finance data sources for SaaS*

To keep track of the right data, focus on a few key sources each month:

Bookings Data This includes all executed contracts for your software and services. Accurate bookings data is vital for calculating sales efficiency metrics and understanding go-to-market effectiveness. Consider using CRM systems like HubSpot, Zendesk, or Pipeline CRM to track this data efficiently.

Financial Data This covers your SaaS P&L (income statement), balance sheet, and cash flow statement. The P&L shows profitability and expense management, the balance sheet gives a snapshot of financial stability, and the cash flow statement tracks money movement. Present these documents with clear breakdowns of revenues, expenses, assets, and liabilities, and make sure to address any common issues like incomplete asset lists or unrealistic projections.

HRIS / Payroll / People Data Since people are often the largest expense, tracking detailed employee and contractor data is crucial. This includes names, titles, departments, locations, employment status and wage rates. Accurate headcount tracking ensures proper expense reporting and helps integrate this data into financial forecasts. You will also need to prepare an extended version of this report for the HR due diligence part, so giving it a little extra time and attention might be a good idea.

Customer / Revenue Data Detailed customer and revenue data are essential for calculating retention metrics and understanding revenue health. This data supports the accurate calculation of key metrics like Monthly Recurring Revenue (MRR), Gross Revenue Retention (GRR), and Net Revenue Retention (NRR), which are vital for assessing growth and customer satisfaction. To track and manage this data effectively, you need comprehensive information including customer names, unique customer IDs, invoice numbers, invoice amounts, subscription start and end dates, and any adjustments or credits.

Several SaaS tools can help streamline this process. Paddle is a popular choice and not only automates data collection but also provides powerful analytics to help you make data-driven decisions and present a clear picture of your business’s revenue dynamics.

*see more in-depth breakdown here

Common Mistakes Founders Should Avoid

Financial reporting might not be rocket science, especially with all the tools and services available but there are still a few common mistakes we keep seeing from founders looking for an exit.

One big one is inaccurate financial reporting. This includes errors in figures or inconsistencies in reconciliation, which can significantly undermine credibility with potential buyers. Discrepancies between reported and actual figures can certainly lead to a loss of trust, potentially derailing negotiations or affecting valuation. This issue often arises from rushed reporting processes or inadequate attention to detail, underscoring the need for thorough reviews and accurate data handling.

Another frequent mistake is ignoring key SaaS metrics like Customer Acquisition Cost (CAC), Lifetime Value (LTV), CAC Payback Period and churn rate. Failing to present clear CAC and LTV figures might make it difficult for buyers to assess the effectiveness of your marketing and customer retention strategies. For the seller, this can easily result in missed opportunities to showcase the business’s true value and health. Inconsistent historical financial data and poor cash flow management can also be problematic. It can prompt questions about financial stability and poor cash flow management can indicate underlying issues with financial health.

Finally, not addressing revenue concentration risk—where a business relies heavily on a few customers or markets—can be a significant red flag. Buyers are wary of such risks, as they can impact long-term stability and profitability.

Conclusion

By understanding what acquirers focus on in financial due diligence, avoiding common pitfalls, and tracking essential finance data sources, you can present a compelling case for your SaaS company. Accurate reporting, consistent data, and clear insights into your financial health and projections are key to a successful exit. Focus on these aspects to ensure a smooth due diligence process and attract the right buyer for your SaaS business.

If our values speak to you and resonate with how you do business, get in touch. Discuss your options with our M&A team: Dirk Sahlmer k (dirk@saas.group) or Pavel Prokofiev, ACA vel (pavel@saas.group). Learn more about how we grow acquired brands on our blog and podcast pages.

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Founded in 2015, Timebutler operates in a large and growing market with ongoing regulatory changes, especially in the German-speaking DACH region. The company has achieved stable growth and now serves over 4,000 customers with more than 300,000 employees in various industries, including Sedo, the previous company of our Founding Partners Tim Schumacher and Ulrich Essmann.

The acquisition of Timebutler denotes saas.group’s 22nd successful acquisition and our seventh in the DACH region.

Juan Gil, Founder of Timebutler, commented, ”The sale of Timebutler marks an exciting milestone and the entire process with saas.group couldn’t have been smoother — always collaborative, always quick and always full of good energy. We share the same passion for innovation and customer-first thinking. For our amazing customers, this means significant benefits: with the vast expertise and expanded resources of saas.group, we will be able to offer an even better Timebutler and improved services in the future!”

Zoltan Bettenbuk, incoming Timebutler GM, commented, “We’re excited to bring Timebutler into saas.group’s growing portfolio, and I’m really looking forward to working with Juan and his team. They’ve built a great tool that’s already loved by many, and it will be a pleasure to keep improving it. We see a lot of opportunities to add even more value for users and strengthen Timebutler’s place among the top absence management tools in the world.”

Tim Schumacher, Founding Partner at saas.group, commented, “Timebutler is an exceptional product that was carefully crafted over many years with exceptional customer focus, and zero marketing, purely growing by word of mouth. This transaction, our 4th this year and 3rd in Germany, reflects saas.group’s growing reputation as a destination of choice for bootstrapped businesses through a founder-friendly M&A process”

saas.group acquires promising SaaS companies with a founder-friendly process in order to elevate their product – and their people – to the next level. Founded in 2017 by serial tech entrepreneurs, the company has acquired twenty-two companies to date, including Beekast, Crosstalent, Tower, Rewardful, Prerender, Juicer and Seobility. With over 350 team members across 30 countries globally, saas.group provides products across Online Marketing, HR, Dev Tools, Customer Experience and more.

saas.group was advised by Luther (Dr. Jörgen Tielmann), BA Group (Neele Wehmeyer), Techminers (Jürgen Vogel) and Dr. Dirk Koehler as our General Counsel. Timebutler was advised by Dr. Joachim Distel.

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