5 Tips on Selling Your B2B SaaS Company from a Software Holding Company

Poya Farigui, Founder of Vitay.io, built up his former company 300% year over year (YoY). He saw remarkable results by leveraging his experience with direct sales and customer reviews. But there came a time when he needed a break to focus on other endeavors, a familiar story among many Founders. So, after proper due diligence, he sold his company to us earlier this year.

As a Founder, you might find yourself feeling like Farigui. You’ve spent most of your time managing your finances, developing a great product, hiring your team, marketing to the right audiences, and scaling. Building your business is exhausting, and at a certain point, there may come a time when you want to sell your SaaS company; so, what do you do?

We’ll go over some tips on what to prepare for when you’re thinking about selling your SaaS company.

Tip #1: Take yourself out of the business

As a Founder, when was the last time you took time away from your company and let your employees work without you? Were they successful? What were the challenges?

At SureSwift, we sometimes challenge Founders to get to a point in their business where they can take a 2+ week vacation with little to no contact with their team. This simulates the buyout process.

Taking yourself out of the business lets you test the waters. You’ll discover whether or not you can trust that your team can handle your company’s day-to-day responsibilities when you’re gone. And if not, it reveals opportunities to better prepare them for the time to sell. Furthermore, as your business grows in self-reliance, it becomes more valuable to you, even if you decide not to sell it. You’re now positioned to sell it or sit on it while the company mostly runs itself.

Tip #2: Improve documentation for a smooth handoff

Buying a SaaS company is a big decision, and due diligence protects both the buyer and the seller. The buyer must evaluate the potential acquisition’s value, and the seller must evaluate the buyer’s experience purchasing SaaS companies.

During the due diligence process, you’ll need to provide business-critical documents to your potential acquirer. This includes information from your security compliance to the technology you use in your company.

Before preliminary due diligence, you’ll want to send a non-disclosure agreement to protect your company’s intellectual property. This is oftentimes provided by the potential buyer but many Founders also have a standard NDA approved by their counsel.

Documentation and data you’ll need during due diligence include,

1. A high-level summary of your company with brief commentary about its current state and operations, market trends, and value proposition. This overview will be helpful while developing relationships with potential acquirers…
2. A Profit and Loss (P&L) statement outlining figures from the past 36+ months. U.S. acquirers will have a strong preference for GAAP financial reporting.
3. An org chart showing the employees in your company along with a detailed employee census.
4. Google Analytics Access to see how well your website performs.
5. Detailed SaaS revenue metrics, such as net MRR growth and revenue retention. Dependable marketing attribution reports, customer segmentation, and product usage data will be valuable to potential acquirers as well.
6. Detailed information about your tech stack.
7. Details about your business’s compliance management.

It’s important to note that this isn’t an inclusive list and that most of these are preliminary due diligence items.

That being said, potential acquirers will ask you for these documents and data, so, you should prepare by having high-quality financial, user, and product data to share with potential acquirers.

Well-documented processes can speed up the acquisition process and ensure a smooth transition for team members, customers, and Founders.

Tip #3: Clean up and organize your tech stack

When potential acquirers assess your business, they look for a stable product that can be easily maintained and scaled. Since startups often move fast while developing a product, these things are often neglected. Sometimes you need to deliver product changes quickly, and perfect long-term tech solutions aren’t always feasible. But now is an excellent time to focus on strengthening your tech stack.

Good test automation that covers, at the most minor core business functionality is a must. This provides confidence that changes can be made without impacting customers and provides documentation for future developers. If you need a starting point, testing tools such as Ghost Inspector can get you quickly started with simple codeless browser tests or more advanced end-to-end tests.

Dealing with technical debt is inevitable for any software development project. Hence, you want to be able to alleviate potential concerns about your product’s debt by identifying and documenting it while also providing a roadmap to tackle it.

Transfer of knowledge is crucial to a smooth transition, so look to improve documentation. . This can best be accomplished by writing and creating resources from the viewpoint of onboarding a new team member to your development team.

Tip #4: Find unit economics that point to future growth

Before considering selling your SaaS, you need to get the business to a point where the potential acquirer doesn’t need to worry about the company’s viability.

For example, metrics like churn should stabilize or trend downward, and your LTV (customer lifetime value) and CAC (customer acquisition cost) ratio should be healthy. The classic LTV:CAC benchmark is 3:1, but for bootstrappers, we see the benchmark move to 4–6:1. If you have a number higher than this, you may not be spending enough on critical business functions or underspending on marketing or sales.

Potential acquirers shouldn’t guess to recognize that your company has value.

Tip #5: Know what you want

Uncertainty can hurt relationships with potential buyers, your team, and waste everyone’s time. So, to prevent this agony, you should know what you want from an acquirer. For example, are you looking for a full acquisition, 100% cash buyout, a minimal transition period? Having clarity on what you want will speed up the buying process.

Selling your SaaS company may be one of the hardest things you ever do in your career. You have your vision, team, and years of hard work, and now it’s the end of a long but fulfilling chapter. But you only get one shot to sell your business, so you need to ensure that you get this right.

Fortunately, there’s a lot you can do on your first try to make the sell as successful as possible. We reviewed tips from taking yourself out of the business to cleaning up and organizing your tech stack. The more organized you are in the initial stages of the acquisition process, the more likely you are to get the best deal possible for your company.