How To Sell A Micro SaaS Company
How To Sell A Micro SaaS Company This post will take the perspective of a founder looking to sell their (micro) SaaS company. We've been on both sides of the table, most recently selling one of our portfolio companies on Micro Acquire.
This post will take the perspective of a founder looking to sell their (micro) SaaS company. We've been on both sides of the table, most recently selling one of our portfolio companies on Micro Acquire.
There are 3 ish main phases of selling your SaaS company.
- Transfer / Support
This one is pretty straight forward. Unless you have a pool of potential buyers, you're going to need to list your company somewhere. There are dozens of places to list (see the marketplaces section below). Depending on your level of certainty that you actually do want to sell (many people use these listing sites as a way to see 'how much they can get') you're likely best off just listing on two or three marketplaces. Each of them comes with drawbacks. Micro Acquire for example makes the communication part of the process a bit of a burden.
What to prepare before listing
Financials are #1. You're going to do a fine job explaining your business (hopefully!). But we see a ton of micro SaaS companies struggle to put together a P&L. We get it, it's annoying, but it's the most revealing document to truly assess the health of a business. Even a simple chart mogul screenshot or a stripe screenshot over the past twelve months is super helpful. Here are some examples of financials that we'd love to see when looking at a company to buy.
Here's a simple profit and loss report for Screenshotapi.net
Ideally we'd get a P&L sheet and the stripe data. Those two docs can carry the conversation a long way. It will lead to questions (why were expenses so high in August?), but these are good questions, buying questions. Without a clear financial picture, we're going to have trouble valuing the business.
It's obvious the purpose of diligence is for a buyer to answer one fundamental, boolean question: "Should I buy this business?"
Diligence sucks. Each interested party is going to want a separate diligence process, and they're going to want to do it their way (even if they have no idea how to run a diligence process). I think it might be possible to address a bunch of common questions in a loom video but I haven't seen any sellers (including us) do that yet. Perhaps something to try next time.
An LOI (letter of intent) usually predicates diligence. We don't always do them, but some buyers like doing them and some financiers want this in place for us to get a quote on a loan. The most important part of this is just a rough idea of price and terms. Obviously things will float in either direction on price, or some structural things may change as we find out more info but broadly an LOI locks the deal down for us for some period of time (usually one month).
Here are some of the questions we like to get answers to during diligence:
- How can we get screwed on this deal? (Risks, etc)
- Why are customers saying yes? (we probably want to speak with at least 2 of them)
- How much work are we going to have to put into growth over the next year?
- How much work are we going to have to put into engineering over the next 3 months? What about the next 1-2 years?
- How much working capital will this deal need to be successful?
- How many resources (people) will be needed to achieve our goals (as the buyer) for this acquisition?
- Can this business be successful without the founders (if the founders are not staying)
- What's the best way to structure this deal? (Initial thoughts on cash up front, earn out, syndication, seller side financing, etc)
Again, all of this is just to decide if it's a yes or a no. It might be a no on just the terms (we can't figure out a good way to structure the deal that makes both parties happy). That happens. It's natural since the ideal for the buyer is $0 down and the ideal for the seller is $100% cash upfront. It's usually somewhere in the middle.
Transfer & Support
After an agreement has been signed, the money is then transferred. We sometimes use an escrow service (like escrow.com, which I passionately dislike) and we sometimes just wire directly. Wiring directly is cheaper for all parties involved but requires a higher level of trust.
Once the buyer says "Yes", the fun of password hunting and transfer begins. This can be painful. We strongly prefer being transferred entire accounts. I.E. if you're hosting on AWS, we want to take over the account. We do not want to have to immediately mess with dev ops + moving servers + database migrations, etc.
Same goes for Stripe. Doing a stripe transfer to a new account requires manually setting up everyone's subscription again. This is manual and sucks for us, so please expect to just hand over the whole thing. It's much easier.
The actual code transfer is quite easy, we can move the repos to our primary XO account. Just make sure you also send over any ssh keys, etc that may need to also be transferred.
Some things that can help make the transfer smooth:
- Be prepared to hand over the entire Stripe account and hosting account (AWS, GCP, Heroku).
- Try to use a password manager for all passwords. That way you can just transfer a folder to us with everything we need.
Expect the few days during and after the transfer to be sort of like being on call. It's really nice for us to be able to reach you quickly for any 'Oh Shit' moments. For example, if your marquee customer asks something we don't know how to do yet, we'd love to be able to reach you quickly to resolve the issue.
After a week or two, things generally calm down (on your side) quite a bit. There's typically some lingering things to transfer or stuff that was forgotten but that should go to zero over time.
We try to keep this process 30 days (end to end) from the first meeting to the wire. We can do it quicker depending on how much time the seller has to offer. I'm certain we could do it all in a day if both sides focused on the transaction 100%.
Marketplaces - Where to list your SaaS for sale
Here's a list of marketplaces. The live list is here.
|10words||discovery||https://10words.io/||Not a marketplace. Just let's you discover apps. Better off on twitter or indiehackers or product hunt||4|
|3dcart App Store||discoverye-comm||https://apps.3dcart.com/||Plugins for Shift4Shop. looks shitty.||1|
|Acquire Me||marketplacenocode||https://www.acquireme.com/||looks new...|
|Barney||agenciesmarketplace||https://www.wearebarney.com/buy-a-business/||Mostly handle agencies|
|BizBuySell||marketplacetraditional||https://www.bizbuysell.com/||mostly traditional businesses for sale. not internet businesses.||4|
|Dealflow Brokerage||brokeragemarketplace||https://dealflowbrokerage.com||Good stuff, but lower number of listings||7|
|Duuce||newsletters||https://duuce.com/||Buy newsletter companies!||9|
|Empire Flippers||e-commmarketplace||https://empireflippers.com/||Mostly amazon FBA.||3|
|Exchange Marketplace||e-commmarketplace||https://exchangemarketplace.com/||Shopify only businesses||6|
|FE International||marketplacetraditional||https://feinternational.com/||Some modern internet businesses but mostly traditional businesses.||4|
|Flippa||marketplace||https://flippa.com/||lots of garbage||3|
|Flipping Websites||marketplace||https://www.facebook.com/groups/flippingwebsites/||facebook group. Not a great way to search for things but maybe you'll get lucky?||2|
|GetAcquired||marketplace||https://getacquired.com/||no great filters||3|
|Hello Exit||marketplace||https://helloexit.com/||New. Have to sign up for email list to see listings||5|
|Indie Hackers||discovery||https://www.indiehackers.com/||Not a real marketplace but great for discovery and cold outreach||7|
|IndieMaker||marketplace||https://indiemaker.co/||can't filter by revenue which is annoying||5|
|Investors Club||marketplace||https://investors.club/||Their auth flow is broken every time i try to sign up so not sure who is using this.||2|
|Latonas||marketplace||https://latonas.com/||ui looks so so so bad. looks like more amazon FBA stuff.||5|
|MicroAcquire||marketplace||https://microacquire.com/||Wish it had some more filters but pretty good||8|
|MicroConf||discovery||https://www.microconf.com/||lots of startup founders in here. use this for discovery and cold outreach||7|
|PitchBook||discovery||https://pitchbook.com/||A subscription to this will run you ~$20k a year. It's a data platform showing stats on funding events, M&A, etc||2|
|Product Hunt||discovery||https://producthunt.com||One idea is to look for old abandoned projects and pick them up for cheap. Lots of leg work on your part to pull this off though.||8|
|Quiet Light Brokerage||marketplace||https://www.quietlightbrokerage.com/||They've been around for a while.|
|discovery||https://reddit.com||some sub reddits have a place to list businesses for sale. Not a fan of reddit in general though but best of luck to you!||3|
|Shopify App Store||discovery||https://apps.shopify.com||Find what's selling or highly rated and reach out to see if they would sell to you.||7|
|SideProjectors||marketplace||https://www.sideprojectors.com/#/||The ui is clunky, hard to navigate and quickly find stuff that matches what you're looking for. Also many listings are garbage products listed for sale for millions of dollars.||1|
|StackShare||discovery||https://stackshare.io/||not the most useful discovery platform but might be able to spot something gaining momentum before the mainstream does.||2|
|Transferslot||marketplace||https://transferslot.com/||no good filiters.||4|
|discovery||https://twitter.com||people tweet publicly with revenue numbers. Great channel for discovery and cold outreach||7|
|Warrior Forum||discovery||https://www.warriorforum.com/||looks like a forum from 1996||1|
|Website Closers||brokeragee-commmarketplace||https://www.websiteclosers.com||another brokerage / marketplace. lot's of FBA stuff.||4|
|WordPress Plugins||discovery||https://wordpress.org/plugins/||Find what's selling or highly rated and reach out to see if they would sell to you.||7|
Micro PE Funds
Here's a list of all the micro private equity funds in the space. If any are missing, feel free to shoot me a note!
The Players (Companies)
Micro PE Funds