How Managing Prospects Made This SaaS Seller $162,500
Updated on June 17, 2021
What do you think of when you hear the term lead generation?
For most people, the first thought that comes to mind is generating contacts that could one day lead to a potential sale, or a company that acquires quality contact information that you then purchase from them to use in your marketing outreach campaigns.
While many lead generation services available today offer a great means to purchase quality contacts, many fail to offer a way to manage this data or keep you in constant contact with these prospects.
You are essentially buying these contacts, and that’s about it. The labor required to follow this process is still your responsibility, and keeping these contacts engaged is also up to you or your customer relationship management (CRM) platform of choice.
William, the seller of this software as a service (SaaS), and his three business partners realized that this was a great opportunity to build a business model on. They recognized that there was no other service on the market at the time that helped to not only manage this data but also to nurture these leads and keep them from sitting on a drive somewhere never to be touched again after that initial outreach was performed.
After spending time in a tedious trial-and-error process to discover who their target audience would be and what pain point their SaaS would resolve, they had a viable solution for professionals looking to manage their leads while keeping in constant contact with them in one automated platform. So, what did we discover during our initial vetting process of this SaaS business in the technology niche?
What Our Vetting Process Discovered About This SaaS Business
While most SaaS business owners will tell you that scaling your model is the quickest way to gain a positive return on investment (ROI), William and his partners already had full-time corporate finance jobs. They were busy, and scaling this SaaS quickly just wasn’t in the cards for them.
So, how were they able to grow to their current level in less than three years? They reached out manually to services and individuals who were already generating leads as a service or who could benefit from a service that manages this prospect data for them.
During our vetting process, we also noticed that a majority of the new subscribers coming into the sales funnel were from referral sources. Once William and his partners discovered who their target audience was through that initial email outreach, those subscribers began referring their service to other professionals in the lead generation space, all without the need for any additional marketing efforts from William and his partners.
At the time this asset was submitted to our vetting team, the business was generating an average of $4,855 per month in net profits, with a staggering 20,000 subscriber email list, which had been gathered over the past three years.
At this point, William and one other business partner were now the two primary managers of this asset since the other two partners were primarily focused on their corporate finance jobs. While generating over 4k per month in net profits sounds like a great income for one individual, split among the four partners, it was hardly worth their time.
William and his partners decided that, with their finance jobs taking most of their focus away from being able to scale this SaaS, it was more of a side hobby for them at this point. They decided to list the asset for sale and give another entrepreneur the opportunity to dedicate the necessary time required to push this business to its full potential.
After our vetting team took all of the assets into consideration, which included a trademark for the brand, an application for the service along with a standalone site, an email list including over 20K subscribers, and SOPs ready to help the new owner get things rolling with ease, our vetting team was ready to present our valuation of this business.
Considering all of this, we offered William and his partners a listing multiple of 46x and a listing price of $223,919 based on similar SaaS businesses we’ve sold on our marketplace. William and his partners were more focused on making a quick sale since most of their time was focused on their finance careers, and they were eager to get this business listed live and see what potential offers investors would send their way.
The Listing Goes Live, and 61 Buyers Want In
As this was one of the highest numbers of depositors we’ve had for a SaaS model in some time, it’s easy to see how badly investors want a quality SaaS in their portfolio.
With nine deposits made in the first day alone, buyers were eager to dig deeper into the inner workings of this model, especially when they learned it had only required William and his partner to perform two hours of work per week to maintain the asset.
The initial batch of buyers looking to perform their due diligence on this listing had a few concerns about the model and how it was structured. Things such as variable fluctuations in revenue sparked the interest of many investors who were digging deeper into the finances of this asset. The pricing structure for subscribers consisted of month-to-month options for smaller franchises and yearly contracts for franchises or individual services looking to manage a huge database of leads. Some of these yearly contracts were also paid in full up front, which had led to a fluctuation in revenue that some investors were concerned about.
A few depositors also mentioned their concern that most of the traffic was coming from referrals, but this was something that actually produced a benefit to the model’s progression, as they had a more targeted niche of professionals they were gaining leads from without any marketing spend on their part.
Over time, more depositors began looking into this business, only to find one thing or another they were not comfortable with. At this point, having gone through several buyers’ calls with no sign of a real offer coming to the table—and the current pandemic not helping whatsoever—William and his partners were willing to take the highest offer on the market and get the deal done sooner than waiting it out for their full list price. So, what was the final offer that sealed the deal on this growing SaaS model?
The Final Offer On The Table
The depositor who walked away with this growing SaaS business was a late comer to the pool of depositors already digging into this listing. They started their due diligence a month after the listing first went live on our marketplace.
The buyer who placed a non-refundable deposit to perform exclusive due diligence wanted to seal the deal with a lower list price offer before anyone else had the chance to do the same. William and his partners were offered a full cash price of $162,500 with a multiple of 33x.
Eager to exit the business so they could focus on their finance careers, William and his partners agreed to this offer, and several days later William and his partners received $138,125 in their account once we factored our commission out.
Not a bad return when you consider William and his partners were spending two hours or less per week maintaining a business that had only taken them three years to grow. Happy with the offer and eager to move on to other ventures, William and his partners were thrilled with their ROI, and the buyer got a great deal on a steadily growing SaaS business. So, what other opportunities does the buyer have now with their newly acquired SaaS business?
The Buyer’s Opportunity to Scale this Established SaaS Brand
During William’s seller interview for this asset, he mentioned a few key growth opportunities for a potential buyer to consider, and this buyer had taken note right from the start.
Observing that William and his partners had never grown outside of the initial email outreach in terms of marketing to new customers, the buyer saw an easy win.
With the growth in lead generation services, which now include construction contractors, insurance agents, real estate agents, and the like, the buyer recognized a gold mine of marketing potential right from the start. The fact that William and his partners had failed to take advantage of this opportunity meant that the buyer could scale this asset to new heights by simply marketing to these individuals and services.
The buyer could focus on the core products already being offered to market these services to the professionals mentioned above, giving the buyer uncapped potential to scale this model further. Both the buyers and sellers were satisfied and happy to have completed the deal. William and his partners are now able to focus on their finance careers, and the buyer got a great deal on this growing SaaS model, which offers plenty of opportunities to scale further.
If you have a SaaS business right now, maybe you would like a big exit just like this.
There is a huge buyer pool out there for “passive” SaaS businesses. If you want that kind of payday, then let’s talk.
You can submit your business to us today to get the process started.
Not quite ready to sell just yet? No problem! You can set up an exit planning call with us to ensure you get the most from your exit.
Or, maybe you want to purchase a well-run digital asset just like this one?
We can help you there too.
Schedule a buyers’ criteria call with one of our business analysts to be notified when a great opportunity such as this comes available on our marketplace.
