[Case Study] How We Sold a SaaS Business for $106,000 in 2 Days

Branden Schmidt Updated on March 16, 2020

[Case study] How we sold a SaaS business for $106,000 in 2 days

It’s a known fact that technology is always changing.

When we look at the online space as a whole and how technology companies and more specifically SaaS (software as a service) businesses are always evolving as software improves, more opportunities arise to those who spark ideas in making work flow seamless.

SaaS as a business model, offers a great opportunity for those seeking a subscription based revenue stream vs. a one time product or service transaction.

From automation software like chatbots helping with customer service, to subscription based email CRM (customer relationship management) tools that help keep your addressable audience engaged to avoid higher churn rates.

The subscription type business model is highly desirable to entrepreneurs looking to benefit from a monthly or yearly recurring income stream from their loyal subscription customers.

As technology improves and keeps up with customer demands, often times businesses will be forced to look at better solutions to complete tasks in a much shorter time frame.

If you are currently learning how to code, or perhaps you have already started building your own SaaS business, the benefits these technologies provide to its users and developers alike are always in high demand.

This was exactly what the seller of this custom form creation SaaS business had seen when he first purchased the asset in 2011. At the time, the business was structured as a pay and download service offering custom web forms to be created by the user. The business at the time was steady, yet fell short in terms of customer retention after they had purchased and downloaded the product.

Seeing the underlying opportunity to turn this business into a SaaS subscription based model, the seller had an opportunity to restructure this well-aged domain into something others may not have noticed at the time of acquisition.

The Vetting Process for SaaS Businesses

The vetting process for SaaS businesses is not much different when compared to other business models we list on our marketplace.

We check the analytics, the average monthly revenue, where the primary source of traffic stems from, the backlink profile, and a number of other metrics we research during our vetting process.

One thing that does stand out with this particular business model and is something that we have already mentioned, is the churn rate.

This is an important number when it comes to the SaaS business model, as a majority of the business relies on subscribers staying active with their accounts. The more subscribers you have on a recurring payment plan will drive the value of the business up, as having these repeat customers purchasing the product every month offers less work for the business in terms of acquiring a steady customer base.

For this particular business, the churn rate was 1.7%, which is quite low when compared to the average churn rates of other SaaS businesses we’ve listed on our marketplace to date.

When you look at other SaaS businesses in the space today, you will notice the primary objective is to offer a product or service that keeps the subscriber active by offering a tier system with multiple price points suitable for most users, but is also low maintenance in terms of support requests on the backend.

Let’s compare for a moment two different SaaS businesses; Ahrefs and Long Tail Pro. When you consider the multiple metrics and data scraping abilities Ahrefs provides over the simple keyword research results of Long Tail Pro, it’s easy to see why Ahrefs might offer a lower churn rate from its users. Having similar capabilities in terms of keyword research, a user may only opt for Long Tail Pro on an “as-needed” basis, or to perform simple batching operations once every few months.

For the seller of this form creation SaaS business, having a low churn rate, coupled with a DR (domain rank) of 72, and a well aged domain established in 2003, meant this business could easily demand a much higher multiple when compared to the average SaaS sales multiple of 30.25x (as you can find on our 2019 trends report).

What this lower churn rate also tells us, is that subscribers are using this software to customize web forms on a regular basis.

This makes sense when a majority of subscribers using this software are not your typical WordPress users, rather, someone who is building a custom static site in any other language or building platform.

This business does offer a WordPress plugin for its subscribers, however, this was not their primary focus when considering the immense competition within the WordPress marketplace.

Another great aspect the seller included with the business was to store the users custom form submissions within their database, resolving common issues found with most WordPress applications storing the users data on their own personal database and hosting servers.

This was where this SaaS business really started to shine.

Alleviating common issues with backup failures or deleting a plugin and losing your data was something this business offers protection against, and is something that most free custom form submission software doesn’t often provide, if at all.

After properly vetting any business before listing it for sale on our marketplace, we give the seller two types of valuations based on data from similar businesses we have sold in the past.

First we give a typical valuation multiple, which is backed by hard sales data and offers the seller the best possible multiple with the shortest projected time on our marketplace.

We also give an absolute valuation of the business. This is more theoretical and offers the seller the option to list at a higher than typical range if they wish to hold out for a bigger offer.

Based on the DR, age of the business, churn rate, and an average monthly net profit of $2,165, the seller agreed to list the business for sale at a typical high sales multiple of 49x and a listing price of $106,118.

Not bad when you consider the seller was only spending one hour or less per week on the business at this point in time.

Buyers are Looking for Passive SaaS Businesses

When we first listed this SaaS business for sale on our marketplace, it didn’t take long for the deposits to start coming in.

Within the first day of going live on our marketplace, the business received five deposits from eager buyers looking to capitalize on this highly attractive asset. When you consider the quality and stability the seller had put into the coding of the business, this should come as no surprise to those who have built or grown a SaaS business around this same model.

The next day another eight deposits were placed on the business, which stems back to something we have discussed in the past on how you can win the wire race. This is not just something that often frustrates buyers when attempting to purchase a business before the next person has an opportunity to beat them to it, but also shows why it is important to have credit on file with us for when you do find a highly desirable business listed on our marketplace such as this.

Of these eight new deposits placed the second day on our marketplace, one of these buyers offered a full list price for this highly lucrative SaaS business. This full list price offer again, comes as no surprise, as anyone within the SaaS space that conducts their own due diligence on this business will notice the hard work and effort put forth in this scalable business the seller has optimized.

The Buyers Opportunity

The buyers, who just so happen to be a team of portfolio business investors, saw a great opportunity in the acquisition of this asset.

The business, which was quite passive at this point in time, required a limited amount of attention on the backend of the business. Having a stable PHP backend, most of the work required to maintain the business was spent on a few service requests that were usually resolved from sending these subscribers to the FAQ page.

The assets included with the sale contained a secondary domain which redirected to the primary domain as a 301 redirect, an email list of over 12,000 subscribers, and a Facebook profile page.

What is interesting about this particular business is that despite having a high domain rank of 72, the seller hasn’t spent any time on content marketing. This, coupled with a large email list that wasn’t being monetized or used to upsell subscribers to a higher tier plan or subscription package, offered a great opportunity for the buyers to capitalize on.

With all of this low hanging fruit awaiting the new owners of this business, both the buyers and seller were satisfied with the transaction.

If you have a SaaS business right now, maybe you want to get a big exit just like this.

There is a huge buyer pool out there for “Main Street” level SaaS businesses. If you want that kind of payday, then let’s talk.

You can submit your business with us today to get the process started.

Not quite ready to sell just yet? Not a 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-ran digital asset 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 back on our marketplace.

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