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by zaroth
3770 days ago
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I don't quite grok the 4x either... Let's say you have a well established (5yr), steady growing (20 - 30% YoY), low churn (5% annual) SaaS with significant custom engineering in the back-end (hard to replicate) currently at $1.5m of revenue. Two co-founders earning $140k each, and $250k EBITDA... I'm not sure you can add back the full $280k to get $530k SDE, but even still why would you sell something like that for $2m? P/E of 8? 1x forward revenue? Is that really the benchmark? |
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One thing to keep in mind is the technological risk and market change over next 5 years. Does your cost base guarantee that you keep investing and changing the business so that after 5 years you are at the top of market again?
Products, services and companies come and go. The buyer needs to take into account the risk of you being outcompeted on the market during coming years. Has happened to many smallish B2B SaaS companies.
The buyer also always has a huge risk of transitioning from current founders and management.