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by runako 757 days ago
Congratulations!

> Yeah, from what I've heard, SaaS businesses sell for a much higher multiple, often selling as a multiple of revenue rather than earnings.

Adding some color as I have been through the process of selling a SaaS. Based on what you have written, at that stage of development, multiple on SDE is most common. 2.4x is on the low side for growing SaaS businesses, but this business is hardware with real COGS so the economics and buyers will be different. We also don't know the growth rate of the business, which is important in assigning a multiple.

Additionally, full cash payment at closing is a reasonable ask but can lower the overall sale price. (I don't know if it did in this case.)

Again, congratulations in taking this big step on your journey!
1 comments
cpncrunch 757 days ago
From the Quiet Light site, the SaaS multiples are in the 4 to 4.5x income range, which is still incredibly low. They have one for sale that involves 5 hr a week work for just over 4x multiple. Not really worth selling for that amount unless desperate or wanting to retire.
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runako 756 days ago
It really depends on where a person is in their career and life. And as OP indicated, there are real benefits to putting a business behind you, taking a win, and moving on to the next thing (with a wad of cash!). For a lot of people, booking the next 4-5 years of income is a meaningful thing.

Valuation also depends heavily on components of a particular business, so it's not useful to just use one range. Does the business require the owner to run, or is a management team in place? Does it generate its revenue from 1,000 paying customers or 25? What is churn like? How fast is it growing? And bigger companies tend to have less risk in general than very small companies. FEI guides to a range of 7x - 10x for SaaS > $2m valuation (yes, this is somewhat recursive). The high end of that range is about a third the multiple Microsoft gets, but then again these are small businesses without Microsoft's competitive moats.

FE International[1] and Acquire.com[2] routinely publish excellent valuation guides for SaaS companies. I highly recommend to anyone looking to build or buy a SaaS.

1 - https://feinternational.com/blog/saas-metrics-value-saas-bus...

2 - https://blog.acquire.com/acquire-biannual-acquisition-multip...

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