Expert Deal Review: September’s Best Listings

Are you someone looking to start your own venture by acquiring a SaaS business in 2024?

Then you’re in the right place! Join Andrew Gazdecki, founder and CEO of Acquire.com, and Ky Pratt, Acquisition Success Manager, as they share their expertise in reviewing seven of the best listings on Acquire.com in September.

Watch the full breakdown below or skip to the deals and let us know which startups you like best by shouting us out on X (Twitter) or LinkedIn.

Who Are Your Presenters?

Andrew Gazdecki, founder and CEO of Acquire.com

Andrew Gazdecki is the founder and CEO of Acquire.com and a lifelong entrepreneur. He bootstrapped his first business, Bizness Apps, to $10 million in annual recurring revenue, which he later sold to a private equity firm in a life-changing acquisition. Since then, he’s sold two more businesses, bought one, and founded the world’s largest startup acquisition marketplace.  

Having been on sides of the M&A table, as a buyer and a seller, Andrew knows how complex and difficult acquisitions can be. He started Acquire.com to fix the complex acquisition process and make it easier for founders to get acquired, and he’s excited to share his knowledge with you today.

Ky Pratt, Acquisition Success Manager

Ky understands what it takes to buy and sell a business. With a background in coaching and client success, Ky has been instrumental in several large exits, shepherding buyers and sellers through the acquisition process and ensuring satisfaction all round.

What Makes Us Special?

Since 2019, we’ve marked some incredible milestones (and world-firsts) in the acquisition space, testament to the talent, services, and technology we put behind your acquisition. 

We’ve helped over 2,000 startups exit, closed nearly a billion dollars in transaction volume, and registered over 500,000 buyers. Live internationally? No problem – we’re active in over 100 countries and in every continent except Antarctica, with a multilingual M&A team to support cross-border transactions.

What Will You Learn From This Deal Review?

You’ll discover our top listings, why we love them, and tips on how you might earn a return on investment. We know our market better than anyone, and you can use our insights to make better choices about your next acquisition, or if you’re selling, learn how buyers will assess your business. 

How We Vet Your Deals

We’ve invested hundreds of thousands of dollars into a world-class curation and advisory team to publish the best listings only so you don’t waste time on founders unwilling to sell or at a fair market price.

Strict Curation

Only around 45 percent of startups make it through our curation process. We verify the seller’s ID and business, review their goals, and prepare them for acquisition, ensuring you get the highest quality deal flow and founders who’re easy to work with and committed to closing.

SaaS Specialists

We have the biggest pool of SaaS companies and buyers in the world. We love the SaaS business model and the problems it solves. You can acquire other business types, but our biggest market is SaaS.

Expert Support

On the seller side, we offer expert support in-house. Our M&A success team helps sellers with everything from perfecting listings to navigating due diligence. Why? To help sellers succeed while ensuring you get all the info you need when you start acquisition talks. For example: is there a P&L? A confidential information memorandum (CIM)? Due diligence checklist? Transition plan? And so on.

Listing Scorecard

When you evaluate a SaaS startup for acquisition, you might not know where to start. The same is true of sellers listing for the first time. To help, we’ve developed the listing scorecard – a checklist we use to ensure sellers and buyers start from the best possible foundation. 

For example, we’ll check the seller has completed their profile, uploaded a P&L, and connected their metrics, and so on. Have they prepared everything you need as a buyer to evaluate that business and make an offer? Is this price within market expectations? 

The listing scorecard benefits you and the seller, ensuring you’re aligned when talks begin. You want the seller to understand the acquisition process and be ready to answer your questions quickly. Likewise, the seller wants to keep you engaged to encourage a fair offer. 

How to View the Full Listings Featured in This Deal Review

To view the full listing and chat to the founder, click the “View listing” link under the startup breakdown below, and request access by signing a mutual NDA. You can only do this with a paid subscription to one of our buyer plans. 

Premium and Platinum buyer subscriptions give you access to closing tools such as LOI and APA builders, free escrow, and unlimited access to deals within your plan’s limits. To find out which buyer plan is right for you, check out our pricing page. 

Expert Deal Reviews (September 2024)

Please note that the deals we discuss below may no longer be active on the marketplace. As some of our best listings on our marketplace, they’re in high demand and typically go under offer within a few days. 

Deal 1: Top Shopify app offering Session Replay & Surveys (2600+ reviews, 4600+ active clients)

Highlights

• Asking price: $750k (4.3x profit, 3x revenue)
• TTM revenue: $251k
• TTM profit: $173k
• Growth rate: 5%
• Founded: 2019

View full listing

Watch the breakdown

Deal 2: Relationship based link-building at scale for SaaS brands

Highlights

• Asking price: $348k (2.7x profit, 1.1x revenue)
• TTM revenue: $326k
• TTM profit: $131k
• Growth rate: 56%
• Founded: 2020

View full listing

Watch the breakdown

Deal 3: Portfolio of 5 Productivity SaaS Apps

Highlights

• Asking price: $1.3M (3.3x profit, 1.6x revenue)
• TTM revenue: $816k
• TTM profit: $404k
• Growth rate: 20%
• Founded: 2018

View full listing

Watch the breakdown

Deal 4: Time tracking SaaS platform for efficiency improvement.

Highlights

• Asking price: $3.1M (28.6x profit, 6.5x revenue)
• TTM revenue: $476k
• TTM profit: $108k
• Growth rate: 20%
• Founded: 2013

View full listing

Watch the breakdown

Deal 5: Payment processing software to manage and process payments from bank accounts and cards

Highlights

• Asking price: $1.3M (4.5x profit, 2.4x revenue)
• TTM revenue: $518k
• TTM profit: $275k
• Growth rate: 5%
• Founded: 2003

View full listing

Watch the breakdown

Deal 6: AI-Powered Platform for Seamless Voice, Music, and Video Production with Minimal Churn

Highlights

• Asking price: $375M (7.5x profit, 2.5x revenue)
• TTM revenue: $150k
• TTM profit: $50k
• Growth rate: 20%
• Founded: 2019

View full listing

Watch the breakdown

Deal 7: Web development plugins for Bubble.io apps with strong margins, stability and predictability

Highlights

• Asking price: $583k (4.9x profit, 4.9x revenue)
• TTM revenue: $119k
• TTM profit: $118k
• Growth rate: 13%
• Founded: 2020

View full listing

Watch the breakdown

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Q&A

How can I verify the accuracy of a SaaS company’s recurring revenue or financial figures?

With recurring revenue, you hope that they're using a solid and well known payment processor like Stripe because you really want a well organized listing as you get into due diligence. Financial diligence is the 1st thing you got to do, and that's where you're matching up dollar for dollar. So you're looking at subscriptions. You're looking at churn. You're looking at contracts, even in some senses, to validate the early numbers to the legitimate numbers, and sometimes that is, looking at not only accounting software, but bank statements, and cross-checking these numbers across the board. If you're a seller, prepare for your sale early, and make sure that your numbers are easily trackable, because that could be a deal breaker. On top of that, an easier way to manage all this as a buyer is to request the seller connect their financials through Acquire.com chart mogul integration. That way, you can verify the recurring revenue, the churn, and give you a trend line of everything as well.

How much importance should be placed on the business’s technical debt and future product roadmap in the acquisition process?

In my opinion (Andrew), it's obviously important but not above traction, revenue, profitability, and all those types of things. I think if there's some clear technical issues, those should obviously be brought up. And as a buyer, you want to catch those in due diligence. But understanding the product roadmap gives you a lot of insight into the former owner's expertise and understand what they would build to grow the business more, or future steps to increase satisfaction of existing users or customers. So there's a lot to learn there. So if you're looking to build out the product roadmap and there's a lot of technical debt, that's just gonna slow everything down. And if that's your plan post-acquisition is to really ramp up development and R&D and start acquiring more customers and address a lot of the suggestions or feedback that they may have. That's what will slow things down. So knowing about that upfront will be hugely important. And technical debt is very, very typical. It just can be caused by different engineers writing code over a period of time and not fixing small bugs, and they start to add up to become bigger bugs down the line. So it's something to be expected. But the level of technical debt can obviously vary.

How do you assess whether the seller has fully optimized their SaaS business before selling?

I would look exactly at product-market-fit. And by that I mean you're looking at core KPIs such as retention, churn, lifetime value of the customer. If the business is already sticky with clients, then the next thing I look at is pricing. Has the current founder ever increased the prices? What would the impact of that be? Lastly, I would look at the P&L and expenses to try to assess what's discretionary, what is truly critical to the business, and that will give me a nice insight on whether the business was optimized in my mind or not. It's part of the diligence but also the fun part because there are so many knobs and levers that you could think about optimizing.

Plus, there's never a business that is fully optimized before selling. There will always be opportunity somewhere, somehow. There's a saying that goes, "once you believe you are the best. You can never become better" and that applies here. The moment you think you're optimized, you're probably never going to grow again. So there's always that optimism you need to have the mentality of 'what can I do next to continue to grow this business" next?'

What role does the seller’s involvement post-sale usually play in SaaS deals? How long should the transition period be?

It depends. This is a big negotiation chip. Sometimes there is no transition period. Sometimes there's a really long one. Sometimes the founder goes and gets a a job with the acquiring company and they run the business similar to how they were when the founder owned it. So there's are extremes along this spectrum but 3 months (90 days) is the typical minimum and just good deal 'hygiene' for sellers.

It's just important for the new owner and the original owner to spend time transferring knowledge. How does the business work? Who's the most important customer? How do you run the business day to day so it's successful in the hands of the acquiring party. 

But again, it's a negotiation. So usually on the high end, you want to compensate the founders for staying on, helping for everything. Then on the low end, it's typically a situation where the business is just seeing so many competitive offers that the owners are able to negotiate a really reduced transition period.

How do you evaluate the competitive landscape of a SaaS business being acquired?

Be a customer, or pretend to be a customer, and go through the motions of searching for that solution. In doing so, you can also see who else comes up. If the business you're looking to acquire comes up, then you might chalk it up as them having good marketing or brand impact. You should start looking for customer reviews and testimonials. All the while, you also get to see what the competition atmosphere is like out for this product you're looking to acquire. As you go through the customer journey you start to gather what the threats are, so that's one standard strategy. 

Then maybe when you're further along and getting deeper in diligence, you need to consider factors on a macro level. For example, if you're a Shopify App in the Shopify marketplace - what if (although unlikely) Shopify shuts down the marketplace and builds it's own solution? Any business that is built around the ecosystem of another overarching platform (i.e. Apple App Store, Shopify Marketplace, Facebook Apps, etc.) is at the mercy of that platform's changes. Assessing viability of the larger platform or the future actions may be pivotal to determine if the acquisition is worthwhile. The main takeaway is, try to be a customer and see what appeals to you and assess as objectively as you start seeing what comes your way in terms of other options. 

Another option is just to use ChatGPT! Ask it for the top five competitors and use that as a starting point. Obviously fact-check the answers but it's a quick and dirty way to get an assessment if you're looking at many deals at time and need to move fast.

What are common mistakes buyers make when reviewing SaaS financials, and how can we avoid them?

Broadly speaking, take everything at face value. If something says exactly $200,000 TTM profit, and you just believe them then that is a huge mistake. We're not saying that founders are intending to lie about their numbers but there are multiple factors that may be missed unintentionally due to how they kept their books or how they handled one-time payments and pricing changes. So questioning everything is a good rule of thumb.

It's worthwhile to get a second opinion if a deal will significantly impacts your net worth. This may not be feasible for all sized deals but getting a 3rd party or professional to review the financials, especially when you feel inadequate in spreadsheets or numbers in general, should be a strong consideration so you have more confidence in the acquisition.

More tactically speaking, a few common mistakes include: 

▶︎ Assuming the growth will continue. No growth is going to continue forever so similar to our previous question of assessing the competitive landscape, doing a SWOT may give you insights on when that wave is going to stop, and what you can do as a new operator to combat it.
▶︎ Anchoring more worth to the topline revenue (usually the larger, flashy number) and not focusing on profit/margin or churn.

Any suggestions on buying a newsletter? 

If you want to buy a newsletter and earn a return on your investment, make many of the checks you’d make on any other business. How is the seller monetizing the newsletter? Is their audience growing? How could you grow the business? Review the financials, business model, assets, customers, competitors, and so on until you’re satisfied it’s a low-risk acquisition opportunity. If in doubt, speak to the founder.

Should a buyer focus more on the profitability of a SaaS business or its potential for growth? and why?

Ideally, you need to focus on both but then it depends on what your buyer persona is. The reason I say both is, it depends on what you're bringing to the table and what type of business you're looking for. If you're looking at early stage businesses, you probably aren't going to see too many that are profitable or with a high profit margin. They could be in their growth phase, and their profits are going back into the company. One thing that you can look at is the Rule of 40, which is essentially a benchmark where you're looking at growth rate plus profit margin, and if that is 40 or more, the business is technically deemed at a reasonable state to continue evaluating for acquisition.

However, you always need to be careful when reviewing growth potential, as it begs the question - why hasn't the owner done this already? Looking at current execution (what has the startup accomplished today) rather than what they can accomplish in the future is key. Plus, growth potential can be wildly over-exaggerated sometimes as it's assessing something that hasn't happened yet. Focusing first on concrete profitability is better for SaaS businesses. Once you understand the business more, then think about the growth potential. And remember, not all growth tactics are made equal and can yield vastly different outcomes based on who's executing. Focus on growth tactics that play into your strengths. A sales expert will have different tactics than a marketing expert or product leader. 

What are the best ways to identify hidden risks in the business’s operations or technology infrastructure?

Mystery shop the business and go through every department. Get a hold of a salesperson (if they have one) and demo the product. Try the product and service if it's self-serve. Email, chat, call their customer service. Click on every button on their site. 

Try to break the thing like an intense user, and you might find a couple of bugs. You might see that no one's home when it comes to support or you're having trouble even using the product. The idea is to use the product from start to finish to understand what holes might be there and how big they are.

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