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Ask HN: Should I sell my SaaS (400k rev)?

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Ask HN: Should I sell my SaaS (400k rev)?

#1

Post by just_to_ask_sam »

Hi All,

For the sake of my employees, customers, and reputation, I've decided to use this alias.

I started a SaaS co 6 years ago, in a very popular/crowded industry. It's grown to roughly 400k/year in revenue (60% profit margins).

The business has been quite slow the last 6 months and even started to decline (roughly loosing 100 MRR every single month – churn being 10% and growth being 10%). We haven't grown much in the last 12 months (maybe $300 mrr was added, in total, after churn, after 12 months?).

My question to you is, when is the time to pull the trigger and sell?

I'm quite bothered by the fact that I can't fix churn, and my broker believes we can get a good payout for the business.

Look forward to hearing your thoughts

Re: Ask HN: Should I sell my SaaS (400k rev)?

#3

Post by just_to_ask_sam »

gigatexal wrote: post #2

If you can't fix the slowing growth and someone else wants to buy it and attempt to do so I'd say why not sell: the multiple you'll probably get on your revenue should be a tidy sum.

Thanks for your comment – another thing I'm worried about is what next? I've been doing this so long, that, unfortunately, I've gotten quite comfortable at it, and worry that I wouldn't know what to do next.

Re: Ask HN: Should I sell my SaaS (400k rev)?

#4

Post by pdog »

It's unlikely you'll be able to sell at a reasonable multiple (beyond 1x-2x ARR) unless your buyer thinks they can turn the company around. If you're not willing to double down and figure out how to a) reduce monthly churn to less than 1% and b) grow revenue by at least 5% per month (after churn), you're much better off putting the company in SaaS maintenance mode, eliminating new development, downsizing the company to the bare minimum, and earning $30k per month with a 70%-90%+ profit margin while customers are still happy.

Re: Ask HN: Should I sell my SaaS (400k rev)?

#5

Post by just_to_ask_sam »

pdog wrote: post #4

It's unlikely you'll be able to sell at a reasonable multiple (beyond 1x-2x ARR) unless your buyer thinks they can turn the company around. If you're not willing to double down and figure out how to a) reduce monthly churn to less than 1% and b) grow revenue by at least 5% per month (after churn), you're much better off putting the company in SaaS maintenance mode, eliminating new development, downsizing the company…

Thanks for your input, it makes a lot of sense. However, I'm worried reducing churn to less than 1% is very very hard (I don't know if you've ran a SaaS with 1% churn – It's not as common), and often requires product changes, which may impact overall growth and cause even more churn.

Re: Ask HN: Should I sell my SaaS (400k rev)?

#6

Post by davismwfl »

Having sold a couple of companies now I will put it to you this way. If you were to sell right now you are selling from a position of weakness, not strength.

If I was in your position and if you are just tired and want to do something else you need to get the business growing consistently again month to month. Maybe that means finding some fresh blood to bring in.

Another option is instead of selling, look into hiring professional management to take over and you drop back to advisor and chairman. Hold them accountable to grow the business. This means for some period the net income will obviously drop but it come back. Plus it may give you the push and distance you need to be able to help the business and yourself.

And of course you could just sell and try to maximize right now but it won't be as favorable since you are not in a strong position. But sometimes it is nice to just move forward and put cash in your pocket even if it isn't the highest amount you could.

Good luck!

Re: Ask HN: Should I sell my SaaS (400k rev)?

#7

Post by cylinder »

If you went completely passive (let your top employee just be CEO) today, how long will it take to lose all your customers and wind down to $0 revenue?

I would just map out how long you think that would take, and forecast all future cash flows by that hypothetical method, and then make your sale price $1 above that amount (discounted).

Very simply if this year you net $240k, next year $200k, then $150k, then $50k, then $0 without you lifting a finger, why would you sell for less than the NPV of that $400k?

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