Any thoughts on how you would value this SaaS company?

investor profile

April 24, 2024

by an investor from Massachusetts Institute of Technology - MIT Sloan School of Management in Boston, MA, USA

Hi,

Prop Deal. 3m top line. 1,6m EBITDA. SaaS company. Zero Rev growth but very consistent YOY topline. Churn is less than 5%. Employees are###-###-#### Software is the only revenue, no services provided. End market is Solopreneurs and Shopify owners.

Any thoughts on how you would value it?

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commentor profile
Reply by an intermediary
in Toronto, ON, Canada
I said this in another thread just now - what's the customer concentration like? It's the first thing I look at when it comes to SaaS. In this case, it doesn't sound like it would be too bad.

But then there is platform dependancy - how much of it is Shopify?

If more than 50% of the base is on one external platform I'd slide to the lower end of the scale.

Having your service built for customers mainly using the same external platform is a double-edged sword - you can grow off the momentum of that platform, but you also run the risk of something changing there that affects your business, including them adding your SaaS product to their core feature set.

When you have that kind of business, you look at whether the growth is tracking, trailing or exceeding the growth of the one big external platform? You said it's flat, so in this case it's lagging.

If you think you can improve the business then you should be able to reasonably expect to at least pull even with the external platform (If it's Shopify, call it 25% YoY).
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Reply by a searcher
from Columbia University in New York, NY 10012, USA
Very hard to say without a lot more detail. In some ways, you should model it out for 10 years with the churn and then discount the cash flows back at a reasonable rate. Can you grow the business? How confidently? I find these situations very difficult unless you can maintain the codebase and do customer support, and all the other things needed.
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