Saas Business Valuation | Accrual or Cash Basis

by a searcher from Trinity Western University

2 years ago

I am looking at a small Saas business that in the prospectus, the broker presented the income statement on an accrual basis (the revenues). During due diligence, I realized that the profit on a cash basis is about 10% less. They provided the cash basis reconciliation after we signed an LOI. 

My question is - is this normal? I feel like I'm overpaying the 10% x my valuation. I'm new to this and I don't feel like I will get a straight answer from the broker. Any help is appreciated!

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3 comments

lender from Universidad Carlos III de Madrid

Hello Carlos. If you are also thinking of financing for this acquisition we can help you with that. We finance up to 80% through Revenue Base Lending. We can finance you in 7 days. Message me if you are interested. --@----.com

2 years ago | like reply | 0 likes

investor from University of Pennsylvania - The Wharton School

Serial SaaS entrepreneur & investor here. Generally SaaS business should be done as accrual accounting (that's the right way to do it). Usually at the small scale you see the reverse (done as cash accounting and after the buy, you need to move it to accrual accounting). Thinking through deferred revenue and liabilities associated with it is always something to think through as related. Happy to chat offline - DM or --@----.com

2 years ago | like reply | 2 likes

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