I wanted to get feedback on a B2B SaaS/subscription based deal I’m working on. First time acquiring a company this size so I appreciate any insight. Here’s are the quick highlights -
Financials: 700k Rev 550k SDE Purchase at $1.65m Owner operated, full time, zero employees.
Business: The product helps businesses in this industry operate. 50% of revenue is tied to CC processing / 50% subscription.
Competitive landscape: About 10 competitors in this space. One PE acquired competitor that has leading market share.
- Technology is aging and needs an overhaul and additional features to remain competitive.
- CAC has increased substantially due to PE competitor, but aging tech also plays a role in this. I know I can bring the product up to current market standards and add significant value.
- A few other competitors have come up for sale&sold in last 6mo so I’m concerned there’s an underlying industry issue I’m missing
- Small customer base <500 (buy vs build?)
- Industry the SaaS supports is seeing some PE roll ups which leads to customers moving off the platform.
- 50% of revenue is tied to customers success (due to CC profit share)
- Customers are typically locked in as moving to a competitor requires effort
- Long term history of existing customer base
- Post redevelopment, product is well positioned for growth
- Purchase price supports financing with solid cash flow for reinvesting in the business/development
- Owner does not focus on sales/marketing/poorly deployed ad spend
- Improve processes and reduce time currently spent
- IBIS report shows industry is still growing YOY
- Potential to roll up some competitors