I've been working towards a self-funded search, and although I've mostly been focusing on more "traditional" businesses (i.e., "boring" companies, like HVAC services, distribution, manufacturing, etc.), I've been encouraged to consider companies which compliment my background (I've been a software engineer for nearly a decade with a fair bit of experience in SaaS platforms). I've been looking around, and I'm finding there's quite a few differences in everything from how these businesses are found, how they're evaluated, how I financing works, etc.
So, in general, what major differences between these approaches should I be aware of? Are there any specific resources I should look into? Is there a good way to leverage my background in my search?
Tech (specifically SaaS) vs. "Traditional" Business Search Considerations
by a searcher from Carnegie Mellon University - Tepper School of Business
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- Recurring: Think of SaaS where revenue is to a large extent predictable. You're almost 90% sure what the revenue would be in the next quarter.
- Re-occuring: Think of partnerships, regular orders etc, where you know revenue would come, but will not be sure on the value.
- Projects: These are random unless one has built a predictable system to get repeat projects.
In my two decades of experience, I have seen higher valuations being assigned to revenue predictability (leave alone growth). That's why SaaS and tech firms are better in terms of predictability and valuation. Also that's why there is a disproportional capital flowing to these firms.