Valuing A Slower Growth Saas Business - Search Fund Community

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02/17/2021 Redacted Redacted

searcher Harvard University - Harvard Business School United States Coast Guard Academy

VALUING A SLOWER GROWTH SAAS BUSINESS

I've got a Saas business that is growing only 15% per year. It's got rock solid EBITDA (~$2M on $5M in sales), but most valuation numbers for Saas businesses are for hyper growth businesses. How would you think about valuing it?

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intermediary New York University - Leonard N. Stern School of Business University of Pennsylvania - Philadelphia - 02/18/2021

I'm glad to discuss this with you. Valuation would really depend on the sector and focus of the product. If it is hyper niche, the pool of buyers would be limited and a lower valuation. If it is part of a large, existing sector, many potential buyers can be found and potentially a premium valuation.

Feel free to send some additional details, or suggest a time for a call to discuss.

Regards,
David

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searcher Harvard University - Harvard Business School University of Notre Dame - 02/18/2021

What's ARR, ARR % of total revenue, and annual retention?

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searcher Harvard University - Harvard Business School Stanford University - 02/18/2021

This link walks you through an example of valuation a SaaS 'SlowCo' https://www.saas-capital.com/wp-content/uploads[redacted]Whats-Your-SaaS-Company-Worth-Oct-2019.pdf

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admin Massachusetts Institute of Technology - MIT Sloan School of Management Taylor University Stanford University - Graduate School of Business - 02/18/2021

Anonymous - Be sure to take full advantage of your UNLIMITED access to BVR Deal Stats, now available under the VALUATIONS tab at the top of this screen. Here is the direct link for NAICS code 334 "Computer & Electronic Product Manufacturing": https://www.searchfunder.com/bvr/sector/17.

^[redacted]‌ from BVR has access to all the underlying transaction data and can probably help you find actual transaction data comparable to the company you're currently evaluating. I would encourage you to reach out to him.

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investor University of Pennsylvania - The Wharton School Miami University of Ohio - 02/18/2021

Serial SaaS entrepreneur & investor - happy to chat - DM or [redacted] As Joseph said a lot depends on ARR size, retention rate, ARR % of total revenue, and TAM. And then depends on the technology stack (how much pure cloud vs on-prem). Lots of comp valuations for similar companies in lower middle-market PE - can talk more offline.

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