Should He Sell His SaaS Company Now or Keep Going?

I talked to the CEO of a serious software company this week who had an offer to buy his company. The deal was almost closed.

“Is this a fair price for my company?” he wanted to know.

We talked about the general trends in acquisition valuations this year for software companies.

We talked about the likely premium for positive things he described:

  • 50% YoY growth
  • 30% profit margin
  • Almost no customer churn
  • They came to buy it, he wasn’t shopping it
  • There are many buyers with money but few good companies to buy
  • It’s a strategic buyer with industry power vs. a financial buyer

And the likely discounts for other things:

  • Some transaction revenue vs. recurring SaaS revenue
  • Valuations are down this year
  • The economy is slowing down and interest rates are going up
  • Cash vs. stock offer
  • Bird in the hand right now with the potential that capital gains tax rates will go up

The deal appeared to be in the range, to me, all factors considered.

But for him, it really wasn’t just about maximizing the valuation.

He could keep growing it and create a much bigger company with a higher value. Just tell any buyers, “No thanks.”

He is a practical founder of a successful software company. He grew this business without any outside funding. He owns all the shares.

And it’s highly profitable now. He doesn’t need the money.

More importantly, he doesn’t have to fit the investment return model of any big investors. They usually have the first say in how and when you sell your company. And you don’t get to sell it “early.”

When you don’t have big outside VC investors, you can do what’s right for you, your team, and your customers. Whatever that is.

For this founder, it’s just about what he wants to do in his life and finding a good home for the amazing business and team he created.

He doesn’t want to be the CEO forever. And he can ensure this business will continue to grow and make a big impact.

We talked about what was important to him and why he felt like it was a good time for a transition.

I congratulated him on creating a valuable company that changed the lives of his customers and employees.


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