Here’s What’s Happening With Smaller B2B SaaS Valuations In 2024

Acquirers of smaller SaaS businesses are moving slowly and taking their time this year, but valuations can still be interesting for companies that fit the buyer’s strategy.

That’s good news for practical SaaS founders who didn’t sign up for “easy” VC funding, never spent too much, and kept on growing.

That’s the message from Adam Haynes, one of the most experienced and active M&A advisors to practical founders who want to sell their software companies.

Adam is a managing director at GLC Advisors & Co., LLC, an M&A advisory firm that helps bootstrapped SaaS founders sell their companies successfully.

The GLC software advisory team has been working with practical software founders for over 15 years and has completed over 120 software transactions, all with enterprise values between $20 million and $200 million for founders.

Adam says there are still 10x+ valuation multiples for the best bootstrapped SaaS companies with $8M+ revenue, 50%+ growth, healthy SaaS metrics, clean financials, and a well-crafted pitch.

Multiples of revenue of 3x – 7x are more common for software companies with slower growth, less perfect metrics, and/or revenues between $2-8 million ARR.

This week in an expert Q&A session of the Practical Founders Podcast, I asked Adam to explain:

  • What has changed in software acquisitions in the last 20 years and recently through 2024?
  •  What is the valuation range for practical SaaS companies under $10M in revenue?
  •  What are the key areas that founders should be working on several years before an acquisition?

I also asked him about all the messy stuff we know is inside our businesses, like co-founder issues, a spike in churn, scrappy financials, and old code—the stuff that hasn’t been cleaned up yet.

Can these hidden problems ever scuttle a deal with an interested buyer?

“When you are selling your company and the buyer is looking at all your challenges and problems, founders should know that rarely are there deal breakers. Buyers and sellers want to get a deal done, and there are ways to navigate around it.

“You can’t have a software company without tech debt, for example. That’s okay. Nothing’s perfect, but you need to have a remediation plan for it. Or if you were going to close a couple of big deals during diligence and you don’t, or they get delayed, the valuation may take a hit. Or they might inject some structure like an earnout if you can get these two deals signed.

“If you don’t own your IP and don’t own or clearly license all your code, that’s tough to navigate around. That can be a dealbreaker, but it isn’t that common.”

Adam shares great insights for practical founders who are dreaming about selling their company someday—or in the next year or two.

Check out this expert interview with Adam Haynes here on the Practical Founders Podcast.

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