How to Flip a SaaS on Acquire

Before investing your hard-earned money, consider the potential returns. A 10 percent return in the stock market is usually considered good1, but on Acquire, it’s not unheard of to Acquire a SaaS, work on it, and earn up to a 1,000 percent return when you sell it. 

And while other investment strategies may fluctuate with the economy, the market for small-scale online tools tends to remain steady¹.

A Twitter thread from a Acquire customer

Successful SaaS businesses have one of the highest multiples (up to seven times profit) of any industry in mergers and acquisitions (M&A). Why? Because a highly-automated SaaS can bring in a sizable annual salary for a founder with only a couple of hours of work a week. However, building a business to that level of autonomy takes perseverance and time.

Any SaaS business worth its revenue multiple will include the following:

  • Responsive customer service
  • A functional and bug-free product
  • Well-researched pricing

On Acquire, you can find many SaaS businesses in the early stages of scaling. These products may serve a handful of customers but need better pricing, marketing, customer service, or product tweaks. A flawed startup can be very profitable for the right buyer. Once fixed, it may go for a much higher price than you paid for it.

Every year we see buyers developing fledgling startups they find on Acquire and sharing their journey. Here’s how you can start building small companies on Acquire, turn them into something bigger, and exit for a profit.

Sign Up as a Buyer and Find a SaaS

You can start browsing businesses for sale on Acquire right away by creating a free account. Just go to our website, sign up as a buyer, and then view the marketplace. 

However, you won’t be able to message sellers or view their private details until you upgrade to Premium (for buying startups under $250,000 TTM revenue) or Platinum (access our biggest, best startups, including those we manage).

Once you’ve upgraded, create your buyer profile. You can see how this works in the video below.


How to Choose a SaaS on Acquire.com

As a first-time buyer on Acquire, consider:

  1. How much money you’re willing to spend.
  2. Your strengths and weaknesses as a founder. 

You might also want to read our article, How to Choose Your First Startup Acquisition.

Deciding Your Budget

When flipping a SaaS, we advise you to start small to minimize your financial risk. Besides the acquisition, you’ll need to budget for domain fees, server fees, and the salaries of any employees or contractors that come with it.

Smaller startups may also present more opportunities to apply your expertise. If a startup already makes millions in revenue, it’s probably got most things right. 

Another way to look at it: A $25,000 startup grown to $1 million is a 4,000 percent ROI. A $1 million startup flipped for $2 million is “only” a one hundred percent return.

Deciding What Type of SaaS You’ll Buy

Even if you find a promising SaaS business at a great price, only buy one that you feel qualified to improve. Perhaps the product needs better marketing, more features, or more streamlined operations. Find one with problems that fit your expertise. 

While you can always outsource an improvement, you risk delays and a strained budget when hiring third parties to work on areas you know little about.

We make it easy for you to tell at a glance what a startup needs. When founders list their startups, we ask them to include a growth opportunities section where they list everything they think a buyer will need to do to grow their company.

Work on Your New SaaS

So you’ve found a SaaS business at a reasonable price and are ready to get to work. Below are a handful of things to start capturing more leads, build better ARR, and shorten the runway to your future sale:

  • Create a content pipeline
  • Implement better customer service
  • Improve your pricing
  • Improve the product

For a little more clarity on how these changes might affect the value of a SaaS, learn what valuation methodologies financial buyers commonly use. For a more in-depth approach, we’ve also written a large guide to raising revenue post acquisition.

Create a Content Pipeline

If you enjoy recording videos, writing, or designing, you have the perfect skill set for search engine optimization (SEO). By publishing helpful and interesting content online, you attract the eyes of potential customers at the top of your sales funnel and refer them back to your product.

Content marketing includes:

  • Starting a YouTube channel with helpful videos and tutorials solving customer problems.
  • Creating a blog answering commonly asked questions in your field.
  • Creating social media accounts for your business or building in public from a personal account.
  • Posting in a forum like Reddit about your product.

More importantly (especially for later sales price) better SEO means lower customer acquisition cost (CAC). Media assets referring free leads are hard to make and take time to scale. A four-year-old video with thousands of views could bring you exponentially more customers than a Google ad². Organic traffic is usually a much larger proportion of customer acquisition than paid channels.

Customer Service

At many early-stage SaaS startups, customer service is a barebones operation easily run by a solo founder. When you only have ten customers most issues are solved with a quick email. Early-stage CS is also a great way to learn directly from customers how to improve your product and which problems they frequently have.

However, as your customer numbers grow, you’ll need to expand your CS teams to meet requests promptly. If customers feel ignored, they’ll leave. All good SaaS businesses also need a powerful customer arm to alert founders about bugs or other errors as they occur at scale.

There are two major channels you can improve for CS and both are equally important.

In-person CS

In-person interaction is important in customer service³, but no solo founder can do CS indefinitely (and potential buyers likely won’t want to). At some point, you will probably want to outsource customer service to either an employee or contractor.

Fortunately, it’s easy to find an affordable customer service contracting service. Many of them are located in countries like the Philippines or parts of eastern Europe. You can also contract with agents on places like Upwork and Fiverr and hire them full-time later.

Automated CS

If you answer your customers’ frequently asked questions on your website, they won’t need to bother customer service teams. Today more chatbot AIs are available to buy and train to answer questions about your product from the FAQs.

We’ve interviewed a handful of chatbot and CS automation providers for our publication, Bootstrappers:

Automated customer solutions can help you keep your customer service team costs down, however, they can never fully replace an in-person phone call.

Modify Pricing

Sometimes the biggest thing holding customers back from buying is your pricing. On Bootstrappers, we’ve interviewed many founders who made record profits and Acquired new customers with just a new pricing plan.

Some different types of pricing plans you could include are:

  • Freemium pricing: Offer a watered-down version of your service for free and make customers pay to use more features.
  • Subscription: Have customers pay per month or year.
  • Day pass/one-off: Offer small runs of your service for customers who only want to use it one time.
  • Pay for usage: If your service provides quantifiable actions, you could charge for the number of times customers use it. For example, a translation service that has different plans for 10,000, 50,000, and 100,000 words translated. These are great options for customers requiring exponentially higher usage rates like enterprises.
  • Lifetime access: Maximizes monetization in the early stages of your business though not a great solution for recurring revenue. Lifetime customers are usually willing to pay substantially more and forgiving if you’re slow on updates.

Remember, pricing can always change. Never be afraid to offer strategic discounts to improve sales. As a rule, once customers start paying, it’s easier for them to keep paying (though you can always expect some churn with price increases). 

Improve Your Product

Finally, if you like tinkering with products, you can add extra value by improving your service. And if you’re unsure what to fix, you can usually learn by scrolling through customer product reviews and complaint emails.

Easy product changes might include:

  • Creating a mobile or desktop application
  • Decreasing website latency
  • Eliminating unnecessary features
  • Bug fixes
  • Adding new integrations

Even if coding isn’t your thing, you can always contract with developers for these improvements. However, a word to the wise: Most technical founders we interview at Bootstrappers tell us someone on the founding team should understand how your product works. Otherwise, it is hard to select the right contractors for help.

Not all product improvements are strictly in the code either. For example, every product needs an eye-catching website with clear descriptions and calls to action. Just a few design and copy tweaks can drastically decrease your bounce rates and improve signups.

Create a Seller Account and Exit Your Business

When you start seeing more customers arriving and your revenue growing month over month, you’ll likely be able to flip your startup on Acquire for a higher price. That means it’s time to make a seller account and close your deal.

Before you begin, we have a free valuation tool to help you set a realistic asking price. You can also get more information about preparing your startup for acquisition on our blog.

To start listing your startup, you’ll need to:

  1. Create and register an account.
  2. Fill out service descriptions.
  3. Set your price.
  4. Connect your web, customer, and financial metrics.
  5. Upload your pitch deck.

By now, you’ve been through the buying process and should be well-acquainted with what buyers are looking for. We advise you to sell at our recommended revenue multiples to ensure a speedy exit.

Once you find a buyer who you think is the right fit and make your exit, let us know on Twitter. You’ve joined a small but growing club of founders who’ve validated their hard work. We hope you invest your funds into a new startup or do something to make your life more fulfilling.

For the love of startups!

Sources

1https://www.fool.com/investing/how-to-invest/stocks/good-return-on-investment/#:~:text=Most%20investors%20would%20view%20an,will%20generate%20significantly%20higher%20returns

2https://videos.brightedge.com/research-report/BrightEdge_ChannelReport2019_FINAL.pdf
3https://blog.hubspot.com/service/personal-customer-service


The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before entering into any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.