This conversation sparked up on our SaaS subreddit, a community which I invite you to join.
Someone asked the following:
I have a Saas side project that I’d like to sell, but not sure about the price.It’s solo and bootstrapped. I work on it for 2-3 hours per month, answering emails, no other work is required.
It has 70 paying users and 500 total. Profit is around $4000 monthly. What would you say?
I found the top answer very relevant in this case, since it’s not a big SaaS company. Here’s the answer:
It should be priced in the x3-4 multiple of annual (trailing 12 months) SDE (seller discretionary earnings), which is basically revenue minus expenses with the exception of compensation or perks to owner.
SaaS businesses are in high demand from investors and SDE multiple range is x3-6 depending on growth rate, churn rate, and scale. Larger businesses have better scale and unit economics, and can be strategic buys for some investors who own complimentary products or services.
The short general answer is: it depends. Of course, when we’re talking about big companies — say MailChimp — there’s no cookie-cutter answer.
When we’re talking about smaller companies, like this one, formulas (like the one above) can be applied.
But at the end of the day, anyone who has ever sold something in their life knows this: the value is in the eye of the beholder. When Google offers Yelp $500M for an acquisition in 2009 and then Yahoo offers $1B, all these formulas go through the window.
But over there, we’re not talking about cash-generating products — we’re talking about something more important than money: relationships built with customers and data.
About Ch Daniel
I’ve updated this signature in July 2020, so older mentions of the signature might not make sense.
I currently don’t write on this blog anymore. I wrote daily for 9 months on this very blog, but now I’m focused on building the CH Group.
If you want to follow my newer articles, check out the CH Group’s blog.
See everything I do here: Chdaniel.com