How to sell a SaaS business: what to prepare a year out

Selling a SaaS business usually means choosing how to sell (a broker or M&A advisor, a marketplace, or a direct approach to buyers), preparing materials, taking offers, and then getting through due diligence before closing. Much of what happens in diligence, though, is decided long before: by the retention, cohorts and customer mix your billing data already shows. This guide is about the part you can work on early: preparing the business, especially its revenue story, a year before a sale.

Bright Vault doesn’t broker sales, value businesses or find buyers. For the transaction itself, talk to an M&A advisor, broker or marketplace that works with software companies.

Disclosure: Bright Vault’s founder, Jon Hainstock, also advises on and brokers sales of software businesses.

The usual stages, briefly

1. Decide. Why sell, when, and what kind of buyer you’d want: a strategic acquirer, private equity, or an individual or small holding company.
2. Prepare. Clean financials and metrics, documentation, contracts, and a business that doesn’t depend on you for everything.
3. Go to market. Usually through an advisor, broker or marketplace, with a summary of the business and its numbers.
4. Letter of intent. A buyer proposes terms, subject to diligence.
5. Due diligence. The buyer checks everything: financial, legal, technical and commercial.
6. Close.

Stage 2 is the one with the longest lead time, and the hardest one to squeeze into a few weeks.

Why a year

Most metrics a buyer looks at are trailing: trailing-12 NRR and GRR, a year of cohorts, 12 to 24 months of concentration and churn. A fix you make today needs time to show up in those numbers.

• If one plan has high churn and you fix onboarding for it now, trailing-12 retention reflects the change gradually over the next year.
• If you raise prices, it takes a full renewal cycle before a buyer can see how customers responded.
• If concentration is high, the base under your largest customers grows a month at a time.

Starting a year out gives a change time to appear in the numbers a buyer reads, rather than as a promise.

The revenue questions buyers diligence

The SaaS due diligence checklist covers these in detail. In short, expect to be asked for:

• normalized MRR and ARR history;
• an ARR bridge showing where growth came from;
• net and gross revenue retention, overall and by plan;
• cohort tables;
• customer concentration and the terms of your largest accounts;
• reconciliation of MRR with recognized revenue and cash;
• a per-customer MRR schedule.

Fixes that take months

These are the kinds of issues worth finding early, because they can’t be fixed in the weeks before a sale:

• Churn concentrated in one plan or cohort. Find out why customers on that plan leave, then change the plan, the onboarding or who you sell it to.
• High dependence on a few customers. Grow the base underneath them, and work on contract terms and renewal timing for the largest accounts.
• A messy plan catalog. Legacy prices, one-off discounts and duplicate plans make every per-plan number harder to read. Consolidate them while there’s time to show clean history afterward.
• Annual vs monthly mix. Moving customers to annual billing changes cash flow and churn timing. A buyer will want to see how those customers behaved at renewal.
• Numbers that don’t tie. If MRR, revenue and cash can’t be reconciled, find out why now, while the people who know the history are still around.

What to have ready

By the time you go to market, aim to have:

• 24 months or more of normalized MRR history, with notes on unusual months;
• an ARR bridge and a per-customer MRR schedule that tie to it;
• a stated calculation for NRR, GRR and churn, applied consistently;
• cohort and concentration views you’ve already read yourself, with explanations for anything unusual.

Where Bright Vault fits

Bright Vault is for this preparation year, if you bill through Stripe. It reads your Stripe history and shows the questions above:

• growth, retention, plans, cohorts and concentration, each filterable by plan;
• ARR bridge and per-customer MRR schedule exports.

The software is free while in early access. If you’re going to market within a year, the 12-Month Exit Readiness Program is a paid consultation alongside it:

• a 45-minute Kickoff Review on your numbers in week 1;
• check-ins at months 3, 6 and 9 on whether the fixes are showing up in the trailing numbers;
• a written read-out at month 12, which is part of the program rather than a report available today.

See the overview for more.

FAQ

How do you sell a SaaS business?

Decide what kind of buyer you want, prepare your financials and metrics, go to market through an M&A advisor, broker, marketplace or direct outreach, agree a letter of intent, get through due diligence, and close. The preparation step takes the longest, and it decides how smoothly diligence goes.

Where can I sell a SaaS business?

Through an M&A advisor or broker that works with software companies, through an online marketplace for businesses, or directly to a buyer you already know, such as a competitor, partner or investor. Which route fits depends on the size of the business and how much help you want with the process. This is a description of the options, not a recommendation of any route or firm, including the founder’s own advisory work.

When should I start preparing to sell?

About a year before you want to go to market, if you can. The metrics buyers read most closely are trailing twelve-month figures, so changes you make need that long to show up in them.