Episode 26 Blog:
SaaS is a $120 billion industry spread over 11,000 companies. On average enterprise, an enterprise customer spends $3500 per employee on annual SaaS subscriptions. That is more than what they spend on bonuses at many places.
Kristie Prinz, a Silicon Valley attorney specializing in SaaS will outline the latest trends in SaaS today…
1. Flexible Pricing
2. Unbundling of Products
3. Customized Products
Rule of Thumb
SaaS companies with revenue less than $5M are valued using SDE or earnings. The earnings multiple varies between 3-5x.
If a company has revenue of more than $5M, and over 50% YOY then the valuation metric is revenue, as they are investing their earnings in growth, which will give delayed returns to a buyer. Such companies are valued at 5-10x on revenue.
Don’t be fooled by 15-25x revenue multiples of the large public SaaS companies. You are not them. Yet. These companies are established and have different benchmarks and expectations of them.
Believe it or not SaaS is now 25 years old segment, and buyers of these companies have become very sophisticated, and target companies with particular KPIs.
I have valued over 100 SaaS companies, including some of the biggest names you can think of, and been part of two SaaS exits. I will share the insider’s secrets so you can maximize the value of your SaaS company….
1. Customer Satisfaction
2. Built to Last
3. Adapt or Die
If you like what you heard, be sure to subscribe!
I am starting this channel to educate people on valuations and how to use them to their advantage.
If there is a topic that is of interest to you please comment below and I will do my best to give you the latest and greatest on it.
– Bharat Kanodia, ASA
Bharat has valued over 2000 businesses, real estate, industrial, and financial assets including governmental infrastructure, public and private companies, and various unique real estate assets. He has signed off on over 4,500 valuations with $2.6 trillion in assets globally. Bharat lives in the San Francisco Bay area with his family and enjoys sailing, golfing, skiing, and horseback riding.
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