How to value a SaaS Business in 2017

Description
This document will outline how to value a Software as a Service (SaaS) business. SaaS is a unique and growing industry. This is exemplified by the 22% expected compound yearly growth towards 2020. However, the uniqueness of SaaS businesses requires special consideration to be made when the decision to sell the business is finalised. In the valuation of a SaaS business, key metrics will be analysed by investors to determine points of strengths.

These metrics include, but are not exclusive to, churn, customer acquisition cost and customer lifetime value. Furthermore, the document will delve into the numerous ways to increase the value of an SaaS business before a sale. Planning a proper exit strategy is imperative for any business and following the steps outlined can add significant value before the sale. Finally, how to actually sell the SaaS business will be discussed. Usually, there are four avenues to pursue which are through the marketplace, auction, broker and direct.

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- Thomas Smale