Similar businesses sell at 2.2x to 9.3x SDE. Compare live listings and connect with sellers.
National transaction benchmarks for software company businesses.
Under $500K
Over $2M
A variety of factors can cause businesses to trade outside this range, including earnings quality, operational transferability, key-person risk, growth trajectory, and geography, so a listing priced above or below the typical multiple usually reflects real differences in the underlying business.
Cofounder & CEO
Key diligence, valuation, financing, and transition considerations for buyers evaluating software company acquisitions.
Pull customer cohort data, not just revenue. What matters is monthly recurring revenue (MRR), the renewal rate by cohort, gross dollar retention (revenue retained excluding expansions), and net dollar retention (including expansions and price increases). Healthy SaaS businesses run 85%+ gross retention and 100%+ net retention. Below 80% gross retention is a red flag. Verify the metrics with raw data, not the seller's summary slides.
How much revenue comes from the top 10 customers? SaaS businesses often have concentration risk that doesn't show in the topline. A business with $5M ARR where one customer is $1.5M is fundamentally riskier than one with $5M ARR spread across 200 customers paying $25K each. Verify the customer count, the revenue distribution, and the renewal status of the top accounts.
Talk to the engineering team. Software businesses with strong unit economics often achieve them by accumulating technical debt — old code, deferred infrastructure work, missing tests, undocumented systems. When the founder/CTO leaves, this debt becomes a substantial problem for new ownership. Verify the engineering team composition, the codebase age, the test coverage, the deployment frequency, and what major infrastructure work has been deferred.
Read the org chart honestly. Many small software businesses are built around the founder's personal relationships with key customers, technical knowledge, and product vision. When the founder leaves at sale, customers can lose confidence, engineering decisions slow, and product roadmap drifts. Verify the founder's day-to-day role and structure the deal to retain them in a transition role (typically 12–24 months) with clear success criteria.
Look at win rates and sales cycles by customer profile. Most SaaS businesses serve multiple customer segments — by industry, size, or use case. Win rates and retention often vary dramatically across segments. A business that "serves SMBs" may actually have great unit economics in one industry vertical and lose money serving everyone else. Verify segment-level metrics and the business's strategic clarity about where it's actually winning.
Look at CAC trends and payback period. Healthy SaaS businesses have customer acquisition cost (CAC) payback under 18 months and stable or improving CAC over time. Rising CAC without rising lifetime value is a sign of market saturation or competitive pressure. Verify the CAC by channel (paid search, content marketing, sales-driven, partner-driven), the trend over time, and what's driving any changes.
Answers to common buyer questions for this market.
