What to Know Before Selling Your SaaS Business with Thomas Smale
In this episode, Thomas Smale talks about how his company helps buyers and sellers of businesses with SaaS-Story in the Making host, Matt Wolach. He highlights the importance of working with an expert when undergoing the processes, how software company leaders can set up their businesses to look great to potential buyers, and shares advice about what owners can do to make sure a potential buyer grabs the opportunity to acquire their business.
Podcast: SaaS-Story in the Making
Episode: Episode 170, What to Know Before Selling Your Business
Host: Matt Wolach, a B2B SaaS sales coach, Entrepreneur, and Investor.
Guest: Thomas Smale, CEO of FE International Inc.
TOP TIPS FROM THIS EPISODE
Allot Time and Effort To Exiting
When you start a business, it also makes sense to build a solid plan on how to exit it. Selling a business will require much of your time and effort, so you will need to find smart ways to do it and plot the best time to sell. This episode covers everything you need to know before selling your business with merger and acquisition expert Thomas Smale. He is the founder and CEO of FE International Inc., a team of M&A advisors and professionals that have completed hundreds of millions in SaaS business acquisitions since 2010.
Always Work with an Expert
Part of starting a business is also creating a plan in case you need to sell it. Let’s say you’ve decided to put your business up for sale. Sure, you can do it by yourself or with your team, but aside from the time-consuming and draining process you will have to go through, you might miss important details. For example, you might not get a grasp of the right amount of equity you can receive from your potential buyer. This is where experts come to the picture. Selling your business is a critical step. Do it smoothly with the help of professionals.
Matt advises business owners to always work with an expert, whether you’re a novice or a large enterprise owner, especially in SaaS that is why he provides sales training and coaching on how to perfect the deal process. This is what Thomas’ company, FE International, has been successfully doing in the past 10 years. His team sells businesses on behalf of the owner and takes care of all aspects, making sure that you exit with no discrepancies left behind.
Good Businesses Attract Good Acquirers
So you have made up your mind to set your business up for sale. How do you make it look great to potential acquirers? Thomas says it’s evident that when you build a good product or a good business, it will magnet a good buyer. Software company leaders and owners can set up their businesses for sale by providing excellent service to their customers first. An acquirer is a customer. Your services should solve a specific need that a demographic finds trouble with. Thomas says businesses that are popular with a particular demographic have more potential – an excellent indicator that there will be sure buyers.
The Journey from Building to Selling
Every business has to have a safety net. Whether it’s because of a huge professional change or a lifestyle adjustment, business owners should establish a plan on how to exit gracefully, and that is by selling your business.
In the event that you decide to exit, there will be an extensive process you will have to go through to ensure a smooth transition and turnover of assets to your future acquirer. Thomas touches more on this process. FE International works with owners through the whole journey of their business, from building to eventually, selling it. Some clients come back in 10 years for evaluation and when they are ready to finally put their business up for sale.
If it’s a SaaS business, Thomas advises that leaders have to make sure to ask all sorts of technical questions to create a highly detailed pitch deck to sell everything about the business. FE International reaches out to potential acquirers on behalf of the seller and lays down the criteria. Thomas puts up a structured process where he gets as many offers as possible for the business, aiming to close to the original valuation or sometimes, higher.
How to be a Sellable Business
While there’s an advantage for popular businesses to be sellable, Thomas points out that there is no requirement to build a business that attracts buyers. As long as your business is profitable and your products can be around for long, acquirers will be there. He adds that one of the factors that influenced this is the growing market, which adapts to the evolving world.
In reality, there is no right or wrong churn rate, he remarks. For example, for people who built small SaaS businesses, the target market might be either consumers or small businesses, and in those cases, the churn rate is always much higher.
Best Time to Sell Your Business
You have made up your mind to put your business on sale. The next step is to decide when you should do it. Thomas says it has to be a combination of two factors: personal and financial. These factors further branch to smaller ones that you should also take into consideration, like your family, your investors, your business partners, and all sorts of relationships. He adds that while his team can tell you when’s the right time to sell your business according to the general trends, you ultimately need to decide for yourself.
There is no right or wrong way. For instance, Thomas had a client who wanted to sell his business because he wanted to retire, buy a boat, and sail around the world. It all boils down to your personal choice and what you want to achieve. Thomas reiterates, figure out for yourself what you want. No one can force you to do it. You have to be up for yourself.
[17:40] “If you build a business in any industry, as long as it’s profitable, growing, the product is good and has a possibility of being around for a long time, then there’s going to be acquirers interested.”
[27:24] “You never know when the right time is. There’s no right or wrong way to approach it. Some people love managing people, others hate it. Others figure out as they go along.”
[09:15] “I always say, you should work with an expert, whatever you’re doing.”
[28:18] “Know what you’re ready for. Know what you can handle. Know what you want to take on.”
To learn more about Thomas Smale and FE International, visit https://feinternational.com/.
You can also find Thomas Smale on LinkedIn at https://www.linkedin.com/in/thomassmale/.
For more about how host Matt Wolach helps software companies achieve maximum growth, visit https://mattwolach.com/.
As part of the founding team in his first SaaS product, Matt owned the sales & marketing processes. But he struggled to sell and gain traction for the company. It took years of learning and tweaking before Matt created The Perfect DEAL Process, an innovative yet easy-to-implement method for closing more software deals. To find out more, visit https://mattwolach.com/about-matt