How to buy a SaaS without getting burned.
Acquiring a SaaS business can be one of the most effective ways to skip zero-to-one and buy into a product with proven demand. It can also be an expensive mistake if you move fast on bad information.
This guide covers what to look for, what to ask, the mistakes most first-time acquirers make, and how to close a clean deal.
What to evaluate in every deal
Six areas every serious acquirer examines before making an offer. None of them alone will make or break a deal — but together, they tell you whether the asking price is justified.
Revenue quality
MRR consistency matters more than peaks. Look for 6+ months of stable or growing revenue. Understand what percentage is annual vs monthly, and whether there are any large one-time payments inflating the trailing average.
Customer concentration
If any single customer represents more than 15–20% of revenue, that is a concentration risk. Ask what happens if they leave. Understand customer contract lengths and renewal patterns before making an offer.
Churn rate
Monthly churn above 5% should be a serious concern. Ask for cohort data if possible — aggregate churn numbers can hide early-cohort retention problems. Net revenue retention above 100% is a strong positive signal.
Operational complexity
How much does the business depend on the current owner? Can it run without daily founder involvement? Understand the support load, the infrastructure requirements, and whether there are any hard technical dependencies.
Growth trajectory
Is MRR trending up, flat, or down? Ask for the last 12 months of MRR — not just a single figure. A business with declining revenue requires a clear explanation and a realistic plan before it deserves a full-price offer.
Technical risk
Understand the codebase quality, hosting setup, and infrastructure. Old, undocumented code is expensive to maintain. Ask about known bugs, technical debt, and the last time the stack was updated.
Questions to ask every seller
Ask these directly. Vague or evasive answers are signals. Honest sellers who have done this before will answer all of them without hesitation.
What does your MRR look like month-by-month for the past 12 months?
What is your monthly and annual churn rate, and how is it calculated?
How many customers do you have, and what is your largest customer's share of revenue?
How many hours per week do you personally spend on the business?
What does customer support look like — volume, channels, average resolution time?
What are the biggest technical risks or known issues in the codebase?
Are there any ongoing legal, IP, or contractual issues we should know about?
Why are you selling now, and what would you do differently if you were starting over?
Common mistakes to avoid
Most bad acquisitions come down to one of these. First-time buyers are especially vulnerable to the first two.
How to negotiate a fair deal
The asking price is a starting point. Most sellers expect negotiation. The strongest leverage in any acquisition negotiation is information — the more you know about the business, the better positioned you are to make a credible, justified counter-offer.
If the business has risks you have identified — high churn, seller dependency, a single traffic channel — use them as structured arguments, not emotional pressure. A written counter-offer with clear rationale gets faster responses and more serious consideration than aggressive verbal negotiation.
Earnouts — where part of the purchase price is tied to post-acquisition performance — are a useful tool when there is disagreement on growth trajectory. They protect the buyer if the business underperforms and give the seller upside if the growth materializes.
Always negotiate a transition support period — typically 30–90 days. Most sellers are willing. It costs them little and protects you significantly during the operational handover.
What a clean deal looks like
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