How to Source SaaS Deals: Finding Profitable Businesses

Knowing how to source SaaS deals has become a critical skill for investors and business owners looking to acquire profitable software companies.

Software as a Service (SaaS) businesses offer scalability, predictable recurring revenue, and high-profit margins, making them one of the most attractive acquisition targets today.

However, sourcing SaaS deals is not as straightforward as it may seem. You need to know where to find businesses, how to evaluate them, and what to consider to ensure you’re making a sound investment.

This guide will provide a step-by-step approach on how to source SaaS deals, including strategies, marketplaces, broker recommendations, and tips for conducting thorough due diligence.

Why SaaS Businesses Are a Great Investment Opportunity

Before diving into how to source SaaS deals, it’s essential to understand why SaaS businesses are such attractive investments. There are several key factors that make SaaS businesses a solid choice for both first-time buyers and experienced investors:

Recurring Revenue Model

One of the most appealing aspects of SaaS businesses is their subscription-based model. With Monthly Recurring Revenue (MRR), buyers can predict cash flow more accurately and enjoy a steady revenue stream. This provides a higher level of financial security compared to businesses that rely on one-time transactions or irregular sales.

Scalability

SaaS businesses are often highly scalable, especially those that are cloud-based. With a well-developed product, a SaaS business can expand its customer base without significantly increasing operational costs. This scalability allows for rapid growth, making it an appealing prospect for potential buyers who are looking to grow their portfolio.

Operational Efficiency

Compared to traditional businesses, SaaS companies typically require fewer employees and lower overhead costs. Operations can often be automated, and customer support can be managed digitally. This operational efficiency is a major advantage for entrepreneurs who want a lean, scalable business.

Understanding these key benefits sets the stage for learning how to source SaaS deals effectively and recognizing the best opportunities when they arise.

How to Source SaaS Deals: Key Strategies for Finding SaaS Businesses

When it comes to sourcing SaaS deals, there are a number of methods to consider. The right approach will depend on your investment goals, budget, and the type of SaaS business you want to acquire. Below are the primary channels to explore when learning how to source SaaS deals.

Online Marketplaces

Online marketplaces are often the first stop for investors and buyers seeking SaaS deals. These platforms list businesses for sale and provide detailed information on each, making it easier for buyers to evaluate the options. Here are some of the most popular online marketplaces to consider when learning how to source SaaS deals:

• Flippa: Known for listing a variety of online businesses, Flippa has SaaS companies in its inventory. It’s a good place for beginners to get started, as it offers a range of smaller SaaS deals that are more affordable. However, buyers should be cautious as Flippa’s vetting process is minimal, and due diligence is crucial.
• Acquire: A favorite for sourcing SaaS deals, Acquire (formerly MicroAcquire) lists vetted startups and growing businesses. They provide metrics such as MRR, churn rate, and Customer Acquisition Costs (CAC), making it easier to assess the business.
  • Pro Tip: If you’re new to SaaS acquisition, Acquire’s transparency and easy-to-navigate platform make it a great place to learn how to source SaaS deals while minimizing risk.
• Empire Flippers: For more established SaaS businesses, Empire Flippers is a trusted marketplace. It specializes in mature online businesses, providing verified financials and operational histories before listing.

SaaS Brokers

Another effective strategy for sourcing SaaS deals is working with a broker. Brokers often have access to high-quality SaaS businesses that may not be listed on public marketplaces. They can also assist with vetting businesses, negotiating terms, and facilitating the acquisition process.

• FE International: This broker is one of the most respected names in the industry and focuses heavily on SaaS businesses. FE International offers high-value businesses ranging from $500,000 to $10 million, and their team handles everything from financial reviews to due diligence​.
• Quiet Light Brokerage: Known for its personalized approach, Quiet Light Brokerage focuses on profitable online businesses, including SaaS companies. Quiet Light brokers work closely with buyers to understand their investment goals and help them source the best SaaS deals available.

Direct Outreach

Direct outreach to SaaS founders is an excellent way to find off-market deals. Many profitable SaaS businesses are not actively listed for sale, but the founders may be open to selling if approached with the right offer. Here’s how to go about sourcing SaaS deals through direct outreach:

• LinkedIn Sales Navigator: Use LinkedIn to find SaaS founders or executives. Craft a personalized message explaining your interest in acquiring SaaS businesses, and outline why you’re the right buyer for their company.
• Cold Emailing: If you have specific SaaS businesses in mind, cold emailing the founder directly can sometimes lead to fruitful discussions. Be sure to provide clear details on your acquisition goals and why you think the deal could be mutually beneficial.
• Networking: Attending industry events like SaaStr Annual or SaaS North is a great way to network with SaaS founders who may be looking for an exit. These events also provide valuable insight into current SaaS trends, which can help you refine your approach to sourcing SaaS deals.

Related: How to Source SaaS Deals

• How to Finance a SaaS Business: A Complete Guide to Funding Your SaaS Acquisition
• The Ultimate Guide to Business Valuation: How to Accurately Assess a Business’s True Worth
• The Ultimate Guide to Buying a Business for Aspiring Entrepreneurs
• How to Turn a Struggling Business Into a $100 Million Success Story

How to Vet SaaS Deals: Ensuring a Profitable Acquisition

Once you’ve learned how to source SaaS deals, the next critical step is vetting these businesses to ensure they are profitable and sustainable. Here’s what you need to focus on during the vetting process:

Financial Metrics to Evaluate

• MRR (Monthly Recurring Revenue): MRR is a crucial indicator of the business’s revenue stability. Look for businesses with steady or increasing MRR, as this signals that the company is growing and retaining customers.
• Churn Rate: The churn rate reflects how many customers cancel their subscriptions within a certain period. A high churn rate can be a red flag, indicating that customers are unhappy or that the market is too competitive. Aim for businesses with a churn rate under 5%.
• Customer Acquisition Cost (CAC): The lower the CAC, the better. High customer acquisition costs can eat into profits and make it difficult to scale the business. Compare CAC to Lifetime Value (LTV) to ensure that the business is profitable from each customer.

Product-Market Fit

A SaaS business’s success largely depends on its product-market fit. Here’s how to assess this:

• Customer Feedback: Analyze reviews, testimonials, and feedback from current customers to gauge how well the product meets the market’s needs. Consistent positive feedback is a good indicator of product-market fit.
• Market Demand: Ensure that the product is in a growing or stable market. If the product solves a niche problem in a shrinking market, it may be difficult to scale or maintain profitability.

Team and Operations

• Founder Dependence: If the business relies heavily on the founder, there may be challenges transitioning ownership. Look for businesses with a solid operational team in place, or at least documentation on how the business operates.
• Scalability: A SaaS business should have a scalable infrastructure that allows it to grow without proportional increases in operational costs. Have a developer assess the tech stack to ensure it can handle future growth.

Common FAQs About How to Source SaaS Deals

What is the best platform for sourcing SaaS deals?

The best platform depends on your budget and experience. For beginners, Acquire is highly recommended due to its transparency and ease of use. For more experienced buyers, Empire Flippers offers more established SaaS businesses with verified financials​.

How can I find SaaS deals not listed on marketplaces?

Direct outreach is an effective way to find off-market SaaS deals. Use LinkedIn to connect with founders, attend SaaS industry events, or send cold emails to companies that align with your acquisition goals​.

What should I look for when vetting SaaS deals?

Focus on financial metrics like MRR, churn rate, and CAC. Also, evaluate the product-market fit and make sure the business is scalable with minimal dependence on the founder​.

How do I avoid overpaying for a SaaS business?

Use multiple valuation methods and compare industry benchmarks to determine if the asking price is fair. Don’t hesitate to negotiate based on your findings from due diligence​.

Conclusion: How to Source SaaS Deals

Understanding how to source SaaS deals is a critical step in building a profitable online business portfolio. Whether you choose online marketplaces, brokers, or direct outreach, the key is to thoroughly vet each opportunity by examining financials, market fit, and operational structure.

By following these guidelines, you can ensure that your SaaS acquisition is a sound investment that positions you for long-term success. The right strategy will lead to discovering and acquiring a scalable, profitable SaaS business that aligns with your investment goals and growth aspirations.