How to Sell a Software or SaaS Business
Software and SaaS businesses command EBITDA multiples of 5.0–9.0× — the highest in the UK SME market — due to recurring subscription revenue, high gross margins (70%+), and scalable business models. Monthly churn rate, ARR growth, and LTV:CAC ratio are the metrics buyers focus on most. The buyer pool is broad, from strategic acquirers (larger software companies) to PE and individual operators attracted by cash-generative, low-capex businesses.
Who Buys Software / SaaS Businesses?
Larger software companies seeking to add a product, customer base, or technical team. PE-backed software consolidators and SaaS-focused funds. Individual technology entrepreneurs who understand the business model. International buyers (particularly US and European software groups) seeking UK market entry or product acquisition. Search fund acquirers are increasingly active in the £500k–£2M EBITDA SaaS market.
What Drives Value in a Software / SaaS Sale
Monthly churn below 3% (annual retention above 90%) is the most important single metric — it drives lifetime customer value and validates product-market fit. Strong ARR growth (20%+) demonstrates market demand. Diversified customer base with no single customer above 10% of ARR. Clean, documented codebase on modern cloud infrastructure reduces technical due diligence risk. Proprietary product with genuine switching costs (integrations, data lock-in) creates competitive moat.
Common Due Diligence Concerns
Technical due diligence is uniquely intensive — buyers commission code reviews, architecture assessments, and security audits (penetration testing). High monthly churn (above 8%) is the most common reason for reduced valuations or deal failure. Founder as sole developer creates transition risk that buyers price at a significant discount. Deferred revenue treatment at completion (unearned subscription income) creates working capital complexity. IP ownership and software licensing compliance must be fully documented.
Typical Sale Timeline
A software / saas business typically takes 4–8 months to sell from preparation to completion.
What Is a Software / SaaS Business Worth?
EBITDA multiples for software / saas businesses in the UK range from 5.0–9.0×. See our full Software / SaaS valuation guide.