Although SaaS companies navigate one of the world’s most complex and tumultuous industries, there are a number of developments that are offering untold opportunities for businesses involved in the sector.

For example, AI has paved the way for greater automation, personalisation and enhanced decision making across every industry imaginable. In fact, Nextmsc.com valued the global AI market at $207.90bn in 2023, predicting that by 2030 the market value will reach $1,847.50bn – an extraordinary CAGR (Compound Annual Growth Rate) of 35.5%. Cyber security is another strand which, thanks to the pervasive nature of an extraordinary range of cyber threats, is expected to grow to $562.72bn by 2032.

But what makes a SaaS business a particularly hot property for acquirers? As many SaaS companies rely on subscription-based revenue, their recurring income model offers stability and predictable financial performance for potential buyers. However, there are a number of other important KPIs that are buyers are looking for including:

• Net Revenue Retention (NRR): NRR measures the percentage of revenue retained from existing customers over a specific period. It is a crucial indicator of customer satisfaction. A high NRR suggests a strong customer base, low churn, and a healthy and sustainable revenue stream.

• Service Obtainable Market (SOM): SOM represents the total addressable market for a SaaS product or service. A large SOM signifies significant growth potential without the need for further investment.

• ARR Growth (%): Annual Recurring Revenue (ARR) Growth measures the percentage increase in subscription revenue year-over-year. Strong ARR growth indicates a rapidly expanding market share and a healthy business with significant growth potential.

Plus, there also some other factors buyers are looking for in a potential acquisition:

• Optimised MRR (Monthly Recurring Revenue): Potential buyers prioritise companies with substantial and rapidly growing MRR. Focus on aggressively growing subscription revenue whilst maintaining/improving the quality delivered.

• Futureproofing: Continuously adapt your technology stack to meet evolving user needs and industry trends. This ensures your product remains relevant for the long term.

• Innovation: Create a work environment that attracts and retains highly skilled developers and engineers who contribute to your technological edge.

• Cost Control: Whilst scaling revenue is important, all buyers are placing equal, if not greater, emphasis on the profitability of targets.

By considering this list closely, whether it be implementing a culture of innovation or focussing on aggressive yet sustainable MRR growth, you can ensure your SaaS business is well-positioned for a lucrative exit.

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Oliver Roper is an Assistant Manager at Shaw & Co

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