Selling a Cloud Software Business

Most Cloud Software businesses are valued using a multiple of profit, then buyers adjust based on retention and gross margin quality. Buyers pay more when renewals are predictable, customers expand over time, and hosting plus vendor costs stay controlled as usage grows. Start with Rejigg’s free valuation calculator, then pressure-test the result against customer concentration, renewal calendar risk, and any services work buried inside “subscriptions.”

Net revenue retention and churn affect multiples because they change how much future ARR a buyer can count on. Strong cohort retention and steady expansion usually support a higher price and fewer protections in the deal. Weakening cohorts, rising downgrades, or churn concentrated in one segment often leads to a lower multiple, holdbacks, or an earnout tied to retention. Bring cohort charts and a churn log so the buyer isn’t guessing.

Yes. You don’t need a broker to sell a Cloud SaaS company, and paying 5–10% of the sale price is hard to justify when you can run a direct process yourself. Rejigg gives you buyer access, pre-vetted inbound interest, digital NDAs, a secure data room, and deal tracking so you can manage outreach, diligence, and offers without a middleman. Start with the finding buyers guide.

Usually, no. Most small and mid-sized Cloud Software deals close without audited financials, but buyers do expect numbers that reconcile back to your billing system. If your reported ARR cannot be tied to invoices, credits, refunds, and collections, that creates more drag than the lack of an audit. Clean billing exports and a customer-level ARR roll-forward usually matter most. Rejigg’s QuickBooks integration can help you build a cleaner data room without spreadsheet sprawl.

Many Cloud Software deals use cash at close plus seller financing or an earnout, especially when the buyer wants protection against retention risk. For steadier subscription businesses with clean financials, some buyers also use SBA 7(a) loans, and those lenders will focus on churn stability and owner add-backs. If you want to model the payment math before negotiations, use Rejigg’s SBA loan calculator.

Most Cloud SaaS sales take 3–8 months from getting your story and data organized to closing. Timelines stretch when buyers cannot reconcile ARR to billing, when renewal risk is unclear, or when security and technical diligence uncover surprises late. A staged data room and regular buyer updates usually keep momentum. Rejigg’s due diligence checklist helps you avoid the common time-wasters.

An ARR roll-forward shows how recurring revenue changed over a period using a simple bridge: starting ARR, new sales, expansion, contraction, churn, and ending ARR. Buyers insist on it because it forces your ARR to match customer-level reality, not a dashboard number that cannot be explained. If the bridge does not tie out, buyers assume data quality issues and start discounting everything. Keep the roll-forward and the billing export together in your data room.

Common terms include a working capital true-up at closing, legal promises about customer contracts and security incidents, and a holdback or escrow to cover post-close surprises. Earnouts are also common when the buyer wants the price to depend on retention or ARR after the handoff. Terms are usually a response to a specific risk, like renewal concentration or a security remediation plan. Push for clear definitions so you are not negotiating vibes.

A working capital adjustment is a closing true-up that makes sure the business is handed over with a normal level of short-term assets and liabilities, like receivables, payables, and deferred revenue. In SaaS, deferred revenue can feel counterintuitive because cash often arrives before revenue is recognized. Most owners do best by agreeing to a simple target based on historical averages and your billing model. Rejigg’s negotiation guide explains how to handle this in plain English.

Earnouts pay you additional money later if the business hits agreed targets, often tied to ARR, retention, or revenue milestones. They show up when the buyer is concerned about churn, customer concentration, or founder dependence and wants proof after close. The main risk is getting measured on results you do not control, like the buyer changing pricing, support, or product investment. If you accept an earnout, push for tight definitions, reporting access, and clear operating control rules.

Not always. Many buyers do not require an SOC 2 report, especially in SMB-focused SaaS, but they will expect a security story that matches your customer base and your contracts. If you sell to enterprise or regulated customers, weak security practices can shrink the buyer pool or change terms. A practical security packet with access control, incident history, and current controls often goes a long way. Rejigg’s buyer vetting and digital NDAs help you share sensitive materials safely.

Buyers commonly ask for a production access summary, the process for granting and removing access, incident history, and recent security review or pen test summaries. They also often ask how you handle secrets, credentials, and logging. If you have completed customer security questionnaires, those can be helpful because they show what you have already committed to in writing. Keep the packet factual and release it through a secure data room after NDAs are signed.

Buyers usually split usage-based revenue into a predictable base and a variable layer. They look at how often customers exceed their commits, whether overages cause churn, and whether your pricing stays ahead of your real cost drivers like compute, data egress, and third-party API calls. If usage revenue is lumpy or concentrated in a few heavy accounts, buyers tend to underwrite conservatively or ask for protections. A simple usage forecast and a feature-to-cost map make valuation discussions faster.

You can run a serious process without spraying customer names and contracts to strangers. Start with an anonymized customer list and a renewal schedule, then share named contracts only after the buyer is vetted and under an NDA. Rejigg supports this workflow. Buyers are pre-vetted, NDAs are signed digitally, and you control exactly who sees sensitive files in the data room and when.

Problem contracts usually have obligations that do not show up in your headline metrics. Common examples include easy termination rights, unusual refund language, strict service level penalties, data handling commitments you cannot meet, and side letters promising custom features or special support. Buyers care most when these terms sit inside a top customer. Pull your top contracts early and build a one-page exceptions list so nothing gets “discovered” in week six.

Taxes depend on deal structure, whether you sell assets or equity, and how the purchase price gets allocated across software, customer relationships, and goodwill. Earnouts also affect timing, which can change when you owe tax on proceeds. This is worth modeling early with a tax professional so you do not win on price and lose on after-tax outcome. Keep your financials and contracts organized so your advisors can move quickly once offers arrive.

Many founders do 4–12 weeks of active handoff, then a lighter advisory period, but the right answer depends on where you are still a bottleneck. If you personally handle renewal saves, release approvals, and security escalations, buyers will ask for more overlap. If you have already assigned owners and rehearsed handoffs, you can usually negotiate a shorter transition. The transition planning guide helps you put the plan on paper.

Expect to share financial statements, a customer list and renewal schedule, ARR roll-forward support, key contracts, vendor and hosting cost summaries, and basic security and technical docs like an architecture overview and incident summaries. The goal is to answer the questions that affect price and structure without turning diligence into chaos. Rejigg includes a built-in secure data room so you can stage materials and control access instead of emailing attachments.

Look past the headline number and compare how each buyer shares retention and execution risk. Line up cash at close, seller financing, earnout triggers and definitions, any holdback or escrow, and working capital targets. Also ask what the buyer plans to do with customer success, support staffing, and infrastructure spend, because that can change retention after close. Rejigg’s deal tracking and offer comparison dashboard let you compare terms side-by-side so you can pick the offer that nets out best.