Been running a small SaaS for six years now. Thinking about selling in the next year or so. I keep reading that buyers want stable ARR more than they care about the new features we roll out. Is that really true? My dev team is constantly pushing updates and I thought that was a good thing. What am I missing?
SaaS Exit
Why buyers care more about ARR stability than fancy new code features
Buyers want predictable revenue. New features don't guarantee renewals. They look at churn and expansion more than your release notes.
I've been on the buying side a few times. Feature velocity is nice to see in the sales memo, but it's not what keeps me up at night. If your ARR is lumpy because customers churn every tme a competitor releases a new UI, that's a problem a shiny new dashboard won't fix. They're going to discount your multiple for instability. Features are cheap to build; trust is expensive to rbeuild. That said, if you have a roadmap that shows you can keep up with bigger players, that does count for something. Just not as much as a smooth retention curve.
What silentpenguin said. ARR stability = lower risk = higher valuati on. Fancy features = higher burn. Buyers hate burn unless growth justifies it.
I'm in the middle of selling my agency and the buyer asked more about client retention than our tech stack. Totally different industry but maybe similar principle.
Thanks, this is helpful. So what does 'stable' actually mean in numbers? Like my churn is around 2% monthly. Is that stable or bad?
2% monthly is 24% annual. That's not terrible for SMB but buyers will want to see it trending down. If it's been flat for three years, they'd rather see that than a dip after a big feature launch that didn't move retention.
Honestly from a technical due diligence view, unstable code can be a liability. If your new features are deployed like fireworks and break stuff, that's a risk. Buyers aren't scared of boring code, they're scared of outages. I'd trade a feature backlog for a stable infrastructure report any day.
Also, consider how you price. If features are your only differentiator, you'll compete on price. If your ARR is stable because you're embedded in customer workflows, you have leverage. Buyers know that.
I'd add that many buyers will actually want to see that you CAN ship features, but they'll weigh it against your support tickets and uptime. It's not binary.
Makes sense. I guess I was conflating 'staying competitive' with 'using features to grow revenue'. Sounds like I should focus on retention data before I even approach a broker.
Good luck. The thread already gave you more than a broker consult would, probably.