I've read various forms of the following question, but haven't found an answer that fits the following, so I'm hoping someone can help out.
I'm interested in potentially acquiring a currently in-beta SaaS solution. Making quite a few ballpark assumptions...the current owners have invested $5k, and currently have 10 customers paying roughly $30/month, so $300 per month revenue. They will obviously assume they can grow those 10 customers (which is what I intend to do) and be looking at how much they would have made over the course of a year (we'll stick with $300/month x 12 = $3600 - $500 for hosting fees).
What would be a reasonable amount to offer? Putting a price on money invested/made is one thing, valuing time and code (IP) is another.
Thanks in advance.
Offer them 10K so you can get a feel how serious they are. I supposed they will not sell it for less than that (5k investment + 3.6K a year = 8.6K). If they agree in anything below 15K they don't want to work on it and you did a fantastic job.
Now if those guys are serious (although 5K isn't much to invest) and they know they can grow the customer base up to 100 in the next year or so, the minimum you can offer to them is 50K and go up to 100K. There is a huge chance they will sell it for this amount if they are not based in US and similar countries.
What can happen is that they are really serious and they need the money but don't want to sell. Then you might consider investing in them for a equity.
Since we don't have much info about this deal, what I've just said is one big assumption.
I'd say it depends on how big the company can potentially grow.
If it's operating in a small niche market where getting 100 paying customers seems unlikely then it's probably not worth much. However, if the business could potentially scale to hundreds of thousands of customers paying $30 a month of recurring revenue, then it's probably worth a lot. As an indicator, an early stage start-up with a beta version, a validated value proposition and a huge market potential is usually valued between 1Mio and 2Mio USD so that a seed investor coming in with 100K to 250K gets about 10% of the company's equity.
Of course, some people will agree with me on these ballpark figures, and others won't.