First things first… How do you pick SaaS companies and even know they are SaaS, and not something masquerading as SaaS?
Good Question!! The core thing to figure out is if over 50% of the companies revenue comes from recurring revenue (Hopefully it’s more like 75%…).
What’s recurring revenue??? Think of it this way. If they were not to use the product at all would they still be paying the same monthly amount as if they used the product.
When you start thinking about this, you will start to poke holes. Then you will confuse yourself, and once you come out of the other end you will end up with an opinion.
The thing is that every company that is close to being a SaaS company wants in to the group because the valuation multiples are quiet frankly amazing. Who wouldn’t want to be valued 10x revenue. Not earnings…. REVENUE.
That is the magic of true SaaS. Your customers sign a contract and pay every month. The very best SaaS companies have addictive products that are central to a customers daily operations and over time customers use them more and more!
Your SaaS Guru