Startups Anonymous Est. 2013 · Read-only archive
Questions

B2B startup: time to quit?

I run a B2B SaaS startup in a niche but fast-growing market. After developing a good quality product, I started getting some revenue. In the last few days, I finalized the business plan and sadly realized that, in the most plausible scenario, in 3 years from now I’ll be turning over about $450,000, which will be paying the salary of 3-4 people and the running costs. That’s for me, well below the salary I could get by being employed now, so the opportunity cost is quite high. If I manage to sell the company, considering a typical multiplier for SaaS (3x), I’m left, after taxes, with not enough money to retire and I’d be looking for a job as I approach my 50’s.

Should I give it up now? Any suggestions?

19 answers from the community

AAnonymous· Oct 31, 2014

It seems the answer is in your question. You don't feel passionate by your startup, you are balancing it with a well-paid corporate job, and think about getting as much money as possible, as fast as possible, to retire as young as possible. In this situation, there is only one answer: do what it takes to sell your startup as soon as possible, as the highest possible valuation. Then take a good job, or try another startup idea.

AAnonymous· Oct 31, 2014

I think that any reflection about passion are suitable for people who still have time to fail multiple times and belong pretty much to the young-founder folklore. I'm well over the hill and I need to risk-manage my decisions. Also, can one really be passionate about solving business problems for other companies? It might be interesting and challenging, but being passionate is something different.

AAnonymous· Oct 31, 2014

How much time have you invested in your company so far? If the product has been reasonably well built, could you bring in other people to run/manage it and dole out equity while you go back to your high paying corporate job?

AAnonymous· Nov 1, 2014

That's a possibility, although any job is not going to pay very much, but it would be (hopefully) safer and not delayed by 2-3 years. I'm trying to risk-weight the different options and make a decision. I'm very aware of the fact that there's no silver bullet.

AAnonymous· Nov 2, 2014

I loved your question - it's a very valid point. With all things being equal - which choice is better? I don't know, but given your tone I think things may not be equal, and you sound like you have a preference... maybe it's okay to do what's right for your family even if not every one gets it. Good luck with it!

AAnonymous· Oct 31, 2014

My first reactions:

sounds like breaking even or paying yourself a small salary at $450k. Could you do without 1-2 of those employees? Or at least contract offshore? Remember as a niche application you DON'T need to provide "fanatical support" or have every integration; changing your outlook to this would help in framing reduced headcount + development.
how do you view your strengths in sales and marketing? $450k might be conservative if you had the right resources working for you. Hire a professional SEO firm; spend money on off shore SDRs and lead gen. If the market is growing maybe you can hit $1.5mm which is much different
what is your current run rate? How much have you spent on development? Given your post, you might be best served just cashing out today.

AAnonymous· Nov 1, 2014

The headcount is already minimal, sales and marketing costs are low: we're fairly well known thanks to some content marketing I do myself. I don't like sales, but I'm doing reasonably well. I spent about $50k in development (+ my unpaid work) and I have now about $18k ARR. Of course things could turn out well, but relying on best-case scenarios can lead to big disappointments.

AAnonymous· Nov 1, 2014

$18k ARR or is that $18k MRR? If ARR and based on your comments I would seriously consider searching for a job and selling it for what you can...

AAnonymous· Nov 1, 2014

It's ARR, but I've just started seriously selling. How does the MRR/ARR of a decently successful B2B SaaS company look like 6, 12, 18, etc months from the MVP? The scenarios I came up with don't look good, but I honestly have very little knowledge about how the metrics of a healthy business should look like. Can anybody help me with that?

AAnonymous· Nov 2, 2014

It is somewhat hard to say generically for a B2B SaaS.

Depends on your annual contract value (ACV), cost of customer acquisition, length of sales cycle and market opportunity / competition.

Here is a question that would get to the heart of it:

what is the ACV of the sales you generated thus far?
what did you spend to acquire those customers
how much time did you spend in selling to those customers

Leaving aside cost structure / development needs and complexity, answers to that should tell the most.

AAnonymous· Oct 31, 2014

How can you gauge things like this ? Wasn't Mark offered nearly a billion in late 05' for F.B. . ? You never can predict the market. You might get offered 800 mil to sell in 3 years.

AAnonymous· Nov 1, 2014

That's possible, but it's not a plausible scenario. Assuming $450k turnover in 3 years is much more reasonable and that's what I base my reasoning on.

AAnonymous· Nov 1, 2014

Nothing you can do to make it more valuable ?

AAnonymous· Nov 1, 2014

Some magic feature ----Like disappearing documents after 7 seconds ?

AAnonymous· Nov 1, 2014

brilliant idea!

AAnonymous· Nov 1, 2014

Ya know. It probably is. Run with it.

AAnonymous· Nov 1, 2014

I ha e 2 companies one that pays the bills the other is a b2b SaaS with 2500 mrr.

I realized about 6 months ago that the niche is too tight and it will never be the thing that makes me an extra 50k a month.

Dev costs were just my time I am the technical cofounder. My partner had the idea and contacts for out first dozen customers.

Its an even split. Since it doesn't touch the revenue of my other company I spend as little time as I can on it. We have hirered a commission only sales person and are shifting down a gear in terms of our involvement.

So if it ain't cutting it either pivot or change your personal focus. 18k to 450k is a large gap.

AAnonymous· Nov 1, 2014

What does the scenario look like in 7 years? I run a enterprise SaaS - here's our experience - take from it what you will.

Year 1 - 20 K ARR

Year 2 - 250 K ARR

Year 3 - 350 K ARR

Year 4 - 400 K ARR

Year 5 - 950 K ARR

Year 6 - 1400 K ARR

Year 7 - 2500 K ARR projected

Enterprise SaaS takes a long time (imho) to get traction. But when it does - it does. Your business model and feature set will evolve during the 'slow growth'. Believe it or not - that's a blessing. It allowed us to really build something our clients need (i.e. we only built what they asked us for) and then that service is worth a serious premium, as of course, no real competition exists for it - or if it did - the switching costs are extremely high.

I started the company at 32 - and left a great corporate job to do so - so I kind of understand the age consideration and your dillema.

I personally think 450K ARR is nothing to sneeze at. If you can do that and stick with it - your co will be worth enough for it to be worth your risk in 10 years.

AAnonymous· Nov 2, 2014

Thank you! That's exactly the information I needed: it looks pretty much like my base, organic-growth scenario. May I ask you how many employees you had from year 2 to 6?