Young SaaS entrepreneurs increasingly choosing to sell their business early

18/12/2023
66

Recent trends in the software industry show a significant shift in the age at which SaaS entrepreneurs are choosing to sell their businesses. Research shows that the average age of entrepreneurs selling their businesses is steadily declining, a trend that is manifesting itself strongly in the Software as a Service (SaaS) industry. In 2005, the average age for selling a business was around 60, while in 2019 it dropped to around 55. Today, however, we see the average SaaS entrepreneur starting to sell their business even earlier. This year, no entrepreneur was older than 50, where we successfully assisted entrepreneurs in the 33 to 49 age range to sell their SaaS businesses.
This trend is driven by several factors:

In recent years, M&A boutique Anno1982 has already helped many SaaS entrepreneurs sell their businesses. In doing so, the company sees the following trends:

High demand for software companies: There is significant demand for SaaS companies due to their repeat revenues and the attractiveness of the "bead threading" (buy-and-build) model within private equity.

Rising popularity of pre-exits: Entrepreneurs are increasingly choosing to cash out part of their business early, followed by a second exit after 5 to 7 years of partnership with a (strategic) buyer/investor.

Market awareness and maturity: With the growth of M&A and private equity funds, entrepreneurs are more aware of early sale opportunities.

Yet our observations show that many SaaS entrepreneurs are not optimally prepared for a sale. Common pitfalls include unrealistic expectations, a lack of getting the company ready to sell, and over-reliance on the entrepreneur himself.

In addition to these trends, recent data suggests that despite the dominance of Generation X and baby boomers in small business, there is a clear emergence of younger entrepreneurs, particularly millennials, in the SaaS industry.

To overcome these challenges, work with Anno1982.nl, a leading specialist in business acquisitions. With their unique approach, which consists of seven detailed steps, they offer support not only in organization and strategy, but also in financial planning. Their team of specialists, including M&A advisors, lawyers and corporate finance advisors, work together to ensure an efficient and profitable sales experience.

Anno1982.nl is driven by (former) entrepreneurs who have experience selling their own businesses. Today they put this knowledge to use by taking a customer-oriented approach, simplifying complex matters and offering clarity and confidence to entrepreneurs. With their baseline measurement, they look at how "exit ready" a company is and determine the desired exit strategy. In doing so, they use innovative sales methods such as pre-exits. In this way, they maximize financial returns while ensuring favorable terms for all parties.
Additional information:

The age of entrepreneurs selling or running their businesses varies, but there are some interesting trends and data that shed light on the current state of affairs:

Generational Distribution of Entrepreneurs: In 2023, small businesses are primarily run by individuals from Generation X and baby boomers, who make up 86.8% of small business owners. This places the average age of business owners between 43 and 77.

Rise of Young Entrepreneurs: Millennials, ranging in age from 27 to 42, represent 12.9% of small business owners, which is a significant increase from the previous year. This indicates an increasing interest of millennials in entrepreneurship. In addition, the average age of new business owners is expected to be around 34.

These data suggest that although the majority of small businesses are still run by older generations, there is a clear trend toward younger entrepreneurs, especially among millennials. This may support the impression that particularly in sectors such as SaaS, younger entrepreneurs are more likely to sell or successfully run their businesses.

The full survey can be found ion this website, below.

Read more: here.

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