I’ve written several articles over the last few months on institutional readiness. One focused on SaaS due diligence preparedness. Another on the value of process and documentation. And yet another on the strategic and organizational implications of preparing a SaaS to be acquired in the future. Back in April, I wrote about the perils of revenue recognition, which is yet another significant piece in the institutional readiness puzzle. The reason for the recurring theme is that SaaS companies can be overly confident that their perspective on their performance is enough to drive a high valuation. The truth is the opposite. Many SaaS companies aren’t prepared for institutional capital or strategic acquisition. And that lack of institutional readiness will cost them opportunities and value.
SaaS Institutional Readiness Report Card
When we were acquired, and throughout the process leading up to the transaction, we felt prepared. We had great bankers and attorneys, and we had invested in systems, processes, and documentation that supported the performance of the company. Our internal ops team and preparation put us on solid ground throughout the process. We had a high level of institutional readiness because of intentional and deliberate effort.
Today, as part of our Beacon9 SaaS Advisory, we help SaaS companies grow and shore up their institutional readiness. Sometimes they’re aware of their weaknesses, but more often they’re not. This seems to roughly align with sometimes they think they’re worth a billion dollars, and more often, they’re not. The under-appreciation of institutional readiness often runs beside the over-appreciation of self-valuation. The irony is that valuation increases with readiness.
That brings us to the SaaS Institutional Readiness Report Card (below). The tool was designed to help SaaS founders, executives, board members, bankers, and investors focus on the high-level concepts of institutional readiness. It’s 19 questions, with an overall score and personalized recommendations based on your answers. Using our recommendations and articles on related topics, you should be able to focus on areas within your business that can improve your valuation and widen your pool of potential investors or buyers. In the end, you’re looking to prove revenue, growth, and future value, while minimizing risk and uncertainty.
We hope you find the SaaS Institutional Readiness Report Card useful, and as usual, please let us know if you find any bugs or typos. Version 2.0 was released August 22, 2018, and added eight additional questions and recommendations.