6 Checks Before You Buy a SaaS or Software Company in 2026
by Raises.com
This article is general information, not legal, tax, securities or investment advice. Laws, rates and programs change, and the details here may no longer be current. Confirm anything you plan to act on with your own counsel and accountant.
A small SaaS company is bought on the quality of its recurring revenue, because there is almost no hard collateral behind it. The subscriptions, the churn and the customer contracts are what a lender and an investor underwrite. That is why the stack leans on a seller note and investor equity, with less bank debt than a business with trucks or a building.
What you are actually buying
Strip a software company down and three things are left: the code, the accounts it runs on, and the customers who pay every month. None of them can be repossessed and resold the way a tractor can. So every check below asks one question. Will the revenue still arrive after the founder leaves?
Neither file cited here is a SaaS purchase, so read them for the method. Andrew Gazdecki, founder of Acquire.com, worked with Raises.com® on a partnership that gave entrepreneurs on Acquire.com a route to capital and a simpler M&A process. A marketplace introduces the buyer to the business. The six checks decide whether anyone will fund it.
1. Recurring revenue: pull it from the billing system
Ask for the export from the billing system itself, month by month, for at least two years. Split out monthly plans, annual plans, setup fees and services. Only the subscriptions are recurring. A founder's dashboard that counts a one-time implementation fee as annual recurring revenue is a claim, and the export is the evidence.
Then build the cohort table. Group customers by the month they signed up and track what each group pays in every month after, which shows logo churn, revenue churn and expansion at once. Net revenue retention is the line to read first. It compares what last year's customers pay now with what they paid then.
2. Concentration: the top account is a loan risk
Rank every customer by revenue. If losing the largest one would leave the business unable to make its debt payments, that customer is the lender's main question. A tool sold to thousands of small accounts on a card loses customers a few at a time. One sold to three enterprises on negotiated contracts can lose a third of its customers in one renewal.
For each large account, read the termination clause and check whether pricing is locked. Then check the renewal date. An enterprise customer up for renewal in your first quarter is a risk you price now. Meet that customer before the LOI goes final.
3. Deferred revenue: cash the seller collected for work you deliver
Annual plans are paid up front. On the day you close, some customers have paid for months of service the company has not delivered yet, and that balance is deferred revenue. The seller holds the cash. You inherit the obligation.
Settle it in the working capital terms of the purchase agreement, so the price reflects the service you owe or the cash stays in the business. Skip it and you spend the first year serving customers whose money went to the seller. Annual plans make that number large.
4. The code: who owns it, and who can run it
Under US copyright law, code written by an independent contractor belongs to the contractor unless a written agreement assigns it. Ask for a signed assignment from everyone who committed code. Match the list against the commit history. A missing one from an early contractor is a hole in the title to the main asset.
Run an open-source license scan as well. Some licenses require you to publish your own source code if you distribute software built on theirs, and a buyer finds that out in diligence or in a dispute. Then test the bus factor directly. Can someone other than the founder build, deploy and restore the product from the documentation alone?
5. The contracts and accounts that have to move
In a stock purchase the customer contracts stay with the company, though a change-of-control clause can still require consent. In an asset purchase each negotiated contract may need the customer's consent to assign. Read the assignment clause in each one. Check the standard terms of service as well.
The accounts move on a schedule: the cloud hosting, the code repository, the domain, the billing system and any app store listing. Ask the billing provider how active subscriptions and stored cards move to a new account. A customer asked to re-enter a card may cancel instead.
6. The founder's transition: what lives in one head
In a small software company the founder is often the product manager, the top engineer and the person who answers the largest customer. That is the key-man risk. Lenders and investors both want the fix written down: a transition period with hours and an end date, and a named successor for each role.
Pay for the transition with the founder's own upside. A seller note paid from the business's cash flow keeps the founder answering questions in month six. An earnout tied to revenue still billing a year after close keeps the founder on the renewals.
How the stack is built with little hard collateral
Banks lend on cash flow here, when they lend at all. The collateral is thin. That pushes more of the price onto the seller note, the earnout and investor equity. Investors come in through an SPV under Rule 506(b) or Rule 506(c) of Regulation D. Form D is filed within 15 days of the first sale.
Ade worked with Raises.com® and went from no funded deals to two closed acquisitions, with a thesis built on defensible industries and capital preservation. His thesis was real assets. A software company has almost none, so its defensibility has to show up in the cohort table, where customers who stay for years are the proof. Put that table in the investor deck.
Stock purchase vs asset purchase for a SaaS company
| Stock purchase | Asset purchase | |
|---|---|---|
| Customer contracts | Stay with the company; change-of-control clauses still apply | Assigned to your company, some only with consent |
| Billing and hosting accounts | Stay in the company's name | Move on a transfer schedule |
| Ownership of the code | Whatever the company holds, gaps included | Assigned on the asset schedule |
| Past liabilities | Come with the company | Mostly stay with the seller, as the agreement sets out |
| Tax basis for the buyer | Carries over | Stepped up to the price, with goodwill amortized over 15 years under Section 197 |
Frequently asked questions
Can you get a bank loan to buy a SaaS company?
Yes, a cash-flow loan such as an SBA 7(a) loan up to its $5M cap, when the business qualifies. Expect the seller note and equity to carry more of the price.
What churn data should I ask for?
Ask for logo churn, revenue churn and net revenue retention by month, built from the billing system export. A cohort table by signup month shows all three.
Who owns the code if contractors wrote it?
The contractors do, unless they signed a written assignment. Collect every assignment before closing and match it to the commit history.
What is deferred revenue in a software acquisition?
It is cash prepaid for service the company still owes. The purchase agreement should credit you for it, or the cash stays in the business.
Does the founder have to stay after the sale?
No rule requires it, but lenders and investors look for a written transition period. A seller note or an earnout gives the founder a reason to keep it.
Raises.com® builds the structure behind the purchase of a business or a building: the PPM, the subscription and operating agreements, the CFA financial proformas and the data room. That keeps the raise legally and financially sound. See how acquisition capital gets structured at https://raises.com/buy-a-business, or book a strategy call at https://raises.com/call.
General information, not legal, tax, securities or investment advice. Laws, rates and programs change, and the details here may no longer be current. Confirm anything you plan to act on with your own counsel and accountant.