Rob Walling

It doesn't really matter if it's profitable.

Let's say I sell for a hundred million at that point.

Does it matter that it was profitable?

No, because I'm making the money on the exit.

And so therefore, the profitability doesn't matter because you are truly looking at the future and what you can get for the business down the line.

And even if let's say, well, so you're only looking to sell it, let's say you grew it to 20 million ARR and it truly is net negative churn 10%, you could cut back on staff.

And at scale, a SaaS company can have growth

gross margins of 80% to 90% and net margins of, let's say, 30% to 50%.

And for easy math, let's just say you can get that $20 million SaaS company to a 50% net margin.

You are throwing off $10 million a year at that point in free cash flow.

And that's a number that matters.

Not the, oh, I'm doing $2 million a year and I'm going to try to crank out $750,000 in profit this year, $1 million a year.

That sounds like a lot to us.

It just doesn't move the needle of these acquirers.

And so, no, they don't care about cash flow in the short term.

It just doesn't really matter nearly as much as the fundamentals of the business and how they see they can grow it and growth in momentum.

and churn or retention.

Those are just opposite sides of the same coin.

Those are the things that are really intriguing because when you look, what am I going to do with this business in the next three to five years, which is how private equity thinks about it and probably how strategics think about it as well.

That's what matters.