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Most people looking at deals are asking the wrong question.

They ask: "Is this a good business?"

The real question is: "Can I make this business worth 3-5x more than I'm paying?"

Because here's the truth — you don't get rich buying great businesses at fair prices. You get rich buying decent businesses at great prices with massive upside you can unlock.

Let me show you exactly how to think about this with a real deal breakdown.

The Deal at a Glance

Business: B2B project management SaaS for construction companies
Asking Price: $2.3M
Annual Revenue: $840K ARR
EBITDA: $420K (50% margin)
Multiple: 5.5x EBITDA
Customers: 147 active accounts
MRR: $70K
Churn: 4.2% monthly

At first glance? This looks like a hard pass for most buyers.

The churn is high. The multiple seems expensive. The revenue isn't hockey-sticking.

But let's dig into what actually matters.

Part 1: The Financial Foundation (What the Numbers REALLY Say)

Revenue Quality Score: 7/10

The Good:

• $70K MRR is all recurring (no one-time setup fees inflating ARR)

• Annual contracts make up 60% of revenue (better retention signal)

• Average customer value is $5,780/year — high enough to have actual sales conversations

• No single customer over 8% of revenue (concentrated risk kills deals)

The Concern:

• 4.2% monthly churn = 50% annual customer turnover (this is the big one)

• Only 82% net revenue retention (you're bleeding money every month)

What This Means:
You're looking at a business with a slow leak. Not a sinking ship, but definitely taking on water. The question becomes: can you patch the leak?

Profitability Deep Dive: Why 50% Margins Matter More Than You Think

$420K EBITDA on $840K revenue is exceptional for a small SaaS business.

Here's why this matters:

1. Margin = Options. High margins mean you can invest in growth without needing outside capital

2. Fat margins hide inefficiencies. This business is probably doing 6-7 things wrong, but still printing money. Fix those things? You might hit 60-65% margins

3. Margin compression room. You could drop to 35% margins and still be healthy while scaling

The Profit Leak Audit:

Looking at the P&L, here's where money is going:

• Hosting: $84K/year (10% of revenue) — this should be 3-5% max

• Customer support: $126K/year (15% of revenue) — two full-time reps for 147 customers

• Software licenses: $42K/year — probably bloated with tools nobody uses

Just those three line items? There's $100K+ you could recapture in year one.

Part 2: The Churn Problem (And Why It's Actually Your Biggest Opportunity)

4.2% monthly churn is bad. Let's not sugarcoat it.

But here's what nobody tells you: high churn in a SaaS business is usually a symptom, not a disease.

I pulled the customer cohort data. Here's what's actually happening:

Churn by Customer Segment:

• Companies with 1-10 employees: 7.8% monthly churn (they go out of business)

• Companies with 11-50 employees: 3.1% monthly churn (acceptable)

• Companies with 50+ employees: 1.2% monthly churn (exceptional)

Churn by Contract Type:

• Monthly contracts: 6.9% churn

• Annual contracts: 1.8% churn

See what's happening? The churn isn't evenly distributed. You have a customer acquisition problem disguised as a retention problem.

The Fix (Worth $500K+ in Enterprise Value):

Stop selling to tiny construction companies. Fire your worst customers. Here's the math:

Currently:

• 147 customers at $5,780 average = $840K revenue

• Losing 50% annually to churn

New strategy:

• Cut the bottom 40 customers (micro businesses, monthly contracts)

• Lose $120K in revenue initially

• Focus all sales energy on 20+ employee companies

• Move everyone to annual contracts (30% discount for annual prepay)

• Add implementation fees ($2,500 per customer)

12 months later:

• 120 customers at $7,200 average = $864K revenue

• Churn drops to 2.8% monthly (33% annual)

• Implementation fees add $60K/year

• Net revenue retention jumps to 95%+

Same revenue, 40% less churn, better customers, implementation fees = business now worth $3.2M+ (7x EBITDA multiple for sub-30% churn).

You just made $900K by firing customers.

Part 3: The Growth Engine (What's Actually Broken)

Current customer acquisition:

• $2,400 CAC (customer acquisition cost)

• 5.2 month payback period on monthly customers

• 2.1 month payback on annual customers

Traffic sources:

• Google Ads: 45% of trials ($8,200/month spend)

• SEO: 30% of trials (3 years of content work)

• Referrals: 25% of trials (no formal program)

Conversion funnel:

• 340 trials per month

• 8.2% convert to paying (28 new customers)

• 38% of those churn in first 90 days

This funnel is fundamentally broken. Here's how you know:

You're spending $8,200 on Google Ads to get 153 trials. 12.5 become customers (8.2% conversion). That's $656 per customer from paid ads alone. Add in your onboarding costs, sales time, and support? You're losing money on monthly customers.

The Growth Unlock:

The business has 250,000 organic visitors per year getting zero conversion optimization. This is insane.

Current homepage conversion: 0.11% (370 trials from 340,000 visitors)

Even mediocre SaaS sites convert at 0.5-1.0%. Construction is even better because buyers are serious.

Conservative fix:

• Rebuild homepage and trial flow (cost: $15K)

• Improve conversion to 0.4% = 1,360 trials from organic

• Same 8.2% trial→paid conversion = 111 new customers from organic vs. 28 currently

• Cost per acquisition: $135 vs. $2,400

That alone would add $640K in ARR in year one. At a 6x multiple, you just added $3.8M in enterprise value for a $15K website project.

Part 4: The Strategic Position (Why This Beats "Sexier" Deals)

Construction tech isn't sexy. Nobody's writing Medium posts about disrupting project management for general contractors.

That's exactly why this is interesting.

Market Position:

• $12B total addressable market (construction PM software)

• Highly fragmented (no single player over 8% market share)

• High switching costs once implemented (6-8 week implementation)

• Network effects within companies (more users = more value)

Competitive Moat (Weak, But Buildable):

Current moat: basically none. The product is good but not defensible.

12-month moat-building plan:

1. Build mobile app (quoted at $85K) — 73% of users asked for this in surveys

2. Add Procore integration (most requested) — creates ecosystem lock-in

3. Launch marketplace for contractors/subcontractors — two-sided network effect

4. White-label offering for large GCs — enterprise channel

Each of these is a 6-figure revenue opportunity that makes the business harder to compete with.

Part 5: The Operator Profile (Who Should Buy This)

This deal is NOT for:

• First-time buyers (too much operator skill needed)

• Pure financial buyers (requires product + marketing chops)

• Anyone afraid of customer concentration work

This deal IS for:

• SaaS operators with 5+ years experience

• Marketing-focused buyers who can fix acquisition

• PE-backed searchers with ops resources

• Strategic buyers in construction tech

Required skills to win:

1. Customer segmentation and lifecycle marketing

2. Conversion rate optimization (you'll live in the funnel)

3. Product prioritization (feature requests will drown you)

4. B2B sales (deals are $5-15K, need conversations)

Part 6: The Deal Structure (How to Actually Buy This)

Seller Wants: $2.3M, mostly cash, quick close

What You Should Offer:

Option A: Cash Heavy (If You Have It)

• $1.6M cash at close (70%)

• $400K seller note at 6% over 3 years

• $300K earnout tied to retention (if annual churn stays below 35%)

This protects you on the churn risk and keeps the seller invested in smooth transition.

Option B: Lower Cash (Most Buyers)

• $900K cash at close (40%)

• $800K seller note at 5% over 4 years

• $600K earnout (50% on revenue, 50% on churn improvement)

The seller probably says no to Option B. But if they're motivated (most are), you can negotiate.

Financing Strategy:

• $500K from your savings

• $400K from SBA loan (7.5% rate, 10-year term)

• $1.4M seller financing/earnout

Your monthly debt service: roughly $4,700/month. EBITDA: $35K/month. You have plenty of cushion.

Part 7: The 18-Month Value Creation Plan

Here's exactly how you turn $2.3M into $7M+:

Months 1-3: Stop the Bleeding

• Audit customer base, identify churn risks

• Interview top 20 customers (what do they love?)

• Interview last 15 churned customers (why did they leave?)

• Fix obvious product bugs (ask support team)

• Implement basic retention email sequences

• Move all monthly customers to annual (with incentive)

Target: Reduce churn from 4.2% to 3.5% monthly

Months 4-6: Fix Acquisition

• Rebuild homepage and trial funnel

• Launch customer referral program (give existing customers $500 credit per referral)

• Cut Google Ad spend by 50%, reallocate to retargeting

• Hire implementation specialist (improve onboarding)

Target: Double organic conversion, add 40 customers

Months 7-12: Build the Moat

• Launch mobile app (React Native, use offshore dev)

• Ship top 3 requested features

• Start enterprise sales motion (target 50+ employee companies)

• Raise prices 20% for new customers (grandfather existing)

Target: $1.1M ARR, 2.8% monthly churn, improve unit economics

Months 13-18: Scale What Works

• Double down on enterprise sales

• Launch integration marketplace

• Acquire small competitor for customer list (spend $200K)

• Implement success team for enterprise accounts

Target: $1.5M ARR, $900K EBITDA, 2.5% monthly churn

Exit Multiple: 6-7x EBITDA (down from 5.5x due to churn improvement and growth trajectory)

Enterprise Value: $5.4M - $6.3M

Your return: $3.1M - $3.8M gain on $2.3M deployed in 18 months.

That's a 135-165% return. Or roughly 90-110% annualized.

Part 8: The Risks (What Could Go Wrong)

Let's be honest about what could blow this up:

Risk 1: Churn Doesn't Improve (30% Probability)

If you can't fix the churn problem, you're on a treadmill. You'll make money from cashflow, but the business won't grow in value. Your $2.3M stays $2.3M.

Mitigation: Don't buy this deal if you can't spend 20 hours in months 1-2 interviewing customers. The insights from those calls are worth $500K+.

Risk 2: Construction Market Downturn (20% Probability)

If commercial construction drops 30%+ (recession scenario), your customers cut costs. SaaS is often first to go.

Mitigation: Focus on larger customers with longer contracts. They cut slower. Also, residential is counter-cyclical to commercial.

Risk 3: Key Employee Departure (25% Probability)

The lead developer built 60% of the codebase. If they leave in month 2, you're in trouble.

Mitigation: Retention bonuses. Equity. Good management. Also, document everything in transition.

Risk 4: Competitive Disruption (15% Probability)

A well-funded competitor could enter and undercut on price or launch superior features.

Mitigation: Speed. Execute the 18-month plan in 12 months. Build switching costs fast (integrations, network effects, custom implementations).

Risk 5: You (The Operator) Are The Risk (40% Probability)

Most deals fail because the buyer can't execute. Period.

Mitigation: Be honest about your skill gaps. Hire contractors for what you can't do. Move fast but don't break things.

The Bottom Line: Should You Buy This Business?

Here's how I think about any deal:

The Three Questions:

1. Can I afford to lose this money? If $2.3M disappearing would ruin you, pass. If it would sting but you'd survive, continue.

2. Do I have an unfair advantage? If you've run SaaS businesses, know construction, or are exceptional at marketing, you have edge. If this is your first rodeo, you're going to learn expensive lessons.

3. Is the upside worth the effort? This deal requires 40+ hours/week for 6-12 months, then 20-30 hours ongoing. If that sounds miserable, don't buy it. If that sounds exciting, you might be the right buyer.

My Take:

At $2.3M, this is a B+ deal, not an A+.

The margin structure is beautiful. The market is real. The product works.

But the churn is concerning, and the growth engine needs rebuilding.

For the right operator — someone with SaaS experience who can fix leaky funnels and improve retention — this could genuinely be a $6M+ exit in 18-24 months.

For the wrong operator — someone buying their first business or without the marketing/product chops — this becomes a $2.3M lesson in why SaaS is hard.

The deal isn't for everyone.

But for someone who knows what they're doing? This is how you build serious wealth.

Want Us to Find Your Next Deal?

Here's the truth: finding great deals like this is a full-time job.

You're competing against hundreds of other buyers, PE firms, and strategic acquirers. By the time deals hit the public market, they've usually been picked over.

The best deals never make it to market.

That's why we built The Continental — Acquire Weekly's private deal sourcing service.

We actively source off-market SaaS, e-commerce, and service businesses doing $500K-$5M in revenue. The kind of deals we'd buy ourselves.

Every deal gets the same rigorous analysis you just read:

• Full financial teardown

• Churn and cohort analysis

• Growth opportunity assessment

• Risk evaluation

• Value creation roadmap

How It Works:

1. We learn your criteria (business model, size, industry, etc.)

2. We source 2-3 qualified deals per month that match your profile

3. You get first look before anyone else

4. We support you through diligence and negotiation

Think of us as your personal deal team — sourcing, analyzing, and delivering opportunities you'd never find on your own.

Ready to see what we can find for you?

Upgrade to The Continental or schedule a call with our team to learn more about how we help buyers find and close their ideal acquisition.

The deal that changes your life is out there.

Let's go find it together.

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