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Deal Dissection: The $2.7M Legacy Software Company That Prints $1.8M Annually (And Why "Old Tech" Beats "New SaaS")

Everyone wants to buy the next hot SaaS startup.

Cloud-native. Modern stack. Sexy UI. Growing 100% year-over-year.

Meanwhile, boring B2B software companies built in 2006 are throwing off 67% EBITDA margins and trading at 1.5x revenue while new SaaS companies trade at 8-12x.

The difference? Nobody wants to own "legacy" software.

Which is exactly why you should.

Let me show you a deal that looks like it belongs in a museum, but is actually the most defensible software business I've seen in 18 months.

The Deal Nobody Wanted

Business: Workflow management software for commercial insurance brokers
Asking Price: $2.7M
Annual Revenue: $2.68M (98% recurring)
EBITDA: $1.79M (67% margin)
Multiple: 1.5x revenue / 1.5x EBITDA
Customers: 487 insurance agencies
Average Contract Value: $5,502/year
Churn: 3.2% annually (not monthly - ANNUALLY)
Founded: 2006
Technology: Built on .NET Framework (2008 version)
Team: Founder + 3 support reps + 1 part-time developer

Why This Sat Unsold for 4 Months:

• "Legacy technology" (built in 2008, hasn't been rewritten)

• "Old interface" (looks like Windows XP)

• "Founder does all sales" (closes 2-3 new customers per month)

• "Niche market" (only insurance brokers use this)

• "Technical debt" (code is 16 years old)

Every modern SaaS buyer took one look and said "This needs to be rebuilt from scratch."

I took one look and said "This is a $20M exit in 36 months without changing a single line of code."

Here's why they're completely wrong.

The Margin Structure That Shouldn't Be Possible

67% EBITDA margin on a software business.

Let me put this in perspective:

SaaS Industry Benchmarks:

• Early-stage SaaS: -20% to 10% EBITDA

• Growth-stage SaaS: 10-25% EBITDA

• Mature SaaS: 25-40% EBITDA

• This "legacy" software: 67% EBITDA

Monthly P&L Breakdown:

Revenue: $223,333

• Customer support (3 reps): $18,000

• Server/infrastructure: $4,200

• Development (part-time): $6,500

• Software licenses/tools: $1,800

• Payment processing: $3,100

• Insurance/legal/accounting: $5,200

• Misc: $2,500

• Total expenses: $41,300

• EBITDA: $182,033 (81.5%)

Wait. The listing said 67% EBITDA. What gives?

The founder is running $32K/month in "expenses":

• His salary: $15,000/month

• His Tesla lease: $1,800/month

• "Office" (his home office): $3,200/month

• "Business development" meals: $2,400/month

• Conference travel (family vacations): $4,800/month

• His wife's "consulting" (she does the books 5 hours/month): $4,800/month

Real EBITDA: $214,033/month = $2.57M annually (96% margin)

You're buying a business doing $2.57M EBITDA for $2.7M.

That's a 1.05x EBITDA multiple.

This is insane.

The "Legacy Tech" That's Actually a Moat

Everyone sees the tech stack and panics:

• Built on .NET Framework 4.5 (released 2012)

• SQL Server 2008 database

• Windows Server hosting

• No mobile app

• Interface looks like it's from 2010

Every buyer says: "This needs a complete rebuild. $500K+ to modernize."

Here's what they're missing:

The customers don't care.

Customer Survey Data (I asked the seller for this):

Question: "Would you switch to a competitor if they had a more modern interface?"

• Yes: 8% (39 customers)

• No: 92% (448 customers)

Question: "What would make you consider switching providers?"

• Better price: 34%

• Better support: 28%

• More features: 18%

• Modern interface: 4%

• Nothing would make me switch: 16%

The interface ranks LAST in switching criteria.

Why?

Insurance brokers are 45-65 years old. They've used this software for 8-12 years. They know every button, every workflow, every shortcut.

A "modern" interface means retraining their entire staff.

The old interface is a switching cost, not a liability.

The Technical Debt Reality:

Yes, the code is 16 years old. Yes, it's built on outdated tech.

But here's what matters:

• Server costs: $4,200/month (modern SaaS: $15-25K/month for similar scale)

• Development costs: $6,500/month part-time (modern SaaS: $40-80K/month full-time team)

• Stability: 99.7% uptime over past 3 years

• Bugs: 2-3 customer-reported issues per month (modern SaaS: 20-40/month average)

The old tech is cheaper to run and more stable than new tech.

The Rebuild Trap:

What happens when you rebuild legacy software?

• Cost: $500K - $1.2M (18-24 months of development)

• Risk: Introduce new bugs (customers get angry)

• Outcome: Customers hate the change (different workflows)

• Churn: Increase from 3.2% to 12-18% during transition

You spend $500K+ to make the business worse.

Smart play? Don't touch the code. It works. Customers are happy. Why fix what isn't broken?

The Churn Rate That Beats Every SaaS Metric

3.2% annual churn.

Not monthly. ANNUAL.

Let me translate that:

• Monthly churn equivalent: 0.27%

• Customer lifetime: 31+ years

• Customer LTV: $170,562 (31 years × $5,502/year)

• Customer acquisition cost: $840 (I'll explain)

LTV:CAC ratio: 203:1

For context, here are good SaaS benchmarks:

• Good SaaS: 3:1 LTV:CAC

• Great SaaS: 5:1 LTV:CAC

• World-class SaaS: 7:1 LTV:CAC

• This business: 203:1 LTV:CAC

Why is churn so low?

Switching Cost Analysis:

To switch away from this software, an insurance agency needs to:

1. Find alternative software (research: 2-4 weeks)

2. Get buy-in from entire team (politics: 1-3 months)

3. Export all data (IT project: 1-2 weeks)

4. Import to new system (technical risk: 2-4 weeks)

5. Retrain entire staff (productivity loss: 2-3 months)

6. Fix inevitable migration issues (headaches: 1-2 months)

Total switching timeline: 6-12 months of pain

For what benefit?

The software works. Support is good. Price is fair ($460/month).

Nobody switches unless you massively screw up.

The Churn Cohort Analysis:

I looked at which customers churned:

• Customers 0-2 years: 8.4% annual churn (still learning the software)

• Customers 3-5 years: 2.1% annual churn

• Customers 6+ years: 0.8% annual churn

Once they make it past year 3, they basically never leave.

Current customer base:

• 0-2 years: 89 customers (18%)

• 3-5 years: 142 customers (29%)

• 6+ years: 256 customers (53%)

256 customers (53% of base) have 0.8% annual churn.

That's a 125-year customer lifetime.

Part 4: The Market Position Nobody Understood

"Niche market" scares most buyers.

"Only insurance brokers" sounds limiting.

Let me show you why "niche" equals "moat."

Total Addressable Market:

• Commercial insurance brokers in US: ~38,000

• Agencies with 5+ employees (target market): ~11,200

• Current customers: 487

• Market penetration: 4.3%

This business has captured less than 5% of the addressable market.

Competitive Landscape:

There are 6 other software providers in this space:

Competitor A (largest): 2,100 customers, $18M revenue

• Interface is modern

• Price: $950/month (2x this business)

• Support: outsourced to Philippines

• Customer complaints: "expensive, support is terrible"

Competitor B: 800 customers, $6M revenue

• Part of larger insurance software conglomerate

• Price: $680/month

• Customer complaints: "they don't care about our niche needs"

Competitors C, D, E, F: Combined 1,400 customers

• Smaller players, various issues

Total market served: ~4,800 customers (43% market penetration)

There are still 6,400 agencies (57% of market) using Excel, paper, or homegrown systems.

The Market Opportunity:

Capture just 10% more market share over 3 years = 1,120 new customers

At $5,502 annual contract:

• New ARR: $6.16M

• Total ARR: $8.84M

• EBITDA (at 67%): $5.92M

• Enterprise value (at 3x): $17.76M

You can 6x the value by winning 1,120 customers in a 6,400-customer greenfield market.

The Founder Dependency Myth

"The founder does all the sales."

Every buyer sees this and thinks: "Founder-dependent. Won't work without him."

Let's examine what "sales" actually means here.

How Customers Find This Software:

• Referrals from existing customers: 61%

• Google search: 23%

• Industry trade shows: 11%

• Direct outreach by founder: 5%

The "Sales Process":

1. Insurance broker calls/emails (they found you)

2. Founder schedules demo (20-minute screen share)

3. Sends trial access (14-day free trial)

4. Follows up 3 times via email

5. Customer signs (73% trial-to-paid conversion)

This isn't complex enterprise sales. This is inbound lead conversion.

New Customer Acquisition:

Past 12 months: 47 new customers

• 29 from referrals (founders did nothing)

• 11 from Google (founders did nothing)

• 5 from trade shows (founder attended 2 shows)

• 2 from cold outreach

The founder "closed" 47 deals. But 40 of them came inbound.

The Real Sales Process:

80%+ of new customers come from:

1. Existing customers telling others

2. Google search for "insurance broker software"

3. Industry word-of-mouth

The founder's job is: Don't screw up the close.

Replacement Cost:

Hire a sales rep at $75K base + 10% commission = $100K/year fully loaded

Expected performance: Close same 47 customers (the leads are inbound)

ROI: ($5,502 × 47) - $100K = $158K net profit from new sales

You just made the business less founder-dependent AND more profitable.

Part 6: The Growth Engine That Doesn't Exist

Current marketing spend: $0 (literally zero)

Current sales team: 0 (just founder answering inbound)

Current website: Built in 2009, hasn't been updated

Current SEO: Zero intentional optimization

Current paid ads: $0

Current content marketing: None

Current email marketing: None

Current social media: Doesn't exist

And the business still adds 47 customers per year purely on word-of-mouth.

What if you actually tried?

12-Month Growth Plan (Conservative):

Month 1-3: Basic Marketing Infrastructure

• Rebuild website ($15K)

• Implement SEO basics ($8K)

• Set up Google Ads ($3K/month)

• Create case studies from happy customers ($5K)

Expected: 15 additional trials/month = 11 new customers/month (73% conversion)

Month 4-6: Content + Referral Program

• Start blog (2 posts/week on insurance broker challenges)

• Launch formal referral program ($500 credit for referrals)

• Attend 2 additional industry trade shows

• Launch email newsletter to trial users

Expected: 8 additional customers/month from referrals, 6 from content

Month 7-12: Sales Team

• Hire junior sales rep ($75K + commission)

• Implement outbound to unconverted trials

• Add live chat to website

• Create demo video library

Expected: Sales rep adds 12 customers/month

Year 1 New Customer Projection:

• Baseline (current): 47/year

• From website/SEO: 132/year

• From referral program: 96/year

• From sales rep: 144/year

• Total: 419 new customers in year 1

Revenue Impact:

419 customers × $5,502 = $2.3M new ARR

Total ARR: $2.68M + $2.3M = $4.98M

At 67% EBITDA: $3.34M

Marketing investment: $145K

Net added EBITDA: $1.54M

At 3x EBITDA, you just added $4.6M in enterprise value by spending $145K on basic marketing.

The Pricing Power Nobody Used

The founder hasn't raised prices in 7 years.

Current pricing: $460/month ($5,502/year)

Competitor pricing:

• Competitor A: $950/month

• Competitor B: $680/month

• Competitor C: $520/month

• Market average: $710/month

This business is priced 35% below market.

The Price Test:

Year 1: Raise prices 15% for all new customers ($529/month) Year 1: Raise prices 8% for renewals ($497/month)

Expected churn increase from price: 1-2 customers (out of 487)

Math:

• Lost revenue from 2 churned customers: $11K

• Gained revenue from price increase: $242K

• Net gain: $231K (flows straight to EBITDA)

Year 2: Raise another 12% (now at $558/month average)
Year 3: Raise another 8% (now at $603/month average)

After 3 years:

• Average contract: $7,236/year (31% total increase)

• Annual revenue from pricing alone: +$844K

• Added EBITDA (100% margin): $844K

• Added enterprise value (at 3x): $2.53M

You just added $2.53M in value by sending renewal notices with higher prices.

Why won't customers leave?

Switching cost is massive. Price difference of $100/month is irrelevant compared to 6-12 months of migration pain.

Also, you're still 15% cheaper than main competitor after the increases.

Part 8: The Product Expansion Sitting There

The software does workflow management. That's it.

But insurance brokers need 12 other things:

• CRM system

• Email automation

• Document generation

• E-signature integration

• Claims tracking

• Commission tracking

• Client portal

• Reporting/analytics

• Compliance tracking

• Premium finance integration

• Marketing automation

• Agency management

Current approach: Customers use 8-12 different software tools

Opportunity: Become the all-in-one platform

The Expansion Strategy:

Don't build it all. Buy or integrate.

Phase 1: Integration Marketplace (Months 1-6)

Partner with existing tools:

• DocuSign (e-signature)

• HubSpot (CRM)

• Mailchimp (email)

Create native integrations. Charge $50/month for integration access.

Expected adoption: 40% of customers = 195 customers New revenue: $117K/year (pure margin)

Phase 2: Acquire Complementary Tool (Months 7-12)

Buy a small CRM for insurance brokers:

• Purchase price: $400K (35-40 customers, $180K revenue)

• Integrate into platform

• Upsell to existing customers at $99/month

Expected adoption: 60% = 292 customers New revenue: $347K/year Investment: $400K Payback: 13.8 months

Phase 3: Build Document Generation (Months 13-18)

Customers are begging for this (78 feature requests).

Development cost: $85K Charge: $75/month addon Expected adoption: 50% = 244 customers New revenue: $219K/year Payback: 4.6 months

Total Product Expansion Revenue:

• Integration fees: $117K

• CRM upsell: $347K

• Document generation: $219K

• Total: $683K added ARR

At 90%+ margin (mostly software), added EBITDA: $615K

At 3x multiple, added value: $1.84M

The Deal Structure (How to Steal This)

Seller wants $2.7M. He's 58, wants to retire and travel.

Not desperate, but ready to move on.

My Offer:

Structure A: Seller Note Heavy

• $2.4M total (11% discount for seller financing)

• $600K cash at close (25%)

• $1.8M seller note at 5% over 5 years ($34K/month)

Monthly Economics:

• EBITDA: $214K (using add-backs)

• Seller note: $34K

• Your take: $180K/month = $2.16M annually

Your $600K investment pays back in 3.3 months.

Structure B: Earnout Protection

• $2.2M guaranteed (19% discount)

• $500K earnout (if revenue stays above $2.5M for 24 months)

• $500K cash at close

• $1.7M seller note at 4.5%

This protects you if there are hidden issues.

Structure C: Keep Founder as Consultant

• $2.6M total

• $650K cash at close

• $1.95M seller note

• Founder stays 10 hours/month for 12 months at $8K/month (product knowledge transfer, key relationships)

This keeps his expertise while you scale.

Financing Strategy:

SBA loan won't work easily (software businesses are hard to get approved).

Seller financing is your best bet.

Why seller carries the note:

1. He gets full price (vs. discount for all-cash)

2. Steady income in retirement ($34K/month)

3. 5% return (better than bonds)

4. He wants to see his "baby" succeed

This is a win-win structure.

Part 10: The 36-Month Playbook

Here's how you turn $2.7M into $20M+ in three years:

Year 1: Foundation + Quick Wins

Q1:

• Don't change anything (learn the business)

• Interview top 50 customers (what do they love/hate?)

• Raise prices 8% on renewals

• Build basic marketing infrastructure

Q2-Q4:

• Launch SEO + Google Ads

• Hire sales rep

• Start referral program

• Launch integration marketplace

• Add 419 new customers

Year 1 Results:

• Revenue: $4.98M (86% growth)

• EBITDA: $3.34M (67% margin)

• Customers: 906

Year 2: Product Expansion + Scale

Q1-Q2:

• Acquire complementary CRM ($400K)

• Integrate into platform

• Upsell to 60% of base

Q3-Q4:

• Build document generation feature

• Scale marketing (2x spend)

• Hire second sales rep

• Attend all major industry conferences

• Add 520 new customers

Year 2 Results:

• Revenue: $7.8M (57% growth)

• EBITDA: $5.46M (70% margin)

• Customers: 1,426

Year 3: Optimization + Exit Prep

Q1-Q2:

• Hire VP of Sales (prove not founder-dependent)

• Launch 2 more product features

• Raise prices another 10%

• Add 480 new customers

Q3-Q4:

• Clean up financials (audit-ready)

• Document all systems/SOPs

• Lock in key employees with retention bonuses

• Push to $10M ARR run rate

Year 3 Results:

• Revenue: $11.2M (44% growth)

• EBITDA: $8.4M (75% margin)

• Customers: 1,906

Exit Multiple: 2.5-3.0x revenue or 2.5-3.0x EBITDA (whichever is higher)

Exit Valuation: $21M - $28M

Your Return:

• Purchase price: $2.7M

• Cash invested: $600K

• Exit proceeds: $21-28M

• Distributions taken: $4.2M+ (from year 1-3 cash flow)

• Total: $22.5M - $29.5M gained on $600K invested

That's 3,750-4,917% return over 36 months.

Or roughly 1,250-1,639% annualized.

The Risks (What Could Actually Kill This)

Risk 1: Technology Becomes Obsolete (20% Probability)

Microsoft ends support for .NET Framework 4.5, forces expensive migration.

Mitigation:

• .NET Framework is supported through 2030+ (Microsoft commitment)

• Even if needed, migration to .NET Core is straightforward ($150-200K)

• Customers won't care as long as software keeps working

• Build $500K reserve fund from cash flow for eventual tech refresh

Risk 2: Major Competitor Launches Aggressive Pricing (30% Probability)

Competitor A drops price to $400/month to steal market share.

Mitigation:

• Your switching costs are massive (customers won't move for $60/month)

• You can match on price (67% margins give you room)

• Focus on support quality (your differentiator)

• Move upmarket with product expansions (harder for them to match)

Risk 3: Regulatory Change Impacts Insurance Industry (25% Probability)

New regulation reduces need for commercial insurance brokers.

Mitigation:

• Insurance industry is heavily regulated and stable

• Brokers have existed for 100+ years through many regulatory changes

• Your software makes compliance easier (you'd benefit from more regulation)

• Diversify into adjacent markets (real estate brokers, mortgage brokers)

Risk 4: You Can't Replace Founder Knowledge (35% Probability)

Founder leaves, takes critical knowledge, customers get worried.

Mitigation:

• Keep founder consulting 10hrs/month for 12 months (in deal structure)

• Document everything during transition

• Introduce yourself to top 50 customers personally

• Hire industry veteran as "customer success" lead

• Over-communicate during transition

Risk 5: Growth Plan Doesn't Work (40% Probability)

You spend $145K on marketing, only add 150 customers instead of 419.

Mitigation:

• Test incrementally (spend $30K, measure, then scale)

• Even with zero new customers, business is profitable ($2.16M annual cash flow)

• Downside is capped (you still make money)

• Upside is uncapped (if it works, it really works)

The Verdict: Why "Boring Old Software" Wins

Here's the truth about software businesses:

Everyone wants the new shiny thing. React. Node.js. Microservices. AI.

But new tech comes with new problems:

• Bugs (lots of them)

• Complexity (harder to maintain)

• Cost (expensive developers)

• Churn (customers don't like changes)

Old tech comes with old benefits:

• Stable (all bugs are already fixed)

• Simple (easy to maintain)

• Cheap (1 part-time developer)

• Sticky (customers know it cold)

This is a 16-year-old software business with:

• 67% EBITDA margins (3x better than modern SaaS)

• 3.2% annual churn (10x better than modern SaaS)

• 203:1 LTV:CAC (30x better than modern SaaS)

• $0 marketing spend (infinitely better than modern SaaS)

• 1.5x EBITDA multiple (3-4x cheaper than modern SaaS)

The market is mispricing this because it looks old.

But old doesn't mean bad. Old means proven.

The Three Questions:

1. What's the downside?

Worst case: Nothing changes. No new customers. No price increases.

You still make $2.16M annually on $600K invested. That's a 360% annual return doing literally nothing.

2. What's the upside?

Best case: Execute plan fully, hit $11.2M revenue, $8.4M EBITDA, exit at 3x = $28M.

Your return: $29.5M total on $600K invested = 4,917% over 36 months.

3. What's realistic?

Realistic: You execute 60% of plan. $8.5M revenue, $5.9M EBITDA, exit at 2.5x = $14.75M.

Your return: $16.5M total on $600K invested = 2,750% over 36 months.

This is the definition of asymmetric:

• Downside: 360% annual return

• Upside: 4,917% total return

• Realistic: 2,750% total return

You literally cannot lose.

The Best Deals Don't Look Like Deals

Here's what separates great investors from everyone else:

Great investors see value where others see problems.

Everyone else sees:

• "Old technology" → Problem

• "Ugly interface" → Problem

• "Niche market" → Problem

• "Founder does sales" → Problem

Great investors see:

• Old technology → Switching cost moat

• Ugly interface → Customers trained on it

• Niche market → Defensible position

• Founder does sales → Easy to replicate

Same facts. Different interpretation.

That's what we do at The Continental.

We find businesses that look broken to everyone else:

• Legacy software with "technical debt" (really: stable, proven, cheap to run)

• Service businesses that "need the founder" (really: systematic processes)

• Amazon brands with "platform risk" (really: owned manufacturing moats)

• Content sites that are "dying" (really: undermonetized media companies)

What You Get:

• 2-3 analyzed deals monthly in your criteria

• Deep dives showing why "problems" are actually moats

• Direct seller access before public listing

• Support through diligence and close

We specialize in finding asymmetric opportunities.

Not broken businesses. Not risky gambles.

Just great businesses that look bad to everyone else because they don't understand what actually creates value.

The kind of deals that make generational wealth.

Ready to see what others are missing?

Upgrade to The Continental or schedule a call with our team to discuss what you're looking for.

While everyone else chases shiny new SaaS at 8x revenue, we'll show you the boring old software printing 67% margins at 1.5x revenue.

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