Deep-dive guide
Micro-SaaS Acquisition ROI Simulator: Is That Small Software Business Worth the Price
Executive industry analysis
Buying a small software business is an attractive shortcut. Instead of spending a year building and finding customers, you pay a price and own a product that already earns money. Sellers quote a multiple of monthly or annual revenue, and it can look like a bargain compared with the cost of starting. The risk is that the multiple is only one number, and the quality of the revenue behind it is what decides whether you earn your money back or finance someone else's exit.
The structure of the problem is a race between churn and new sales. Recurring revenue decays at the churn rate each month, because customers leave. New customers replace some of the loss. Over time, MRR drifts towards a steady level equal to new MRR divided by churn. If today's MRR is above that level, the business shrinks towards it, whatever the seller's headline says. If it is below, it grows. The purchase is a bet on that steady level, not on the current figure.
The domino model follows the logic. The purchase multiple tells you how many years of today's revenue you are paying. Churn gives the customer lifetime, which sets how long the revenue lasts. Together with new sales, this gives the path of MRR over the next three years. The payback period is the price divided by monthly operating profit, after the cost of running and your own time. The final box shows the average monthly result once the price is spread across the period.
The iceberg shows costs that a multiple ignores. Visible are the purchase price spread over the holding period and the cost of hosting, payment fees and tools. Below the waterline are your own maintenance hours valued at what your time is worth, the financing cost of the money tied up in the purchase and the transfer work: legal fees, escrow, migrating accounts and learning the code. Founders often count none of these and are surprised when a business that looked profitable pays less than a job. Use the simulator to test your own numbers before you make an offer.
Formula and methodology blueprint
The model is the average month over a 36-month holding period. MRR follows a path that decays at the churn rate and is topped up by new MRR each month, so the average is a blend of today's MRR and a steady level. Running costs are 22% of MRR for hosting, payment fees and tools. Your maintenance time is valued at your hourly rate. The price is spread over 36 months, with financing at 8% a year, and a one-off transfer cost.
- Steady-state MRR
- M* = new MRR ÷ churn
- The level MRR drifts towards when new sales balance churn.
- Average MRR
- M̄ = M* + (M₀ − M*) × (1 − (1 − c)³⁶) ÷ (36 × c)
- Average MRR over three years given today's MRR, churn and new sales.
- Operating profit
- O = M̄ × (1 − 22%) − hours × hourly value
- Monthly profit after running costs and your own time.
- Payback
- Months = (price + transfer cost) ÷ O
- How long the operating profit takes to earn back the purchase.
- Net result
- Net = O − price ÷ 36 − price × 8% ÷ 12 − transfer ÷ 36
- Average monthly profit after the price, financing and takeover work. The breaking point is where it reaches zero.
Cascading elasticity
Churn is the most elastic input, because it changes both the steady level and the speed of decay. Price scales the amortised cost directly, and MRR scales all the revenue. Maintenance hours matter more than expected because they are paid every month at the full value of your time.
Three real-world case studies
Bootstrapped starter
A small tool bought for a modest price
A buyer pays a low price for a small tool with steady revenue, low churn and a few hours of upkeep a month. The profit is small but positive. Loading it shows how a cheap purchase with low maintenance can work even at tiny scale.
Scaling mid-market
A larger business with low churn
A buyer pays a higher price for a business with fourteen thousand dollars of MRR, low churn and a good new sales channel. Operating profit is large relative to the price. Loading it shows low churn and growth carrying a high multiple.
Black-swan crisis
A leaky business at a rich price
A buyer pays a high price for a product whose customers leave quickly, with no new sales and heavy maintenance. The revenue decays and the time is expensive. Loading it shows the price never paying back and which lever restores the case.
Industry benchmark matrix
| Metric | Danger zone | Industry average | Top 10% elite |
|---|---|---|---|
| Purchase multiple of annual revenue | Above 4 times | 2–3 times | Below 2 times with verified growth |
| Monthly revenue churn | Above 8% | 3–5% | Below 2% |
| Payback period | Above 36 months | 18–30 months | Under 18 months |
| Maintenance hours per month | Above 40 | 10–20 | Under 8 with automation |
| Share of MRR from the top customer | Above 30% | 5–15% | Under 5% |
Variables and levers
Purchase price
What you pay the seller for the business, code, domain and customers.
Lever: Negotiate on verified numbers, ask for an earn-out or seller financing and walk away if the multiple needs growth you cannot show.
Current MRR
Monthly recurring revenue at the time of purchase, verified from payment records.
Lever: Verify MRR from payment processor records and check how many customers produce it, since concentration is a hidden risk.
Monthly revenue churn
Share of MRR lost each month to cancellations and downgrades.
Lever: Study why customers leave in the first two months and fix onboarding; churn is the main driver of what the business is worth.
New MRR added per month
Recurring revenue from new customers you expect to add each month, from marketing and word of mouth.
Lever: Plan a realistic acquisition channel before you buy, because without new sales the business only shrinks.
Maintenance hours per month
Hours you spend each month on support, bug fixes, updates and infrastructure.
Lever: Document the code, automate deployments and set up self-serve support so that maintenance stays a few hours a week.
Value of your hour
What an hour of your time is worth, from your alternative income or the rate you would pay someone else.
Lever: Be honest about your time: if the business pays less than your hour is worth elsewhere, you are subsidising it.
How to use this simulator
- 1Start from the realistic preset or enter the asking price, MRR and churn from the listing.
- 2Read the five domino boxes to see whether the multiple, churn or payback turns red first.
- 3Press Find my breaking point to see the price or churn rate at which the deal stops paying.
- 4Compare the current plan with the negotiated plan on the 24-month chart.
- 5Verify revenue, customers and churn independently before you make an offer.
Mistakes to avoid
- Paying a multiple of today's MRR without checking whether churn will shrink it before you earn the price back.
- Counting your own time as free, which makes a poor business look like a good one.
- Relying on the seller's reported revenue without verifying it from payment records.
- Forgetting transfer work and hidden dependencies such as a single large customer or a founder who answers every support request.
Frequently asked questions
What multiple should I pay for a micro-SaaS?
Multiples vary widely with growth, churn, age and dependence on the founder. Compare against recent sales of similar businesses and focus on the quality of revenue rather than the headline number.
How do I verify MRR?
Ask for read-only access to the payment processor and bank statements, check customer counts and refund history, and look at cancellations over several months, not just the current snapshot.
Why does new MRR matter so much?
Without new sales, MRR decays by the churn rate each month. New MRR sets the level the business settles at, so a purchase is only as good as your ability to keep adding customers.
Should I count my own time as a cost?
Yes, at least at your opportunity cost. If you would otherwise earn more or build something else, unpaid maintenance time is a real cost that reduces the return.
How do I find the price at which the deal stops working?
Press Find my breaking point. The tool moves each input towards its worse end and reports the value where average monthly profit reaches zero.
How accurate is this?
It is an educational model with stated assumptions, not investment, tax or legal advice. Seek professional advice for a real purchase and replace the inputs with verified data.
This is an educational planning model with stated assumptions. It is not financial, tax or legal advice. Replace the inputs with your own figures and verify important decisions with a qualified professional.