The acquisition of any company can be complex, time-consuming, and even economically perilous. Whether you’re acquiring a company to take over as CEO or looking to buy a competitor for an eventual merger, you need to know what to do in the first 90 days post-acquisition.
Things are even trickier with software-as-a-service businesses (SaaS), as you often inherit many clients, processes, and technologies. This article will discuss key steps to consider after you acquire a SaaS business.
Analyze the Company’s Financials (Again)
If you did your due diligence before acquiring a new business – which you certainly should have! – you’ve likely already overviewed the company’s financials. But it’s a good idea to do so once more post-acquisition. Why?
Because as the new executive or manager of a SaaS company, you now have access to even more financial documents and information than you did previously. This information can fill in any economic gaps you might have noticed, answer questions you may still have, and provide you with an overall better picture of your new company’s performance and abilities.
For example, according to a recent study, 70% of businesses surveyed reported having to wait between one and six months on average for their invoices to be paid. You need to ensure your acquisition doesn’t have this issue (or if it does, there is a plan to correct it).
By overviewing your new SaaS company’s financials once more, you can:
- Better determine the steps to take to “right the ship” if needed
- Understand how best to leverage your new acquisition
- Spot any problems you’ll need to solve ASAP as the new CEO
Key Metrics To Consider
But what exactly should you look at? There are many different key metrics to analyze and consider as you overview a SaaS business’s financials, including:
- Free cash flow. The free cash flow will tell you how much money you have to reinvest back into the business, return to stakeholders, or use on any other expenses.
- Website traffic, which indicates how many visitors your business’s site receives
- Customer acquisition cost or CAC. This tells you how much money you have to spend to acquire a new customer with the SaaS business.
- Customer lifetime value, which tells you how much money you can expect to make from each client or customer.
- Average conversion time, which tells you how long it takes to convert an average customer.
- Employee satisfaction
- Employee turnover rate, which indicates how often employees leave.
- Client retention rate, which tells you how many clients you retain over a set timeframe.
- Profit margin, which tells you your net profits after deducting the cost of business expenses.
- Revenue growth
- Revenue per client, which tells you the percentage of your revenue you get from an average client.
Talk to Your Workers
Immediately after acquiring any SaaS business, you should make an effort to talk to all new workers under your employ.
Whenever a company acquires another or changes leadership, it causes a lot of confusion and uncertainty in the workforce. That confusion can manifest as lower productivity, people jumping ship for competing organizations, and other negative effects.
But you can circumvent or stop this from happening by simply communicating directly with your employees. Specifically, you should tell your workers:
- Your goals for the organization
- How you plan to improve the SaaS business
- What you’ll strive to do in terms of personal goals
- Anything else you might feel is crucial
Above all else, be confident. If you sound confident, you’ll inspire further confidence in your acquisition and prevent people from feeling like they need to look for new jobs right away.
That said, you should also not promise that there won’t be any personnel changes in the future. Not only will your employees not believe you, but you’ll end up looking untrustworthy if you do have to let some people go, change managers, or make other staff adjustments later.
Communicate to Clients, Too
By the same token, it’s critical to communicate with your new SaaS business’s clients. If you purchased the business, odds are it has a substantial clientele. That clientele might be aware of your acquisition or that you are now the leader in charge of the company.
If you don’t communicate with those clients, they could lose faith in your SaaS business and decide to go to a competitor. This is bad for your bottom line and your reputation overall.
Talk to your SaaS business’s clients directly by telling them your goals, how you plan to maintain service quality, and what exciting developments you have in mind. The more you tell them, the more likely they’ll stick with your company even if they don’t know you personally.
It’s best to start off your relationship with the clientele on the right foot instead of losing the customer list and having to rebuild it from scratch.
Expect Job Hunting – But Retain Key Talent
As touched on above, any acquisition usually comes with some personnel changes. You should expect to do some job hunting soon, especially when it comes to middle management positions.
For example, if you merge your company with another SaaS enterprise, you probably don’t need as many supervisors and middle managers as shared between the two organizations. The same is true with upper-level staff, executives, and front-line workers.
Your HR department needs to be firing on all cylinders and ready to find new people to fill open positions, especially if you shift your acquisition’s goals or processes to some extent (more on that below).
However, don’t immediately go on a firing spree! The worst thing you can do is indiscriminately fire all the leadership from the acquired SaaS business. This makes the front-line or lower-level workers nervous and could cost you impressive talent for no good reason.
Instead, take a few months (such as the first 90 days) to analyze which managers and executives do their jobs the best. You can retain that talent in the long run, then let go of the employees who aren’t worth it in comparison.
Remember, you acquired this SaaS business as a shark. You must expect to behave like one in terms of personnel management!
Do an Assessment of People, Technology, and Processes
It may also be wise to thoroughly audit an acquired SaaS business at the earliest opportunity. An audit in this sense is an overview of the:
- People who work at the organization. Specifically, you need to know how many people work for the company, how they operate, what they want, and the kind of leadership they respect.
- Technology the company currently uses. For example, does this new SaaS company use a specific type of software or CRM platform? If it’s the same as your current organization, great! If not, you’ll need to integrate the two systems or make the acquired SaaS business use your organization’s technology.
- Processes used by your newly acquired SaaS enterprise. The processes, like workflows or methodologies, may or may not be the same that you use at your primary organization. Again, this will require further integration or you to override the business’s current processes with new ones.
Try to integrate processes and technology wherever possible. While you can override them when needed, it’s usually more costly and time-consuming, especially if the workers at the acquired SaaS business are attached to those tools or procedures.
For example, major PCI compliance requirements that must be met include using secure payment devices, regular accounting, etc. Seeing whether your acquisition meets these requirements is crucial in the early days of owning the business.
Define Your New Objectives
It’s also important to look at your merger or acquisition at a high level. You should define the objectives for your acquired SaaS business, such as:
- Bolstering revenue between your two organizations
- Eliminating a key competitor in your niche or industry
- Changing the acquired business to focus on a specific aspect of your model or business plan, etc.
By defining your new objectives, you can do all the above steps with your new goals in mind. For example, if you want to eliminate a major competitor and downsize the SaaS organization, you know you’ll have to cut most of the employees so that you can look at the personnel roster with a clear focus.
Double Down on Marketing and Customer Acquisition
You’ll likely want to focus more on marketing and customer acquisition as your merger proceeds. Whenever one company acquires another, customer acquisition and retention tend to suffer. It’s a natural byproduct of customers losing faith in the organization since it was purchased by someone else.
Expect to spend more time and money on marketing, acquiring new customers, and retaining current ones. Your marketing department should double down on announcing the merger and depicting it as a positive thing (which it is!).
You should also launch marketing campaigns to previous clients to draw them from the acquired SaaS enterprise to your new brand. Marketing campaigns like PPC or pay-per-click ads, social media campaigns, and more can offset the initial turbulence experienced after an acquisition.
Lean Into Content Marketing
But what if you’ve acquired a SaaS business and aren’t looking to create a new company?
In that case, you need to lean hard into content marketing. Content marketing is one of the best ways to bolster brand authority and awareness in a specific niche or subject. If you produce a lot of high-quality content, like guides and blog posts, your target audience will see your brand as an authority in that subject.
This works wonders for boosting your initial and long-term customer account. On top of that, it can help to restore any lost confidence in the organization after it was acquired. Content marketing often results in ancillary benefits as well, such as:
- Bringing new potential customers to your site
- Improving your website SEO or search engine optimization efforts
- Acting as passive marketing for your brand
- Helping to build brand authority across the internet by linking to high authority sources, etc.
No matter what you plan to do with your SaaS business, be sure to integrate it quickly and smoothly. The longer integration takes, the more personnel you may lose and the more time you’ll have to spend converting previous clients into current customers.
It helps to have a solid integration plan in mind from the start. Determine:
- When you want the two businesses to be operating with the same technologies and processes
- When you want your staff roster to be finalized
- When you want the SaaS enterprise’s customers to be fully on board with your organization
Don’t Forget the IRS!
There’s one last thing to keep in mind: the IRS. Whenever you acquire a new business, you have to assess your tax situation diligently and thoroughly. You must also figure out what you’ll tell the IRS within the first 90 days of acquiring the business to avoid major fees or tax time headaches.
Of course, you should have followed good tax procedures and tax structuring processes during the due diligence timeframe. For example, you should know how much you can deduct due to the purchase price of the business and any associated expenses for the transaction.
However, you’ll likely need to make tax filings after acquiring your new SaaS business. For instance, you’ll need to file IRS Form 8594, the asset acquisition statement you attach to your individual income tax return. The seller of the business will need to fill out and file this form, as well.
If needed, don’t hesitate to hire an accountant to make the process smoother and faster. It’s best to avoid major mistakes when it comes to the IRS so you can proceed with your business and grow it without a hitch!
Ultimately, the first 90 days post-acquiring a SaaS business are vital. These initial weeks set the tone for your leadership of the organization, help set expectations for your clients, customers, and employees, and set your company up for its financial future.
But if you follow the above steps, you’ll jump into your new position successfully and find that your acquisition serves you well in your goals. Good luck!