Solved: Paid Ads to Increase MRR for SaaS Exit?

Hi there,

Thanks for reaching out! I'm happy to give you some initial thoughts and guidance on your situation. Selling a SaaS business based on paid ads is an interesting strategy, and like you've guessed, there are a few things to bear in mind.

We'll need to look at all your numbers...

First things first, you've gotta make sure you're really looking at all the costs involved. This isn't just about the ad spend itself. It's about absolutely *everything* that goes into getting a customer through the door. This is where a lot of people slip up. A lot of the time businesses think they are breaking even, but they don't realise quite how much they are paying to aquire each customer.

I remember one B2B SaaS client we worked with thought they had their CAC nailed down perfectly. It turned out, they had forgotten to include their sales team's salaries in the calculation and didn't factor in the cost of all the software the sales team was using to manage the leads they were working with. Once we pointed that out, they realised their CAC was much higher than they initially thought, and so the unit economics didn't look as attractive as they first seemed. The margins are everything, especially in a SaaS business!

So, what should you be including in your CAC? Well, things like:

-> Salaries (sales, marketing, customer support)
-> Software costs (CRM, marketing automation, analytics)
-> Agency fees (if you're using one)
-> Ad spend (obviously!)
-> Content creation costs (if you're doing content marketing)
-> Any other expenses directly related to acquiring customers

Once you've got a really clear picture of your true CAC, you can start to figure out if your plan is viable or not. It also depends on who is going to buy the business off you. Will they be able to operate more efficiently than you? If so, you could make the business worth more.

I'd say you need to increase customer lifetime value

A low CLTV could really cause a problem here. As you've said, a CLTV of $100 isn't great, especially if you're spending $100 to acquire a customer. It's important to consider *why* your churn rate is 10%.

Is it because your product isn't sticky enough? Is it because you're not providing enough value? Is it because your customer support isn't up to scratch? Or is it because you're not targeting the right customers in the first place?

Here's a few things you can do to increase it:

-> Improve your onboarding process so new users get value from the product quickly.
-> Add new features that your customers will love.
-> Improve your customer support so people get their problems solved quickly. Maybe look into hiring a full time customer support person, or even better training for your current employees.
-> Upsell existing customers to higher-priced plans.
-> Increase customer retention by offering discounts or other incentives to stay.

If you can increase your customer lifetime value, you can afford to spend more to acquire each customer. And the higher your CLTV, the more attractive your business will be to potential buyers.

You probably should target more

It sounds like you are just targeting on Facebook ads. This could be a mistake as it is limiting your targeting.

Are you *sure* that Facebook is the best place to reach your target audience? Have you tested other platforms? Have you considered Google Ads? Or LinkedIn? Or even TikTok or Apple search ads?

If you're relying solely on Facebook Ads, you might be missing out on a huge pool of potential customers who could be cheaper to acquire in the long term. Facebook can be amazing, however, I've worked with a few clients now that have moved away from Facebook ads to other advertising platforms with much more positive ROI. So it really depends.

I remember a software client where we achieved 45k+ signups at under £2 cost per signup. We used Meta Ads, Tiktok Ads, Apple Ads, and Google Ads for this campaign.

Different channels also require different creatives, e.g. we've had several SaaS clients see really good results with UGC videos on TikTok and Meta ads, there's loads of angles to test here as well, so it's well worth a try.

You'll need to look at long-term value

This is a big one. Any acquirer isn't just going to look at the numbers as they stand *today*. They are going to look at the potential for future growth and profitability. They might think they can scale it better than you, or operate more efficiently, or they may already have a similar business that would make yours more valuable when combined.

So, if you can demonstrate that your business has the potential to scale rapidly, or that you have a clear plan to improve profitability over time, that's going to make it much more attractive to potential buyers. Show them how you're planning to reduce churn, increase customer lifetime value, and lower your customer acquisition costs.

A strong brand presence and awareness can also go a long way here. Even if you're breaking even on your paid ads *now*, the customers you're acquiring are still building awareness of your brand. That could translate into organic growth down the line, which makes your company more attractive to potential buyers.

I've detailed my main recommendations for you below:

So, is this strategy viable? It *could* be, but it's important to go in with your eyes wide open and do your homework first. Look into those numbers, know your target audience, and have a plan for the long-term.

Paid advertising can be a minefield. You may want to consider working with an agency with expertise in scaling SaaS campaigns. We offer a free initial consultation where we review your strategy and account, which is usually super helpful and gives potential clients a taste of what it's like to work with us. Feel free to book in a time for a free consultation.

Regards,
Team @ Lukas Holschuh