FirstPass Memo

Answers

What due diligence should I do before buying a small SaaS?

Short answer: For a small SaaS, diligence comes down to five checks: Stripe revenue matches the bank, churn and customer concentration are acceptable, the code and domain belong to the seller, costs and owner time are complete, and Stripe, hosting and customers can transfer. Do the free checks first, with read-only access, before paying anyone or signing anything binding.

Updated 7 October 2026 · Figures checked against their sources on 7 October 2026

In what order should I do SaaS due diligence?

Cheapest and fastest first, so a deal that will fail fails before you spend money. Acquire.com's report (updated 1 September 2026) gives an average of 81 days on market for SaaS sales, with most within 90 days, so there is usually time to do this properly.

  1. Hour one: the listing. Run it through the red-flag checker and send the first questions. Free.
  2. Days one to three: read-only access. Stripe View Only, analytics, a screen share of hosting and the code repository. Free, and it decides most deals. Our 72-hour vetting plan sets out the order.
  3. After a letter of intent: documents. Bank statements, contracts, the full customer list, code access under NDA.
  4. Last: paid help. An accountant or developer review, and a lawyer for the purchase agreement, once the free checks have passed.

What does a first pass on a small SaaS look like?

This composite listing looks clean at first: 3% churn and a payback of three years. The checker raises these flags to resolve before anything else.

Composite example, not a real listing

Micro-SaaS for podcast transcription, monthly subscriptions
Asking price: $72,000
MRR: $2,600
Average monthly profit: $2,000
Churn: 3% monthly
22 paying customers
Top customer: largest customer is 30% of revenue
Business age: 2 years
Owner hours: 15 hours per week

Traffic sources typed in: Direct 40%, Organic search 35%, Referral 25%.

What the red-flag checker returns: a payback of 36 months (3× annual profit) on average monthly profit, and these flags:

  1. High Top customer is 30% of revenue

    If that customer leaves after the sale, a large part of the profit leaves with it.

    Ask: Is that customer under contract, and have they been told about the sale?

    How this rule works

  2. Medium Only about 22 paying customers

    Each customer is roughly 4.5% of revenue on average, so losing one or two moves the numbers.

    Ask: Can you share revenue by customer for the top 10 over the last 12 months?

    How this rule works

  3. Medium Seller reports 15 hours a week

    That time either becomes your job or a cost you pay someone else, which lowers the real profit.

    Ask: Which tasks take the time, and what would it cost to hand them to a contractor?

    How this rule works

  4. Medium No connected data source mentioned

    The figures appear to be typed in by the seller. Nothing in the text says revenue or traffic is connected from Stripe, PayPal, analytics or a marketplace check.

    Ask: Can you give read-only access to the payment processor and analytics, or exports that match the P&L?

    How this rule works

With 22 customers and one at 30% of revenue, losing a single account changes the price; and 15 hours a week of owner work is a cost the profit leaves out. Each flag comes with the question to send.

The five checks

1. Revenue

Stripe payouts match bank deposits, and stated MRR matches cash collected. Method: how to verify Stripe revenue.

2. Churn and concentration

Monthly revenue churn from the same export, and the top customers' share. See acceptable churn and top customer over 25%.

3. Code, IP and domain

Who wrote the code, whether it is all in a repository the seller controls, which licences apply, and who holds the domain registrar account.

4. Costs and owner time

Every recurring cost, including hosting, tools, payment fees and contractors, plus the owner's hours at a fair rate. Convert with the true payback calculator.

5. Transfers

Stripe, hosting, domain, email and third-party API accounts. Stripe transfers go through Stripe Support; cross-border buyers need a new account (can a Stripe account be transferred?).

Which SaaS questions need documents?

Our question bank has 19 SaaS-specific questions, 14 for a first message and 5 that need documents or access before a letter of intent:

  1. Can you reconcile MRR to cash collected last month, including failed payments, discounts, refunds and annual plans?
  2. Who wrote the code, is it all in a repository you control, and are there licences that would not transfer?
  3. Are there known bugs, security issues or announced platform changes that will need work?
  4. Can the payment processor account move to a new owner, or will customers need to re-enter payment details?
  5. Has any large customer asked for a discount or warned that they may cancel?

When should I pay for professional diligence?

Once the five checks pass and you have agreed a price in principle. Paying earlier spends money on deals the free checks would have ended. For larger deals, or code you cannot read yourself, a developer's review of the repository and an accountant's reconciliation are worth their cost. The whole process, from criteria to closing, is in how to buy a SaaS business.

Sources

  1. Acquire.com, Biannual Acquisition Multiples Report (11 February 2026, updated 1 September 2026), read 7 October 2026
  2. FirstPass Memo, seller question bank, October 2026 (general checklist), our own questions
  3. FirstPass Memo, red-flag checker rules, our own rules, published as /rules.json
  4. Stripe Support, Transfer a Stripe account to a different entity due to a business sale or acquisition, read 7 October 2026

Related

Get the SaaS and software seller checklist

Join the FirstPass Memo waitlist and the next page gives you the SaaS and software seller question checklist (web page and PDF) straight away, along with the other free files: seller question checklists for eleven business types, the 72-hour vetting plan and a deal-tracker spreadsheet. Nothing is emailed; you download them on the page.

We will write when paid memos open, and occasionally before. Unsubscribe any time by replying "stop" to hello@firstpassmemo.com. Looking at a live listing priced $10k–150k? Apply for a free beta memo instead; its confirmation page has the same downloads.

Composite examples are invented and labelled. Figures from other sites are quoted with a link and the date we read them; FirstPass figures are asking prices and seller-stated profit, not sale prices. Informational screening only, not investment, legal or tax advice.