Sell Your Technology Company in California
You are not selling software. You are selling revenue that renews on its own, and proof that it will keep renewing.
Buyers of a SaaS company, managed service provider or digital agency rarely pay for features, code quality or the roadmap on its own. They pay for contracted, recurring revenue, the rate at which customers stay and spend more, and clean ownership of the technology behind it. Transworld Veritage helps California technology owners present those numbers the way strategic and private equity buyers measure them, and manage the deal through closing.
A value range comes with no listing agreement. Your name stays private until a buyer has signed an NDA.
Sources: Software Equity Group, Quarterly SaaS Report 2Q26 (Aug. 2026); SaaS Capital, 2025 Retention Benchmarks for Private B2B SaaS Companies (Sept. 2025).
In this guide
- 01The four numbers buyers check before they read your deck
- 02What a technology company is actually worth
- 03Why size changes the multiple so much
- 04Strategic buyer or private equity: who pays more
- 05The headline price is not the whole price
- 06Five mistakes that cost owners the most
- 07The process, week by week
- 08A two-minute readiness check
- 09Your three options
The four numbers buyers check before they read your deck
Experienced technology buyers skip the product demo and open the revenue file. These are the numbers they look for first.
ARR and MRR
Annual or monthly recurring revenue from subscriptions and managed-service contracts. One-time setup fees, project work and hardware resale are counted separately and valued lower.
Net revenue retention
Revenue from last year's customers this year, including upgrades and losses. SaaS Capital's 2025 data shows a median of 102% for $25–50K contracts and a top quartile of 111%. Above 100% means you grow before you sign anyone new.
Gross churn
Customers and dollars lost each month. Buyers model churn forward, so a small monthly loss becomes a large discount over a five-year hold.
Rule of 40
Growth rate plus profit margin. A company growing 25% at a 15% EBITDA margin scores 40. It lets a slower, profitable company compete with a faster one that burns cash.
Source: SaaS Capital, 2025 Retention Benchmarks for Private B2B SaaS Companies. Rule of 40 is a common investor benchmark, not a pricing formula.
What owners think buyers pay for
- The feature list and the roadmap
- Total users or downloads
- Total revenue, including projects
- The founder's technical vision
- A big-name customer logo
What buyers actually pay for
- Contracted recurring revenue with multi-year terms
- Net revenue retention above 100% and low logo churn
- High gross margin on subscription revenue
- Code and IP the company clearly owns
- No customer above roughly 10–15% of revenue
A buyer is not buying your product. They are buying a revenue curve, and pricing how sure they can be that it keeps going.
Every diligence question, from cohort tables to contractor agreements, comes back to that. When you can show the curve with clean data and clean ownership, buyers compete on price. When you cannot, they protect themselves with earn-outs and escrow.
What a technology company is actually worth
Revenue multiples by company type
Multiple of annual revenue. Green: small businesses sold through brokers. Gold: SaaS M&A and private SaaS valuations.
Sources: BizBuySell valuation benchmarks for IT & software services and software/app/SaaS, sold businesses 2021–2025; Software Equity Group, 3Q25 and 2Q26 SaaS M&A medians; SaaS Capital, 2025 Private SaaS Company Valuations (bootstrapped 4.8x, equity-backed 5.3x). Actual results depend on the factors listed here.
Smaller technology businesses, usually those with under about $2 million in earnings, are priced like other owner-run companies: on SDE. BizBuySell reports an average SDE multiple of 3.31x for software, app and SaaS businesses and 3.10x for IT and software services firms sold from 2021 to 2025.
Once recurring revenue is large, growing and well documented, buyers switch to revenue or ARR multiples. That switch is where most of the value gap comes from. Software Equity Group's 2Q26 median was 4.0x trailing revenue, while the best companies still draw outlier multiples. Getting your metrics ready to support a revenue-based valuation is often the most valuable work you can do before a sale.
What pushes value up
- Net revenue retention above 100%, shown by cohort
- Multi-year or auto-renewing contracts with price escalators
- High gross margin on subscription revenue
- MSPs: managed contracts as most of revenue, not projects
- Vertical focus with clear product-market fit
- Clean IP chain: every employee and contractor signed
What pushes value down
- One customer or reseller above 15–20% of revenue
- Month-to-month contracts and rising churn
- Revenue that depends on the founder's custom work
- Unlicensed or copyleft open-source code in the product
- Deferred revenue and taxes that are not tracked
- Telecom or media revenue tied to one carrier or platform
Why size changes the multiple so much
The same business is worth more per dollar of earnings at a larger scale. In IT services, the gap between the smallest and largest deals is more than double.
Buyers pay up for scale because it lowers risk: more customers, deeper management and less dependence on any one person. For a smaller firm, the practical lesson is that cleaner contracts, a second layer of managers and documented recurring revenue can move you into a better bracket faster than growth alone.
Investor-backed platforms also buy smaller companies as add-ons. They can pay above the small-company range because your customers fit into a larger business they already run.
IT services: median EBITDA multiple by deal size
Enterprise value to EBITDA, by deal value in US$ millions.
Source: Aventis Advisors, “MSP Valuation Multiples,” using Mergemarket data on 624 IT services deals (updated Aug. 2026).
Strategic buyer or private equity: who pays more
Private equity and venture-backed buyers were involved in 59% of SaaS deals in 2Q26. Strategic buyers make up most of the rest. Each one pays for something different.
Strategic acquirers
Software and tech companies buying your product, customers or team. They can pay for synergies, but often fold you in and want founders to stay.
PE platforms and add-ons
Funds building software or MSP platforms. They pay for recurring revenue and margin, and often ask you to roll equity into the larger company.
Search funds and individuals
Operators buying one company, often with SBA 7(a) loans. Best for profitable firms priced on SDE.
MSP and IT roll-ups
Groups buying managed service contracts, cybersecurity and cloud practices. Managed recurring revenue drives their price.
Media and marketing groups
Agencies and holding companies buying digital media, ad-tech and marketing technology for audience, data and client rosters.
Telecom services buyers
Carriers, fiber and unified communications providers buying customer bases, contracts and field service teams.
The best price usually comes from a buyer who can do more with your customers than you can. Finding that buyer is the job.
The headline price is not the whole price
Technology deals often include an earn-out, an escrow or holdback, and sometimes rollover equity. Each one is money you may not receive at closing.
SRS Acquiom found that 22% of private technology deals in 2025 included an earn-out, up from 14% in 2014–2022. Across non-life-science deals, only 21% of the total maximum earn-out potential had been paid. Earn-outs tied to ARR targets you cannot fully control can shrink fast.
We put every offer on the same footing: cash at close, money at risk, how targets are measured, and what protects you if the buyer changes pricing, sales or product plans.
Source: SRS Acquiom, 2026 M&A Earnout and Milestone Trends.
Same offer, different reality
Illustrative example, index of 100: what reaches you at closing. Not a forecast.
Five mistakes that cost owners the most
- 1
Leaving gaps in IP ownership
Every founder, employee and contractor who wrote code should have signed an assignment. California Labor Code §2870 limits what employers can claim and §2872 requires written notice, so old templates may not hold up. Open-source licenses need a review too.
Cost: a larger escrow, a delayed close, or a buyer who walks - 2
Mixing recurring and one-time revenue
When subscriptions, projects and hardware sit in one revenue line, buyers value all of it at the lowest multiple.
Cost: an SDE price for an ARR business - 3
Ignoring customer concentration
One large customer or channel partner can feel like a win. To a buyer it is a risk that gets priced in or pushed into an earn-out.
Cost: a lower multiple or a price tied to that customer - 4
Accepting an earn-out on targets you cannot control
Once the buyer runs sales, pricing and the roadmap, ARR targets can slip for reasons that have nothing to do with you.
Cost: part of the price that never arrives - 5
Talking to only one buyer
An unsolicited offer from a competitor or fund sets a low anchor. Without other bids, you have nothing to compare it with.
Cost: no leverage on price or terms
Sources: Cal. Labor Code §§2870–2872.
The process, week by week
Not knowing what happens next is one of the hardest parts of selling. Here is the usual sequence, so you can see where you are at every stage.
- Weeks 1–3
Metrics & value
Rebuild ARR, cohort retention, churn and gross margin, normalize earnings, and set a range you can defend.
- Weeks 3–6
Package
A blind profile and offering memorandum built on the metrics strategic and PE buyers use.
- Weeks 6–12
Outreach
NDA-first outreach to strategics, funds and platforms. Competitors see less until they are screened.
- Weeks 10–16
Offers & LOI
Offers compared on cash at close, earn-out, rollover, escrow, your role and your non-compete.
- Weeks 14–24
Diligence
Revenue quality, code and IP review, security, contracts, taxes and customer consents run side by side.
- Closing
Transition
Customer announcements, key-employee retention, and handover of systems and accounts.
Timing varies by buyer type, deal size and diligence depth. Strategic deals with code review can take longer.
A two-minute readiness check
How many of these can you check today?
Count your checks honestly. The result tells you which path below fits you best.
- Three years of financials, with recurring revenue reported separately
- Monthly ARR or MRR, churn and retention by customer cohort
- Net revenue retention at or above 100%
- No customer or channel partner above roughly 15% of revenue
- Signed IP assignments from every employee and contractor
- An open-source and third-party license inventory
- Someone other than you can run sales and product for a month
- You know what you need to net, and whether you would roll equity
Your three options
Sell now
0–6 months- Best if growth and retention are at a peak
- Valuation and market launch right away
- Price based on today's metrics
Prepare, then sell
6–24 months- Separate and grow recurring revenue
- Fix IP, contracts and concentration first
- Go to market with metrics that support a higher multiple
Partial sale or recap
Depends on the buyer- Sell a majority to PE and roll the rest
- Take money off the table and stay on
- Fits founders who want a second payout later
How we protect you
Technology sale questions
Is my company valued on revenue or on earnings?
Smaller, owner-run technology businesses are usually priced on SDE or EBITDA. Larger SaaS companies with strong recurring revenue and retention are often priced on ARR or trailing revenue. We show you where your company sits and what would move it.
What if a competitor contacts me directly?
Take the call, but do not share numbers without an NDA and do not treat it as the only offer. A single unsolicited bid gives you nothing to compare it with. We can run a quiet process around it.
Will I have to sign a non-compete?
Probably. California voids most non-competes, but Business and Professions Code §16601 allows one when you sell your ownership and goodwill. Its scope, length and territory are negotiable.
How do buyers look at an MSP or IT services firm?
They split managed, contracted revenue from project and hardware revenue. Managed revenue on multi-year agreements earns the higher multiple, so we present it separately.
Will my team and customers find out?
Not from us. Marketing uses a blind profile, and buyers sign an NDA before learning your name. Competitors get limited information until they are screened.
When should I start planning?
Ideally 12 to 24 months before you want to leave. That gives you time to separate recurring revenue, fix IP and contracts, reduce concentration and build a team that can run without you.
Find out what your recurring revenue is worth to a buyer, before you decide anything.
A confidential conversation is the right first step, whether you plan to sell this year or in a few years. You get a value range and a clear view of who would buy, with no obligation.
- Confidential, NDA-first process
- Value range with no listing agreement
- Advisors with brokerage, M&A, legal and investment banking backgrounds
ARCADIA | TORRANCE | SANTA CLARA | SAN MATEO
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