• how do I assess the market for a product

    It's difficult to know where the market will be in 2-3 years time, but you can look at current trends and see which direction it is going (use http://www.google.com/trends/) and then make a judgement call based on logic. E.g. iPhone 5 might be popular now but it's likely in a few years time there will be a new model with a different name. So iPhones will still be popular, just not the iPhone 5.

    I have seen quite a few SaaS businesses matching a similar profile. Their product is okay, they a stable client base but no proven scalability. There are big and better competitors who own the "scalable" part of the market. What you will probably find (if there are only 100 clients) is that the vast majority of CONVERTING clients (NOT traffic) are referrals or word of mouth. This explains why they hang around a while (the churn in this case sounds fine and active subscribers are growing) but also why the current owner has not been able to scale it. Referrals/WoM are not particularly scalable as a source of new clients. If the seller has run paid campaigns in the past (PPC, media buys etc.) that have been profitable, then find out why they are not now (probably not profitable).

    If I was buy-side advising you on the information you have provided, then I would say it's best to avoid a business like this if you are planning on scaling. 100 clients doesn't show much regarding scalability, especially if they have been acquired organically. The other red flag is the only competitive advantage (which is not a competitive advantage at all) is price. You'll end up in a race to the bottom chasing after price sensitive clients (who are always the worst - they pay the least but want the most). That's not to say the business won't continue to be relatively stable, but in this case it doesn't sound like there is anything in favour of the business being scalable and unless you have experience in the market/niche/SaaS it's probably best avoided (if I remember correctly this is a first-time buy for you). Obviously the seller will not tell you this (or the broker) but that's why you are doing the right thing seeking third party/unbiased opinions on here.
    This article was originally published in forum thread: how do i acess the market for a product started by hys View original post