SaaS startup companies are fun places to work and be engaged. They are stressful, competitive, exhilarating, rewarding, crushing and educational - sometimes all in the same day. For entrepreneurs and early joiners, they can be quite financially rewarding. For most technology startups, their end goals generally fall into two categories: sale to a larger organization or IPO. While some focus on becoming sustaining independent business, that’s rare. As a result, most companies contemplating their next move have spent far too much on Amazon Web Services and haven’t focused yet on trimming the fat.
Selling the company comes with great rewards, as it’s fantastic to be a part of an experience where some other organization has seen your company’s value and is interested in acquiring it. Yet, the process of selling is complicated and often daunting dealing with lawyers, salespeople, compliance audits, etc. The term the business world uses for this is due diligence M&A, or Mergers and Acquisitions. Let's dig into this area, focusing on what it means for software engineering leadership.
Planning to Sell the Company
When selling your company, there will be several audits done on the company. One of these will be financial. We know we said we'd focus on engineering but bear with us. They will look at your engineering costs for your employees, the hardware you've purchased, what your spending on for services, and more importantly, what are you spending on cloud computing costs. As a SaaS company most, if not all, of your income comes in through the website. The auditors will look at growth rates, the percentage of cloud computing costs against gross income and if the cloud computing costs are linear or stepped. Basically, do you periodically have significant increases in expenses but stay flat most of the time. For example, adding a new RDS server every six months would do it.
This information can be important for evaluating company price. If the purchasers feel that your expense ratio is too high, they might make it a bargaining chip during negotiations.
As an engineering leader, getting ahead of expenses can be just as important as delivering that quarterly goal killer feature. A Cloud Cost Management tool like Aimably is a wise investment to get ahead of this. Using /aws-cost-control-products-and-services Aimably Reduce, you can get your engineering team to make significant cost reductions. The results of that process will be a great counterpoint during the audit, especially when you share your plans for ongoing monitoring using Aimably Warn. This kind of planned control will put you in a much stronger negotiation position as you will be able to show a continued cost reduction savings over time.
A sale of your company can happen at any time, and when it does, being prepared for it can put you as an engineering leader in a commanding position. Aimably can put you in this position.
Merging the Company Operations
When the sale of the company is complete and your company is acquired the real fun begins: the merger. At this point as an engineering leader, you probably have a new boss, and/or you are in the position of taking over another engineering organization. Opportunities are great at this point, but so often are the politics.
Having the original cloud computing cost under control with Aimably can put you in a stronger political position. You can't get blindsided with a cost-cutting exercise, as you will have already done so, or at least have the tools at hand to accomplish further reductions. You'll also have the history to show the savings you have previously made and expertise to share with other teams.
On the other hand, it’s important to not run roughshod into conversations with other teams, as the politics of control can be very sensitive initially. Stay aware of overall company goals and recommend the appropriate interventions that are in alignment with your expertise. If there’s a company-wide push to reduce spend, consider implementing cost control and monitoring in your new sister lines of business.
Is your company prepping for a merger or acquisition? Now is the time to get your costs under control. Consider scheduling a consultation today!