How a SaaS Company Survived Failed Diligence
How clean financials and a rebuilt QoE kept a SaaS deal alive at full value.
Table of Contents
Table of Contents
The Situation
What the Financials Were Hiding
When the buyer ran their QoE, the books didn’t hold up. Recurring and one-time revenue were mixed together, EBITDA adjustments had no documentation, and the deal stalled almost immediately.
Key Situation Factors
The Challenge
What Was Actually Putting the Deal at Risk
The numbers were not the only problem. The bigger issue was what they were doing to buyer confidence. Undefendable ARR and undocumented adjustments shift every conversation from growth potential to risk. That is when deals get repriced or fall apart entirely.
Key Risk Factors
- Buyer could not underwrite the ARR with confidence
- Every margin figure became a question mark
- No documentation meant no way to verify anything
- Financial picture felt like a liability not an asset
- Deal trust was eroding fast
Our Approach
Our Approach
Our Approach
1
Step 1
Set Up the Board Cadence
Locked meeting dates upfront, set a pre-read process one week before every meeting, and defined who owned what across the CEO, CFO, and board chair. Meetings had agendas, minutes, and action-item tracking so nothing fell through the cracks between sessions.
2
Step 2
Put Structure Around the Close and KPIs
Set a weekly leadership meeting rhythm, defined the month-end close window with a hard target of the 15th and no later than the 21st, and built KPI dashboards with named owners across sales, marketing, and finance.
3
Step 3
Built the 13-Week Cash Flow Model
Modeled weekly inflow targets against operating outflows of roughly $197K per week excluding rent and $250K including rent. Rent scenarios, funding needs, and runway were visible in one place and updated on a consistent basis.
4
Step 4
Tied Everything to a Budget and Growth Plan
Pressure-tested unit-level labor costs, revenue targets, and cash break-even assumptions at the location level. Set the FY2026 budget deadline at January 31 with year-end financials due February 15 and assigned clear ownership across the leadership team.
1
Phase 1
Revenue Normalization
We went back to the contract level and separated recurring subscription revenue from one-time fees and custom dev work. From there we rebuilt the ARR schedule from scratch and reconciled all deferred revenue balances. The result was a clean, defensible $750K ARR that buyers could actually underwrite.
2
Phase 2
Expense and EBITDA Cleanup
We pulled out every non-operating cost buried inside the operating structure, including owner expenses, one-time legal fees, and non-recurring contractor costs. Then we built a normalized EBITDA bridge with a monthly recurring margin breakdown. True operating profitability was no longer a question mark.
3
Phase 3
Documentation and Reporting
We prepared a formal QoE style report with a full adjustment schedule, every entry tied back to source documentation. On top of that we delivered buyer-ready revenue and churn analytics. Nothing was left without a paper trail.
The Turning Point
When the Conversation Shifted
Once the revised QoE package was in the buyer’s hands, the dynamic changed quickly. Follow-up questions dropped off, diligence started moving again, and the discussion shifted from “what are the risks here” to “how do we grow this.” The valuation conversation stabilized right back around the original LOI terms. Financial credibility, once rebuilt, did exactly what it was supposed to do.
QUANTITATIVE RESULTS
Built the Infrastructure Before We Touched the Growth Plan
1
%
Of customers recently chose a financial product from a provider other than their main bank.
1
B
Of revenues at risk between now and 2025 if card-issuing banks are slow to invest in next-gen payment options.
1
%
The share of US banks’ working hours which could be impacted by technologies like generative AI.
1
%
the average premium that commercial payments clients would be willing to pay their provider for value-added services.
Qualitative Results
What Changed Beyond the Numbers
Getting the financials right did more than keep the deal alive. It changed the entire dynamic with the buyer. Questions slowed down, diligence stopped feeling like an interrogation, and the founder walked into final negotiations actually feeling in control.
Key outcomes
- Buyer trust in the numbers went up significantly
- The business no longer looked like an accounting risk
- Diligence became faster and far less back and forth
- Management finally had clarity on their own ARR
- A reporting standard now in place for the next investor conversation
Testimonial.
"I needed a solution that was
cost effective but high quality and high caliber. So that's where Frack comes into mind.. They take care of what your needs are and they tailor it exactly to what your business requires. You're not just hiring Frack, you're hiring an entire team of experts and you're not just getting this one individual on your team, you're getting our entire network."
Key Takeaways
Demo Heading
Mixed Revenue Distorts Value
Mixing recurring and one-time revenue does not just confuse buyers, it puts your entire valuation at risk.
Gaps in EBITDA Kill Deals
Undocumented EBITDA adjustments are not a minor oversight in diligence. They are a deal killer.
The Value Was Always There
The $4.5M was always there. The business was worth it. The financials just were not saying so.
A Clean QoE Holds the Multiple
A rebuilt QoE package brought buyers back to the table without renegotiating the multiple.
Client Profile
Industry
B2B Software (SaaS)
Company Size
~$750K in recurring annual revenue
Timeline
Pre-close, active deal under LOI
Stage
Pre-Exit
Engagement Type
Quality of Earnings Review
Financial Clean-Up
Similar Cases We Have Resolved
All
Accounting & Financial Infrastructure
Cash Flow Management
Exit & Succession Planning
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