Traditional SaaS due diligence focuses on growth rates, retention metrics, and market size. Bifurcation due diligence adds a critical structural layer: determining whether a company is positioned for Floor, Ceiling, or stuck in the unviable middle.
If the primary value proposition can be replicated by a well-prompted AI model with standard APIs, the company is structurally a Floor play.
YES → Floor only | NO → Ceiling possible
2. Is switching cost greater than 12 months of fees?
Calculate the true cost: migration effort, retraining, integration rebuilding, data transfer, and business disruption.
NO → Floor only | YES → Ceiling possible
3. Does the product become the system of record?
Systems of record accumulate data that becomes more valuable over time. If the product is a “tool” rather than a “system,” it lacks structural lock-in.
NO → Floor only | YES → Ceiling possible
4. Is there a services/implementation layer?
Professional services create organizational embedding. When a company has invested six months and $500K in implementation, switching means writing off that investment.
NO → Floor only | YES → Ceiling possible
5. Does data gravity compound over time?
Five years of historical data is worth more than one year. The switching cost increases every day the customer uses the product.
NO → Floor only | YES → Ceiling possible
Scoring
4-5 “Ceiling possible”: Strong structural potential for Ceiling strategy
3 “Ceiling possible”: Weak position, may not be defensible
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
