8 ms·

What I Learned Selling a Software Business

439 points by earlyresort 11y ago

davidw 11y ago
> Back in the day someone won a Nobel Prize for pointing out that, if a population of goods has unknown potentially costly problems, and there is no way to determine which particular instances of the goods have the problesms, the market will penalize all goods in that population. The canonical example is used cars. George Akerlof and "The Market for Lemons": https://en.wikipedia.org/wiki/George_Akerlof https://en.wikipedia.org/wiki/George_Akerlof
- nerfhammer 11y ago
  https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons
sbierwagen 11y ago
(2015)
- deleted 11y ago
  [deleted]
- cpach 11y ago
  This essay was published like 17 minutes ago :)
  - dang 11y ago
    Our heuristic for this is that if we're personally the first to add it to the Internet Archive, it's probably new.
    - douche 11y ago
      Does everything that gets posted here get added to the Internet Archive? Or just stuff that hits the front page? Either way, that's kind of awesome.
      - dang 11y ago
        Not yet, but it's on our list! and an HN user who works for them has personally committed to budging me if I don't get it done in the next month or two. The way it works right now is that we have a keyboard shortcut to open the archive.org page for a url posted to HN—kind of like the 'past' and 'web' links we display at the top of /item pages, except faster [1]—and we use that when trying to find the date of an article. Sometimes the archive doesn't have it yet, in which case we click the link to add it. 1. Actually a number of HN features have started as moderator keyboard shortcuts. It would be fun to release that software, but... time.
  - sbierwagen 11y ago
    I could have sworn I had read this post before, but googling doesn't show any strings from it showing up anywhere else. It's always disconcerting to get slapped in the face with clear evidence of a memory error. Did I combine https://news.ycombinator.com/item?id=9589223 https://news.ycombinator.com/item?id=9589223 and http://www.kalzumeus.com/2014/12/22/kalzumeus-software-year-in-review-2014/ http://www.kalzumeus.com/2014/12/22/kalzumeus-software-year-... somehow? Who knows.
    - dennisgorelik 11y ago
      You could predict many of these things described in this post from other Patrick's posts and comments. Other "I sold my SaaS business" stories discussed on HN in the past could make Déjà vu impression too.
    - pcglue 11y ago
      I had that same exact feeling! I scrolled to the bottom looking for a date somewhere to confirm (there was none), but then saw the reference to stockfighter and finally dawned on me it was likely a new post. Then I read it.
    - prawn 11y ago
      At first, it seemed familiar to me too, so I can see how you might've been confused. Also, Patrick intentionally omits the date from his blog entries which likely didn't help you.
dennisgorelik 11y ago
This time Patrick's summary of Bingo Card Creator does not look rosy at all. All facts are still the same, but the overall impression of BCC now is that it is a small, declining and time-consuming business. Patrick himself actually struggles with money, like all of us. Patrick definitely has (had?) the power of optimistic spin in his stories.
- psycr 11y ago
  This comment is strange to me, I did not have the same impression whatsoever. The numbers here, and overall picture, match all of his previous annual summary posts. It's been fairly clear in those summaries that his attention has shifted to other projects/consulting opportunities etc, and that BCC was declining in profitability.
  - dennisgorelik 11y ago
    The facts are the same, the impression is different. The change in impression did not happen overnight though. Earlier posts were much more optimistic, with slow decline of optimism over the years. The thing is, even the same earlier years of BCC growth do not look as rosy anymore as they were at the time of that growth.
    - graeme 11y ago
      >The thing is, even the same earlier years of BCC growth do not look as rosy anymore as they were at the time of that growth. Why? He stopped actively focussing on the business years ago. Of course it's going to decline. Few recurring revenues businesses, if any, are truly "build it once, sell it forever". They need upkeep and growth plans. Patrick's growth efforts went elsewhere.
      - dennisgorelik 11y ago
        My point here is not about declining 2013-2016 years of BCC business. My point is about growth in ~2008-2012. Back then in Patrick's stories that growth looked impressive. The same ~2008-2012 years of BCC business do not look as impressive anymore. Now we can see how BCC was time-consuming business with profits that are not really exciting for software developer. That said, the learning aspects of BCC for all of us still look great: baseline for our businesses, realistic expectations, and relevant know-how.
sdrinf 11y ago
| Selling BCC was going to pay for living expenses while we built Starfighter’s first game (Stockfighter) and also pay for some development work to assist with the sale of my other SaaS business, Appointment Reminder. ^^ - you're selling AR as well? Last presentation was showing that to be a profit machine? Would love to learn about the reasoning behind that decision!
- patio11 11y ago
  AR is modestly successful, but needs to buy three things at the moment: my family's living expenses, my attention (via hiring reasonably complete replacements for me), and my contribution to Starfighter. It can afford roughly one of them. "Why sell AR?" is pretty straightforward: I'm CEO of Starfighter. I signed up for 5~10 years of my life building stock exchanges and getting devs better jobs, and that's more than enough work. It does not need to be interrupted by e.g. dealing with the Lithuanian hacker ring which found a novel way to route calls to Caribbean phone sex numbers. (A great story for another day.)
  - dpritchett 11y ago
    This suggests that StarFighter has some cash that is being used to keep you afloat. I don't expect you to disclose, but I'm guessing there's a silent partner or maybe just some ex-Matasano money floating things. Cool!
    - deleted 11y ago
      [deleted]
- bdunn 11y ago
  Because AR takes mental space, even if someone else you hire is managing it. Focusing on one thing is best. I recently sold my SaaS for the same reason — I wanted to eliminate needing to worry about it while working on growing my other (more profitable) business. (Lastly, as things that probably make Patrick excited to get out of bed and work, I'm assuming Starfighter > AR.)
quellhorst 11y ago
Such a long article but no mention of how much he sold it for.
- simonswords82 11y ago
  $57,000 SOLD See http://feinternational.com/buy-a-website/3745-software-busin.. http://feinternational.com/buy-a-website/3745-software-busin....
  - kentt 11y ago
    I might be wrong, but I don't think that means that it was sold for 57k, only that it was the asking price.
    - shawn-furyan 11y ago
      That's true but the article does mention how most of the things that impact price went in patio11's favor. One can reasonably infer that if the seller feels everything went in his favor at the end of the process that he wasn't bullied too far off of his asking price. He does also mention how one seller tried to demand a 40% discount at close, and that the broker had a better deal waiting in the wings. So we can have a pretty high degree of certainty that the sale price was between $28,500 and $57,000, likely closer to $57k.
- icelancer 11y ago
  It's almost like he signed a contract to not explicitly disclose it.
- pchristensen 11y ago
  FTFA: "I negotiated something similar to “I can mention the sale almost immediately after it happens as it will leak regardless; I agree to not disclose the price; you accept that BCC is extraordinarily well-covered on the Internets and that guessing the price will not be that difficult.”"
aresant 11y ago
FEI still has the original listing on their site: Yearly revenue - $31,000 Yearly net profit - $19,000 Asking price - $57,000 SOLD It's fascinating what a small amount of money we're ultimately talking about vs. the influence of the "cult of Bingo Card Creator fans" on HN - which I am card carrying member of. (1) http://feinternational.com/buy-a-website/3745-software-business-in-education-niche-25k-gross-mo http://feinternational.com/buy-a-website/3745-software-busin...
- zkhalique 11y ago
  Could someone write an article about Patrick McKenzie's appeal and techniques on marketing to the HN community? :) And by marketing, I mean getting their attention and building a brand, not money.
  - davidw 11y ago
    He's genuine (tech people don't like certain kinds of BS), he's helpful, and he's done something a lot of people want to do. And he's been very good at communicating what he's done. I think it helps a lot that he built a business that's "human scale" - everyone can relate to replacing their salary, whereas building some zillion dollar SV business really isn't in the cards for most of us. Also, bingo cards was a huge wakeup call that you don't have to do something technically brilliant or with an amazing business model. "Just" find a niche and sell stuff to people with a need.
    - dba7dba 11y ago
      Opensourcing business processes, with tech skills to back it up. Rare combo.
  - patio11 11y ago
    BCC was originally a bit of a purple cow, which is interesting to the HN community because it overlaps programming/business but different than the vast majority of what is on HN because it's the aggressively un-startup startup. Publishing sales numbers before that was common probably helped a non-zero amount, too. Many HNers feel a sense of personal investment in me, because HN has been my home-away-from-home for ~7 years now and I am a "local boy who made good." I write decently and have a strong written voice which people like. A relatively small fraction of what I write is immediately useful to people. Also: I write a lot. My published output is something on the order of ~3 million words, roughly ~2 million of which are on HN. (Give or take 500k or so. It's been a while since I ran the script and I don't have a few hours to wait before bed.) That's roughly Lord of the Rings, Harry Potter, and Game of Thrones... combined. There: that's the whole secret. Use these dark magicks responsibly.
simonswords82 11y ago
I got in touch with FEI about selling one of my web businesses and they couldn't help due to our UK focus. Sucks for us, I've heard good things about them. Can anybody recommend a broker that assists UK based and focussed web businesses?
- ThomasSmale 11y ago
  Hi Simon, Sorry we couldn't help - our focus tends to be on businesses that are primarily US focused with their customer base (although our sellers are based all over the world). Not aware of any established UK brokers who focus on web businesses - there isn't a huge market with UK buyers for online businesses so not overly attractive to enter. Thomas (from FE International)
  - jordanlev 11y ago
    lol... didn't know the "I" in FEI stood for "International" until this comment talking about how you are US-focused :)
  - simonswords82 11y ago
    Thanks Thomas - totally understand and not having a moan at all - just wished that there was an equivalent to you that we could use as we've heard such good things.
benologist 11y ago
I'm spending this year packaging up my current business to make it as attractive as possible to potential buyers. This talks a lot about the process, but what are some things people like us can do to maximize their return on such a sale?
- patio11 11y ago
  Grow revenue via any legitimate means. Cancel any expenses that aren't required to run the businesses (SaaS accounts you keep around "in case I get around to it", etc). Obsessively document everything you do for the business; get as much as possible outsourced to people following the procedures you've written up, ideally without spending too much money on this. Get your ducks in a row on numbers, most importantly the financials (bookkeeping bookkeeping bookkeeping) but also classic (SaaS?) analytics numbers like number of trials, conversion rate, churn rate, etc. Historical numbers and numbers segmented per traffic source/vintage are good things to have, too. Bonus points if these are pointing in the right direction over time. In more detail: http://feinternational.com/blog/saas-metrics-how-to-value-saas-business/ http://feinternational.com/blog/saas-metrics-how-to-value-sa... I might also add "Negotiate the sales price, even if the buyer and/or broker does not want to negotiate the sales price."
- ThomasSmale 11y ago
  Check out the post we [luckily timed!] today - http://feinternational.com/blog/how-to-start-planning-your-exit-strategy/ http://feinternational.com/blog/how-to-start-planning-your-e... - some basics in the blog post and a short (free) e-course you can sign up to on what to plan, too.
song 11y ago
Just wanted to quote this: "I’m told, against my expectations, that BCC was impressively well-documented by the standards of other businesses its size. This implies that many people are running their small projects in even more of a cowboy fashion than I do, for example by not having dedicated books for the business. If this describes you, God help you. At a minimum, get your books for the last year done professionally — whatever you spend on bookkeepers/accountants will be a pittance next to the time saved and additional valuation captured." Even if you're not selling, getting this done will save a lot of headaches the road... Dedicated books for the business is a MUST. I know a lot of small businesses where this is not done religiously and it always comes back to bite the owner in the ass... EDIT: By the way, I was curious so I just took a look at the BCC site, the blog is timing out...
- mbesto 11y ago
  I regularly see companies (i.e. P&L, Balance sheets, technology spend, etc) in the small/mid cap space (EBITDA of anywhere between $500k-$10M) and you'd be amazed at how poorly documented businesses are that still are able to generate serious profits.
  - mooreds 11y ago
    "There's no problem that sales can't solve." Well, except if you want to sell your company at some point in the future or actually have some idea of COGS or know how you are actually doing.
    - jerguismi 11y ago
      If the books aren't done properly, and you want to sell, but still can demonstrate profitability, there will be someone who will buy at some price. Money can solve also the problem where you can pay someone to go through your accounts etc, and make the books from ground up. Of course it is going to be expensive, and you need a good accountant for that.
BorisMelnik 11y ago
I think one of the big things about BCC isn't how much (or how little) money he made but how well documented the process was. We've all seen plenty of projects do 10k months but not many of them are sustainable or so well documented in a blog.
voltagex_ 11y ago
>migrate all of my email in Google Apps for Work (oh God, don’t ever do this) Yeah... I have a non-trivial number of purchased Android apps on my Google Apps for Work account ($6AUD/month) and there's no published way to move apps to a "normal" Google account. I'd probably be paying Google forever if I had business dependencies hanging off that account (but I set it up when custom domains were "free").
voltagex_ 11y ago
>Accordingly, I decided to retroactively cut her in for 5% of the business. Props to Pepper for accommodating this request, as it is somewhat non-standard. ("Can you invoice me a substantial amount of money and promise me that you will pay a particular employee of yours a bonus of the same amount, net only of taxes?" "We can do that.") Businesses exist that are this cool? Where do I find them?
raymondhong 11y ago
great
pitt1980 11y ago
"People try to buy software businesses with “no money down.” (“Will you loan me the entire purchase price of the business? I’ll pay you back over the next 3 years. Promise!”)" ---------------- While I see why you would have run away from that particular structure, I'm curious as to how flexible you might have been from a straight lump sum structure If I was buy a business like this, willing to accept $X as money down, some % percentage of revenue for Y months, until you were paid Z amount, with some contingencies built in would look pretty attractive a sellers willingness to agree to terms like that would send a pretty strong signal that they weren't selling a lemon as a buyer, I'd be willing to commit to a Z price significantly higher than what I'd be willing to commit as a lump sum up front if the seller believed in the business, (and I guess were able to substantiate that I had enough ability no to drive the business into the ground) it seems like such a structure would net the seller more as well ---------------------- I'd love to hear your thoughts about how receptive you might have been to an offer like that
- ufmace 11y ago
  I would expect that it isn't so much about the direct financial tradeoffs so much as the question of - will you actually continue to pay on the loan agreement, and what are my realistic options if you decide not to? The first would require quite a lot of expensive, invasive due diligence on your ability to pay that people selling software businesses don't care to perform or pay somebody else to perform. The second is likely to be lousy. Options are likely to be to file a lawsuit, which is expensive, and try to collect if you win, which may or may not be possible, and is almost certainly very time-consuming. If you're selling a software business, you're mostly likely doing it because you don't want to bother with it anymore. You are very unlikely to suddenly decide you want to start up what is effectively a bank for one guy. I'd tell anyone who says they can't afford a lump sum to try to get a loan from an actual bank, because I have no interest in pretending to be one.

439 points by earlyresort 11y ago

> Back in the day someone won a Nobel Prize for pointing out that, if a population of goods has unknown potentially costly problems, and there is no way to determine which particular instances of the goods have the problesms, the market will penalize all goods in that population. The canonical example is used cars. George Akerlof and "The Market for Lemons": https://en.wikipedia.org/wiki/George_Akerlof https://en.wikipedia.org/wiki/George_Akerlof

nerfhammer 11y ago
https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons

sbierwagen 11y ago

(2015)

deleted 11y ago
[deleted]
cpach 11y ago
This essay was published like 17 minutes ago :)
- dang 11y ago
  Our heuristic for this is that if we're personally the first to add it to the Internet Archive, it's probably new.
  - douche 11y ago
    Does everything that gets posted here get added to the Internet Archive? Or just stuff that hits the front page? Either way, that's kind of awesome.
    - dang 11y ago
      Not yet, but it's on our list! and an HN user who works for them has personally committed to budging me if I don't get it done in the next month or two. The way it works right now is that we have a keyboard shortcut to open the archive.org page for a url posted to HN—kind of like the 'past' and 'web' links we display at the top of /item pages, except faster [1]—and we use that when trying to find the date of an article. Sometimes the archive doesn't have it yet, in which case we click the link to add it. 1. Actually a number of HN features have started as moderator keyboard shortcuts. It would be fun to release that software, but... time.
- sbierwagen 11y ago
  I could have sworn I had read this post before, but googling doesn't show any strings from it showing up anywhere else. It's always disconcerting to get slapped in the face with clear evidence of a memory error. Did I combine https://news.ycombinator.com/item?id=9589223 https://news.ycombinator.com/item?id=9589223 and http://www.kalzumeus.com/2014/12/22/kalzumeus-software-year-in-review-2014/ http://www.kalzumeus.com/2014/12/22/kalzumeus-software-year-... somehow? Who knows.
  - dennisgorelik 11y ago
    You could predict many of these things described in this post from other Patrick's posts and comments. Other "I sold my SaaS business" stories discussed on HN in the past could make Déjà vu impression too.
  - pcglue 11y ago
    I had that same exact feeling! I scrolled to the bottom looking for a date somewhere to confirm (there was none), but then saw the reference to stockfighter and finally dawned on me it was likely a new post. Then I read it.
  - prawn 11y ago
    At first, it seemed familiar to me too, so I can see how you might've been confused. Also, Patrick intentionally omits the date from his blog entries which likely didn't help you.

dennisgorelik 11y ago

This time Patrick's summary of Bingo Card Creator does not look rosy at all. All facts are still the same, but the overall impression of BCC now is that it is a small, declining and time-consuming business. Patrick himself actually struggles with money, like all of us. Patrick definitely has (had?) the power of optimistic spin in his stories.

psycr 11y ago
This comment is strange to me, I did not have the same impression whatsoever. The numbers here, and overall picture, match all of his previous annual summary posts. It's been fairly clear in those summaries that his attention has shifted to other projects/consulting opportunities etc, and that BCC was declining in profitability.
- dennisgorelik 11y ago
  The facts are the same, the impression is different. The change in impression did not happen overnight though. Earlier posts were much more optimistic, with slow decline of optimism over the years. The thing is, even the same earlier years of BCC growth do not look as rosy anymore as they were at the time of that growth.
  - graeme 11y ago
    >The thing is, even the same earlier years of BCC growth do not look as rosy anymore as they were at the time of that growth. Why? He stopped actively focussing on the business years ago. Of course it's going to decline. Few recurring revenues businesses, if any, are truly "build it once, sell it forever". They need upkeep and growth plans. Patrick's growth efforts went elsewhere.
    - dennisgorelik 11y ago
      My point here is not about declining 2013-2016 years of BCC business. My point is about growth in ~2008-2012. Back then in Patrick's stories that growth looked impressive. The same ~2008-2012 years of BCC business do not look as impressive anymore. Now we can see how BCC was time-consuming business with profits that are not really exciting for software developer. That said, the learning aspects of BCC for all of us still look great: baseline for our businesses, realistic expectations, and relevant know-how.

sdrinf 11y ago

| Selling BCC was going to pay for living expenses while we built Starfighter’s first game (Stockfighter) and also pay for some development work to assist with the sale of my other SaaS business, Appointment Reminder. ^^ - you're selling AR as well? Last presentation was showing that to be a profit machine? Would love to learn about the reasoning behind that decision!

patio11 11y ago
AR is modestly successful, but needs to buy three things at the moment: my family's living expenses, my attention (via hiring reasonably complete replacements for me), and my contribution to Starfighter. It can afford roughly one of them. "Why sell AR?" is pretty straightforward: I'm CEO of Starfighter. I signed up for 5~10 years of my life building stock exchanges and getting devs better jobs, and that's more than enough work. It does not need to be interrupted by e.g. dealing with the Lithuanian hacker ring which found a novel way to route calls to Caribbean phone sex numbers. (A great story for another day.)
- dpritchett 11y ago
  This suggests that StarFighter has some cash that is being used to keep you afloat. I don't expect you to disclose, but I'm guessing there's a silent partner or maybe just some ex-Matasano money floating things. Cool!
  - deleted 11y ago
    [deleted]
bdunn 11y ago
Because AR takes mental space, even if someone else you hire is managing it. Focusing on one thing is best. I recently sold my SaaS for the same reason — I wanted to eliminate needing to worry about it while working on growing my other (more profitable) business. (Lastly, as things that probably make Patrick excited to get out of bed and work, I'm assuming Starfighter > AR.)

quellhorst 11y ago

Such a long article but no mention of how much he sold it for.

simonswords82 11y ago
$57,000 SOLD See http://feinternational.com/buy-a-website/3745-software-busin.. http://feinternational.com/buy-a-website/3745-software-busin....
- kentt 11y ago
  I might be wrong, but I don't think that means that it was sold for 57k, only that it was the asking price.
  - shawn-furyan 11y ago
    That's true but the article does mention how most of the things that impact price went in patio11's favor. One can reasonably infer that if the seller feels everything went in his favor at the end of the process that he wasn't bullied too far off of his asking price. He does also mention how one seller tried to demand a 40% discount at close, and that the broker had a better deal waiting in the wings. So we can have a pretty high degree of certainty that the sale price was between $28,500 and $57,000, likely closer to $57k.
icelancer 11y ago
It's almost like he signed a contract to not explicitly disclose it.
pchristensen 11y ago
FTFA: "I negotiated something similar to “I can mention the sale almost immediately after it happens as it will leak regardless; I agree to not disclose the price; you accept that BCC is extraordinarily well-covered on the Internets and that guessing the price will not be that difficult.”"

aresant 11y ago

FEI still has the original listing on their site: Yearly revenue - $31,000 Yearly net profit - $19,000 Asking price - $57,000 SOLD It's fascinating what a small amount of money we're ultimately talking about vs. the influence of the "cult of Bingo Card Creator fans" on HN - which I am card carrying member of. (1) http://feinternational.com/buy-a-website/3745-software-business-in-education-niche-25k-gross-mo http://feinternational.com/buy-a-website/3745-software-busin...

zkhalique 11y ago
Could someone write an article about Patrick McKenzie's appeal and techniques on marketing to the HN community? :) And by marketing, I mean getting their attention and building a brand, not money.
- davidw 11y ago
  He's genuine (tech people don't like certain kinds of BS), he's helpful, and he's done something a lot of people want to do. And he's been very good at communicating what he's done. I think it helps a lot that he built a business that's "human scale" - everyone can relate to replacing their salary, whereas building some zillion dollar SV business really isn't in the cards for most of us. Also, bingo cards was a huge wakeup call that you don't have to do something technically brilliant or with an amazing business model. "Just" find a niche and sell stuff to people with a need.
  - dba7dba 11y ago
    Opensourcing business processes, with tech skills to back it up. Rare combo.
- patio11 11y ago
  BCC was originally a bit of a purple cow, which is interesting to the HN community because it overlaps programming/business but different than the vast majority of what is on HN because it's the aggressively un-startup startup. Publishing sales numbers before that was common probably helped a non-zero amount, too. Many HNers feel a sense of personal investment in me, because HN has been my home-away-from-home for ~7 years now and I am a "local boy who made good." I write decently and have a strong written voice which people like. A relatively small fraction of what I write is immediately useful to people. Also: I write a lot. My published output is something on the order of ~3 million words, roughly ~2 million of which are on HN. (Give or take 500k or so. It's been a while since I ran the script and I don't have a few hours to wait before bed.) That's roughly Lord of the Rings, Harry Potter, and Game of Thrones... combined. There: that's the whole secret. Use these dark magicks responsibly.

simonswords82 11y ago

I got in touch with FEI about selling one of my web businesses and they couldn't help due to our UK focus. Sucks for us, I've heard good things about them. Can anybody recommend a broker that assists UK based and focussed web businesses?

ThomasSmale 11y ago
Hi Simon, Sorry we couldn't help - our focus tends to be on businesses that are primarily US focused with their customer base (although our sellers are based all over the world). Not aware of any established UK brokers who focus on web businesses - there isn't a huge market with UK buyers for online businesses so not overly attractive to enter. Thomas (from FE International)
- jordanlev 11y ago
  lol... didn't know the "I" in FEI stood for "International" until this comment talking about how you are US-focused :)
- simonswords82 11y ago
  Thanks Thomas - totally understand and not having a moan at all - just wished that there was an equivalent to you that we could use as we've heard such good things.

benologist 11y ago

I'm spending this year packaging up my current business to make it as attractive as possible to potential buyers. This talks a lot about the process, but what are some things people like us can do to maximize their return on such a sale?

patio11 11y ago
Grow revenue via any legitimate means. Cancel any expenses that aren't required to run the businesses (SaaS accounts you keep around "in case I get around to it", etc). Obsessively document everything you do for the business; get as much as possible outsourced to people following the procedures you've written up, ideally without spending too much money on this. Get your ducks in a row on numbers, most importantly the financials (bookkeeping bookkeeping bookkeeping) but also classic (SaaS?) analytics numbers like number of trials, conversion rate, churn rate, etc. Historical numbers and numbers segmented per traffic source/vintage are good things to have, too. Bonus points if these are pointing in the right direction over time. In more detail: http://feinternational.com/blog/saas-metrics-how-to-value-saas-business/ http://feinternational.com/blog/saas-metrics-how-to-value-sa... I might also add "Negotiate the sales price, even if the buyer and/or broker does not want to negotiate the sales price."
ThomasSmale 11y ago
Check out the post we [luckily timed!] today - http://feinternational.com/blog/how-to-start-planning-your-exit-strategy/ http://feinternational.com/blog/how-to-start-planning-your-e... - some basics in the blog post and a short (free) e-course you can sign up to on what to plan, too.

song 11y ago

Just wanted to quote this: "I’m told, against my expectations, that BCC was impressively well-documented by the standards of other businesses its size. This implies that many people are running their small projects in even more of a cowboy fashion than I do, for example by not having dedicated books for the business. If this describes you, God help you. At a minimum, get your books for the last year done professionally — whatever you spend on bookkeepers/accountants will be a pittance next to the time saved and additional valuation captured." Even if you're not selling, getting this done will save a lot of headaches the road... Dedicated books for the business is a MUST. I know a lot of small businesses where this is not done religiously and it always comes back to bite the owner in the ass... EDIT: By the way, I was curious so I just took a look at the BCC site, the blog is timing out...

mbesto 11y ago
I regularly see companies (i.e. P&L, Balance sheets, technology spend, etc) in the small/mid cap space (EBITDA of anywhere between $500k-$10M) and you'd be amazed at how poorly documented businesses are that still are able to generate serious profits.
- mooreds 11y ago
  "There's no problem that sales can't solve." Well, except if you want to sell your company at some point in the future or actually have some idea of COGS or know how you are actually doing.
  - jerguismi 11y ago
    If the books aren't done properly, and you want to sell, but still can demonstrate profitability, there will be someone who will buy at some price. Money can solve also the problem where you can pay someone to go through your accounts etc, and make the books from ground up. Of course it is going to be expensive, and you need a good accountant for that.

BorisMelnik 11y ago

I think one of the big things about BCC isn't how much (or how little) money he made but how well documented the process was. We've all seen plenty of projects do 10k months but not many of them are sustainable or so well documented in a blog.

voltagex_ 11y ago

>migrate all of my email in Google Apps for Work (oh God, don’t ever do this) Yeah... I have a non-trivial number of purchased Android apps on my Google Apps for Work account ($6AUD/month) and there's no published way to move apps to a "normal" Google account. I'd probably be paying Google forever if I had business dependencies hanging off that account (but I set it up when custom domains were "free").

voltagex_ 11y ago

>Accordingly, I decided to retroactively cut her in for 5% of the business. Props to Pepper for accommodating this request, as it is somewhat non-standard. ("Can you invoice me a substantial amount of money and promise me that you will pay a particular employee of yours a bonus of the same amount, net only of taxes?" "We can do that.") Businesses exist that are this cool? Where do I find them?

raymondhong 11y ago

great

pitt1980 11y ago

"People try to buy software businesses with “no money down.” (“Will you loan me the entire purchase price of the business? I’ll pay you back over the next 3 years. Promise!”)" ---------------- While I see why you would have run away from that particular structure, I'm curious as to how flexible you might have been from a straight lump sum structure If I was buy a business like this, willing to accept $X as money down, some % percentage of revenue for Y months, until you were paid Z amount, with some contingencies built in would look pretty attractive a sellers willingness to agree to terms like that would send a pretty strong signal that they weren't selling a lemon as a buyer, I'd be willing to commit to a Z price significantly higher than what I'd be willing to commit as a lump sum up front if the seller believed in the business, (and I guess were able to substantiate that I had enough ability no to drive the business into the ground) it seems like such a structure would net the seller more as well ---------------------- I'd love to hear your thoughts about how receptive you might have been to an offer like that

ufmace 11y ago
I would expect that it isn't so much about the direct financial tradeoffs so much as the question of - will you actually continue to pay on the loan agreement, and what are my realistic options if you decide not to? The first would require quite a lot of expensive, invasive due diligence on your ability to pay that people selling software businesses don't care to perform or pay somebody else to perform. The second is likely to be lousy. Options are likely to be to file a lawsuit, which is expensive, and try to collect if you win, which may or may not be possible, and is almost certainly very time-consuming. If you're selling a software business, you're mostly likely doing it because you don't want to bother with it anymore. You are very unlikely to suddenly decide you want to start up what is effectively a bank for one guy. I'd tell anyone who says they can't afford a lump sum to try to get a loan from an actual bank, because I have no interest in pretending to be one.