19 ms·
Selling My Bootstrapped SaaS Business (2017)
- mrunkel 7y agoNice article. Well written and with just enough detail. I am curious though if the team also had equity in the company?
- sudhirj 7y agoI'd suppose any minority stake would be compensated the same way as a fraction? Similar to having stock options in a startup that's been sold. Even if it's an asset only sale, those people still own X% of a company that now has $Y Millon on the books.
- tylertringas 7y ago(post author here): The team did not have equity but I paid out substantial bonuses voluntarily to all employees. There's a lot of work to be done on how to incentivize employees in bootstrapped startups tbh. Nathan Barry has some good posts on the topic but I don't think it's a problem with any best practices yet: https://nathanbarry.com/profit-sharing/ https://nathanbarry.com/profit-sharing/ https://nathanbarry.com/equity/ https://nathanbarry.com/equity/
- mrunkel 7y agoThanks for taking the time to answer. Yeah, you arrived at the root of my question which was how do you share with your team, especially in a closely held startup.. I probably would have been better served directly asking the question. ;)
- sideproject 7y agoFor anyone interested in perhaps purchasing a side project to pursue your very own SaaS, take a look at a project that I've been running on the side - SideProjectors https://www.sideprojectors.com https://www.sideprojectors.com Lot of interests in the past few years around "indie makers" and "life style businesses" and "side hustles" have attracted quite a few interesting projects to be posted on my site. It's been cool to see these projects being exchanged.
- jakear 7y agoI’m seeing “NaN undefined 0NaN” in the rightmost “Details” box for each posting. Mobile Safari
- sideproject 7y agoHm. Thanks for reporting it. Could you send me a screenshot by any chance? Can't replicate it on my end (hello@sideprojectors.com)
- tbassetto 7y agoSame here, using Safari if it helps.
- daliusd 7y agoIf you are on linux you can reproduce it with midori browser.
- duncans 7y agoe.g. in macOS Safari: <div class="mt-1 text-gray-700"><time datetime="Invalid Date">almost NaN years ago</time> - NaN undefined 0NaN, aN:aN:aN </div>
- edoceo 7y agoI use BrowserStack for my webapp. A little script hits dozens of pages, grabs screenshots and let's you quickly see across many, many browser/os combinations
- homero 7y agoHow do i contact listings? Why can't i click on sites?
- einarvollset 7y agoAbove about $1-2m enterprise value, any half serious buyer will require exclusivity as part of an LOI. In fact, it is a good signal of an unserious buyer if you get an LOI without a binding exclusivity clause.
- thematt 7y agoHow common are breakup fees as part of an LOI?
- einarvollset 7y agoExtremely rare at the kind of enterprise value I see ($5-50m mostly). From what I hear also extremely hard to enforce (clause is usually very vague).
- jalonso510 7y agoEven in deals where there is a breakup fee, it's not a part of the LOI. It would be negotiated as a part of the Merger Agreement or Asset Purchase Agreement, to cover what happens if the deal signs, but then one party breaks off before moving to closing. The LOI is always non-binding so there's no firm commitment to do the deal at that phase and no penalty for breaking up.
- deleted 7y ago[deleted]
- arthurcolle 7y agoAny good resources for determining SaaS valuation, outside of the conventional methods of analyzing the value of a business? (DCF, etc) ?
- einarvollset 7y agoBeyond talking to a knowledgeable M&A advisor who does deals in the range you’re looking at, I’d take a look at usesummit.com (full disclosure: am an investor)
- sk5t 7y agoNot a bad article, although the couple of paragraphs about hiking Mount Kilimanjaro and the like are beyond cringey. Seconding the desire to know the corporate structure and how it worked out for the team. Any equity split? How did these factors add or subtract to the sale process? Cash sale or some interest in the acquirer? It's really baffling that these would be left out.
- dang 7y agoDiscussed at the time: https://news.ycombinator.com/item?id=15497632 https://news.ycombinator.com/item?id=15497632
- dangrossman 7y agoI have a $400K/year bootstrapped SaaS I'd sell if I didn't have to deal with the process of selling it. But because I'm not willing to pick up the phone and talk to buyers and lawyers, and the long-term transfer of knowledge about an old tech stack and all that, I'm likely going to sit on it until some day I shut it down, or some kind of marketplace appears where you can flip a business like that without getting on the phone.
- Bombthecat 7y agoIsn't that very sad for the customers?
- dangrossman 7y agoI don't see why. My experience in selling websites in the past (sub-$100K so I could just go through Flippa) is that the new owners never add anything, keep the site up for a year or two to recoup their money, then shut things down. I'm still hosting services I wrote as far back as 1998 (as Perl CGI scripts).
- charlesdm 7y agoThing is you don't want to sell to a nontechnical owner. I've sold apps in the past where it all just died, because the purchaser did not put in any effort. You want to sell to a party who will run it as if it was their own product (or who will hire a capable team to expand it further). That is possible for a $400k ARR product, but much harder for a website doing say $50k through one-off sales.
- mscasts 7y agoMay I ask why you would want to sell such a business? Running such a business is my dream and I just have a hard time understanding why someone would sell a profitable business unless you're set for life?
- mritchie712 7y ago
- aksdjn2123 7y agoDoes anyone have any idea how much his business would be sold for? He described it as a "life-changing amount of money". If he was doing around 50k in MRR at the time he sold, what would his valuation look like?
- Nilef 7y agoAround 2.4 million - possibly higher depending on the mechanics and industry of the actual business Typically it’s ARR x 4
- zaroth 7y agoI’ve not seen multiples that high selling two companies. The multiple depends heavily on the growth rate. If you’re growing at 25% YoY — unless you’re in a hot market — it’s probably closer to 2x revenue.
- arvidkahl 7y agoWe recently sold our bootstrapped SaaS to SureSwift Capital as well. It took us less than two years from founding to exit. I write about it at https://thebootstrappedfounder.com/from-founding-to-exit-in-two-years-the-feedbackpanda-story/ https://thebootstrappedfounder.com/from-founding-to-exit-in-... . Danielle, my Co-founder, and I did an interview at https://www.sureswiftcapital.com/blog/bootstrapped-saas-founders-sell-business/ https://www.sureswiftcapital.com/blog/bootstrapped-saas-foun... as well. Both articles give some insight into the process of selling the company and how we got it to that point. Our experience was very positive. We had structured our business to be as sellable as possible, even when we didn't intend to sell it. Having documentation and automation in place at every corner made the due diligence and transition phases a joy. I see a lot of people in the comments here asking for valuation and structural information. In researching the process before we sold, I had the same questions, and never really found reliable answers. It seems that every transaction is inherently unique. All numbers we throw around, MRR, EBITDA, multipliers, they are thrown out of the window once you look at the actual business, it's internal workings and dependencies. My suggestion for fellow SaaS bootstrappers who want to sell their business: make sure you can hand it over easily, make sure you are not required (to remain part of the operations), make sure your infrastructure is either easily migrated or well-documented. You will want to negotiate, as value is in the eye of the beholder. I am currently writing at length about this whole process. I'll release it on the blog before the end of the month.
- newusertoday 7y agocan you share the range at which your business was acquired?
- arvidkahl 7y agoI can’t. But it was substantial. Like for Tyler, it was life-changing for us. In many ways.
- giarc 7y agoI'll add a simple tip to other builders, use a password manager. When I sold my startup, remembering all the passwords and getting them changed took longer than I would have liked. Additionally, we also lost access to a service because we used "Google login" with name@company.com and in the hand over the new owners deleted name@company.com in G suite. We couldn't access the account since the email no longer existed.
- bayesian_horse 7y agoOne problem with bootstrapping is that the founders carry all the risk. The alternatives, i.e. selling equity for capital, usually means the founders mitigate some of that risk. For example their salaries would not come completely from their own capital anymore. I think that's important to keep in mind. Bootstrapping is not the optimal solution for everyone. If you fail, you pay dearly, especially in opportunity costs, but many also touch their savings or their families' money.
- beberlei 7y agoThat wasn't at all the problem for me in the first years of bootstrapping. I didn't invest with my own capital, but by putting my spare time into it. Funding was provided by the early customers. I kept working full time for my previous employer for one year, then part time the second and third year with decreasing hours. Also now that its running on its own, I also feel that I have less risk, because with a profitable company there is no requirement for growing a specific amount that investors demand or otherwise they take your control away.
- bayesian_horse 7y agoAs I said, this varies from situation to situation. Also, you may be confusing risk with outcome. Your outcome was positive. If your business had failed, at any point, you would have lost any benefit from the work you put in. It's also not quite fair to assume that the time you worked on that project is worth 0 Dollars.
- digitallogic 7y agoThat's definitely true for some folks, but it's not universal. I split my time between contracting and my bootstrapped business. The business is profitable and operational costs are very low. The only financial risk is the opportunity cost of not being employed full time. Through contracting I make about 30% less than I did as a salaried employee, but I am immensely happier than when I was employed full time. Even if I wasn't bootstrapping a business, that tradeoff feels worthwhile to me.
- klausjensen 7y agoGreat read, highly recommended. I especially liked this paragraph: The absolute most important factor in getting a great deal in a sale is not having to sell. All of the work here happens well before the sale. Craft your business in a way that you would be perfectly happy to run it indefinitely. Get your work/life balance in order and your stress level under control. Go into a sale process with the idea that if you don’t get exactly the offer you want, you are 100% willing to just wait it out and run your business for another year.
- brianwawok 7y agoAnd for this to happen you really want to bootstrap from day 1. If you have investors on your back you have pressure to grow or bust. Bootstrapping isn’t always easy but it seems to have been worth it so far!!
- tylertringas 7y agoBootstrap or just don't raise 'too much' capital and not from VCs. Lots of optionality still available for founders who raise eg less than $500k and don't give up control. (I'm not exactly neutral on this tho)
- brianwawok 7y agoFor sure! Friends and family can be a good source, but can imply different risks (i.e. awkward Thanksgivings).
- brianwawok 7y agoA few years old but a good read! I worry that perhaps the advice isn’t quite the same for all businesses. My SaaS business is fairly technically complex. I don’t think it would appeal to a non-technical buyer that gobbles up simple Wordpress sites. I think it makes the available market of buyers a lot smaller. I hear less stories about this kind of business being acquired (although I know it happens)
- Giorgi 7y agoThat's amazing, considering your whole business model can be replaced by just a wordpress plugin
- eatwater123 7y agoBut like; it was a Shopify plugin, so saying it can be replaced by another plugin (for a different platform completely) doesn't make sense here, right?
- tylertringas 7y agoPretty cool right?
- davidw 7y ago> There’s always a risk that these posts turn into a 5,000-word humblebrag. But I really do think it’s worth a read because, unlike most business acquisition stories, which often feel like an out of the blue stroke of good luck, the way that I sold Storemapper feels very replicable for other entrepreneurs. Emphasis mine, but that's why I love reading about these things. It seems somewhat realistic compared to moving to silicon valley and doing the VC fueled rocket ride.
- hahla 7y agoIf you’re interested in selling your side project or SaaS business shoot me an email (in profile) with the URL, avg monthly pageviews, and October’s full month revenues if any. I started out 15 years ago brokering but have transitioned into running my own network of sites. I can make an offer within 24 hrs if I’m interested and you can skip the hoopla of fielding buyers, creating financial statements, spending weeks on QA, paying 8% brokerage fees, etc.