If you're trying to grow your startup you've come to the right place. Get my 170-page ebook on how to grow a startup and join thousands of self-funded entrepreneurs by subscribing to my newsletter at right.
This is a guest post by Thomas Smale from FE International, a website brokerage with an emphasis on SaaS apps.
At FE International we speak to website owners on a daily basis who are looking to sell their businesses. Unfortunately, many of these businesses are not sellable for a number of very avoidable reasons. Planning your exit in advance (even if you have no intention of selling now) is always the sensible thing to do and will put you in good stead, saving you headaches when you do decide it’s time to move on.
SaaS products have always proven to be very popular with buyers over the years. Last year we sold 78 web-based businesses, so reflecting on these we’ve pooled together our collective experience to show you what really improves the saleability and the value of a SaaS business in the eyes of a new potential buyer. A combination of these factors could be the difference between selling for 1x EBITDA (if done badly) and 3x (if you follow these rules).
About 8 months ago I acquired a small startup called HitTail. You can read more about the acquisition here.
When the deal closed, the app was in bad shape. Within 3 weeks I had to move the entire operation, including a large database, to new servers. This required my first all-nighter in a while. Here is an excerpt of an email I sent to a friend the morning of September 16, 2011 at 6:47 am:
Subject: My First All Nighter in Years
Wow, am I tired. Worst part is my kids are going to be up in the next half hour. This is going to hurt
But HitTail is on a new server and it seems to be running really well. Feels great to have it within my control. There are still a couple pieces left on the old server, but they are less important and I’ll have them moved within a week.
I’ll write again in a few hours with the whole story. It’s insane how many things went wrong.
This is final installment of a 3-part series covering my acquisition of HitTail. I’d originally planned on a 2 part series, but when parts 1 and 2 went to the top of Hacker News I received so many questions that I decided to add this prologue to answer them.
Every question below has been asked via email, comment or Twitter over the past four weeks.
Why I Bought My Next Startup (Instead of Building It) This is part 2 in a series covering my acquisition of HitTail; part 1 went to the top of Hacker News last week and I have a slew of questions from that discussion that I will answer next week.
But first I want to address the most common question I hear when I tell someone I acquired a startup:
Why did you buy instead of building?
If you’re a developer you’re probably scratching your head wondering how I could pass up the chance to do the awesome green field development. A new project with no legacy baggage…this is the stuff we live for!
But I did indeed opt to plunk down my hard earned cash instead of hunkering down for 6 months in my dev cave, and what follows are my reasons for doing so.
Based on the title of this post you might be thinking I have mad stacks of money in the bank.
That I’ve had a few “exits” and instead of hunkering down and writing code for 6 months I opted to talk to a few of my buddies at the yacht club and purchase a primed and growing social network for somewhere in the mid-seven figures.
Indeed, I did buy my latest startup, but the deal was done from a spare bedroom of my suburban home in Fresno, California for less than most people pay for a new car. And the funds came from revenue generated by my portfolio of web applications and websites that I’ve built over the past several years.
This acquisition is a long story, but if you have a few minutes let me tell you the best parts.
I can’t believe it’s this time of year again. MicroConf is in the air. If you’re starting, or thinking about starting, a self-funded startup this is the place to be in April.
My co-host and I are crafting a line-up of speakers that will be speaking to your specific needs as a bootstrapper, rather than someone with a bazillion dollars of funding in the bank. Honestly, MicroConf is unlike any conference you’ve ever attended.
First things first, here are the things we’ve nailed down so far:
MicroConf 2012: The Conference for Self-Funded Startups and Single Founders
April 30 / May 1 at the Hard Rock Hotel in Las Vegas, NV
128 pre-release tickets will be available next week (until we sell out).
Who Should Attend? Anyone launching a startup with no outside funding who wants to hang out with and learn from 128 of today’s leading founders and entrepreneurs. We are intentionally keeping the conference small based on feedback from last year.
I received the following question from a reader a few weeks back:
I’m considering creating a mobile app and I want to know quick/effective ways to validate some of my assumptions. Is it more effective to put out small experiments that test your assumptions, or are surveys of the possible users a better approach?
My answer: it depends on what you’re trying to test.
Once you’re too close to a design it’s hard to view it with an objective eye. That’s where external feedback from a knowledgeable source can help you discover potential improvements, as Derek has done in this video.
Please enjoy – it’s just over 15 minutes and it’s filled with insights on building a high-converting marketing website.
I was wondering if you had any thoughts on cost of customer acquisition for freemium businesses. When you calculate it out, it seems that paid marketing efforts like AdWords are almost universally doomed to fail. Our lifetime value of a customer is only around $1 when you factor in a high initial churn and all the free users. I imagine companies like Evernote are in a very similar position since they have a similar pricing model.
We are obviously hitting social media, PR, etc. quite hard, but I don’t think paid acquisition could possibly work here. Have you seen paid acquisition work for freemium businesses?