What I've Learned from Buying a Business Instead of Founding One

Hello! What's your background, and what are you working on?

Hi! My name is Will Hankinson. I've bounced back and forth between game development and web development for the last 10 years or so. I had some success as an indie Flash game developer back before Flash died, and I used to post revenue and sales stats on my (now defunct) blog. The blog is gone (I got tired of WordPress getting hacked), but you can see most of those old games and projects on my personal site. People always seemed to like that level of transparency, so I thought I'd continue that with my new venture.

IntroCave is an online intro video maker. Users can browse through my templates (around 100 right now), pick one, and customize it to suit their needs. Exactly what can be customized is template-driven, but it's usually some combination of logo, subtitle, music, and sometimes colors. The service is mostly used by small businesses who want a fancier logo reveal on their social videos and just-getting-started YouTube channels.

The site was making around $2,700/month when I acquired it last summer. Since I’ve been at the helm, that's gone up to $5K/month before settling back down to around $1,800/month.

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What motivated you to get started with IntroCave?

I read a post on Hacker News a few years back about some guys who purchased an existing business for around $100K. That seemed like a pretty good idea, so I signed for a couple of the broker email lists and started browsing. I built financial models on maybe 20-30 of them before eventually purchasing IntroCave. I wouldn't say I'm super hardcore on the "4-hour workweek" or "retire early" fronts, but generally, I like the idea of putting my money into assets that can make more money (my wife and I also do rental properties).

Besides "doing it for the money," my current day job is at a digital marketing agency. I mostly build MVPs — whether that's internal tools for clients or small marketing sites — and I rarely get to do what I consider the "fun parts" of web development: scaling, analytics, A/B testing. I don't have a ton of time to work on the side hustle, so purchasing one meant I got to skip the "is this viable" step and go straight to the operations stage.

Why did you purchase IntroCave and not one of the other businesses?

It ended up being a lot of small reasons, but not necessarily the ones I was expecting while looking at other businesses for sale. I thought I was shopping for a small Ruby-based SaaS app. IntroCave is built in PHP (Laravel) and has an à la carte business model (along with ads). The backend renderer is a mishmash of .NET and After Effects scripts. I had done a lot of Ruby on Rails (which is similar to Laravel), a lot of C# (in Unity, not a .NET environment), and a lot of Photoshop scripts (which is the same weird JSX and document model as AfterEffects, but with a different API). It was a lot of random pieces that were really close to what I was familiar with.

On top of the tech stack, I don't think we're anywhere near the peak of YouTube popularity. Intro makers are a relatively small subset of an even bigger market (customizable video templates), and that market doesn't seem like a winner-take-all environment. There's enough demand here (and still growing!) that I saw lots of ways to expand — either by moving into new pockets of on-demand video (explainer videos, product videos, creating content for Instagram) or by doubling down on this one niche and making the product better than the competitors.

On a more personal level, I was a film major back in undergrad. Before I got into programming, I dabbled in animation and video editing. It seemed like this would be a good excuse to dust off some of those old skills.

The final deciding factor: I saw that intromaker.com was just a parked domain for sale. As I was negotiating for IntroCave, I also reached out and started negotiating for that domain. A lot of IntroCave's traffic was coming from searches related to "intro maker," so it seemed like a natural target. I'm currently focused on stabilizing and growing IntroCave, but my long term plan is to build a 2.0 version which will live at the Intro Maker domain.

None of those were slam dunk reasons to buy the site, but it just seemed like it had a lot of what I wanted. I made an offer, there was a bit of negotiation, and we transferred everything in June of 2018.

Can you talk a little about how you bought the site?

Small online businesses generally sell at multiples of two to four times the profits, so it's not super hard to do some napkin math and figure out what a site making around $2,500 a month might sell for. With the extra domain that I bought and other startup costs, the final price is probably going to be somewhere in the neighborhood of $100K-$120K. About a quarter of that was performance-based earnouts, which gave me some confidence that the original seller would hang around to answer any technical questions that came up.

That sounds like a huge risk, but it didn't seem crazy. I've done the indie game development thing for a few stretches of time, which most people would call unemployment. I don't see a huge difference between spending $100K out of pocket and foregoing a software developer salary for a year. In terms of actually paying for it, I used a line of credit. The debt service is about $500/month, which at the time of purchase was about 20% of the profits each month. I'm currently taking all the cash that comes in and paying down that loan, so it could be years before I find out if I made any money on this deal.

Find something that will be interesting to work on for years at a time.

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What went into taking over the product?

I didn't build the initial product, but I can talk a little bit about what it's like to jump into a code base you just bought and have no idea what's going on. The web server is fine. I've insulted PHP a lot over the years, but Laravel has been pretty nice to work with. I have to do a lot of Googling, but I'm mostly able to translate my normal Rails strategies into Laravel without too many mental somersaults.

The hard part is the render servers. Without giving too much secret sauce away, After Effects is not really designed to open and close hundreds of files a day. These servers need to be babied and coddled and restarted on a regular basis, and for the first six months or so I would occasionally wake up and everything would be on fire. For what was supposed to be a mostly-passive revenue stream, IntroCave started out pretty damn active. I made the decision almost immediately to completely rebuild the render pipeline, and that's been an ongoing thread for the entire time I've owned the site.

Rebuilding the render pipeline also means rebuilding all the content, so I've been manually rearchitecting every template on the site to fit into the new system. I've been able to port some of the changes from the new system into the old system as I've gone, and that's significantly reduced how much babysitting is required.

Lately, I've gotten into a pretty good development cadence. I keep a bucket of "big jobs" (marketing automation, the new render pipeline) and "small jobs" in Trello that I can knock off if I find an hour or two to tinker. I haven't had large swaths of time to work on the big stuff in the last couple of months, but having that bucket of small jobs means I feel like I'm still making progress.

How do you find time to work on the product?

I'm pretty fortunate to be on a four-day work week at my current day job. I take a little bit of a salary hit doing that, but as someone who's always liked to dabble and tinker having a dedicated day each week makes a huge difference. From a purely mathematical point of view, that breakeven point is somewhere around $25K-$30K/year (side project taxes are weird, so it's hard to do a direct comparison). Under that line, I'd be better off just working a five-day schedule and taking a full salary. I mentioned I'm at a digital marketing agency — the work I do there is generally pretty boring. The people around me are all fantastic and I do believe the things we're building make an impact for our customers, but it's not the type of thing I would choose to build if I wasn't getting paid a salary. Having a product I can own and control and tinker on for one day a week has been a surprisingly good way to stay fulfilled at my regular day job.

Salaries are great! Don't be afraid to work a day job for a few years and tinker on the side.

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Ten years ago, I was doing this stuff after work and on the weekends. Now that I'm 35, I need a lot more sleep and the evenings/weekends tend to get filled up spending time with my family (wife, dog, two kids). We have a use-it-or-lose-it vacation policy, so I'm also not shy about taking an extra day or two off if we're in a lull to just bang on IntroCave.

What's your business model?

I sell single-serve customized video renders. I currently charge $4.99 for a 720p render and $9.99 for a 1080p render, but it's on my to-do list to do a few pricing tweaks in the coming months. Sales through Stripe generally make up about two-thirds of my revenue (after transaction fees) and Adsense accounts for the rest.

Most of the sites in this space (which I would broadly call template-based rendering as a service) are on small subscription fees. I think that makes a lot of sense if you're targeting marketing agencies who want to post a video every week on five different channels. With YouTube intros specifically, though, how many intros do most people really need? I feel like my site is mainly geared towards newer channels who want to step up a notch in production quality, and I just don't see most of those customers buying multiple videos.

I have one customer on an annual plan (which I don't really advertise). Every now and then I'll see someone making repeat purchases in the analytics and I'll reach out to them to see if they'd like to switch, but so far most of the customers I've talked to prefer the flexibility of pay-as-you-go.

What have you done to grow IntroCave?

The site was already getting quite a bit of organic traffic from a few keyword rankings, so my efforts have been mostly focused on increased engagement, funnel optimization, direct contact and email growth, and targeting a wider set of keywords to de-risk that single organic channel a little bit. Engagement and funnel optimization kind of went hand-in-hand. I added a lot of features to increase "browsability" and got the funnel tracking working a little better in Google Analytics. I started running A/B tests in Google Optimize. I wouldn't say I crushed it in any one area, but average revenue per visit and other metrics like time on site and ad revenue have ticked up since taking over.

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I was getting quite a few email sign-ups (and still do!), so I started a monthly newsletter and took to posting one or two blog posts each month. I brought in a writer to do a handful of blog posts to take that off my plate, but ultimately decided it didn't save enough time versus doing it myself. Email traffic and organic traffic started going up. I went through every template on the site and rewrote all the tags and descriptions. I bulked out the category descriptions to have real content on them instead of just a wall of video thumbnails. I started ranking for some deeper keyword searches. Revenue ticked up from around $2,800 in the first full month to just shy of $5K in January of this year. I was flying pretty high, to be honest!

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In March, traffic fell off a cliff about halfway through the month. I dropped to the second or third page for most of my top search terms, to the point where most of my traffic is now direct. SEO is still a black box to me, so I didn't really know what to do about it. A few folks on Indie Hackers pointed me to a Google algorithm update, and I was basically thinking I'd flushed $100K down the toilet at that point. I talked to a few SEO consultants and hired someone to do an SEO teardown. One of them did a sort of video review using some professional tools, and I noticed something on one of the dashboards buried in Ahrefs — I got a TON of backlinks in March.

Month Revenue
Jul ‘18 2832
Aug ‘18 4102
Sep ‘18 3760
Oct ‘18 3408
Nov ‘18 3947
Dec ‘18 3562
Jan ‘19 4966
Feb ‘19 3952
Mar ‘19 3134
Apr ‘19 1764

I signed up for my own Ahrefs account and started poking around. Starting in early March, just before my traffic went to shit, I started getting a ton of links from obviously spammy sites. Someone was running a negative SEO campaign against me. Not just me, it turns out. After visiting a few of those spammy link farm sites, I could see lots of links to my site as well as some of my competitors. Being relatively new, the spammy links disproportionately affected my rankings compared to some of those other sites. I don't have any hard proof (especially considering Google also pushed an algorithm change around this time), but I have a pretty good idea who was behind it based on which site has shot up in the rankings for those keywords.

So...now what? War? Fight fire with fire?

Not exactly.

I know the niche is viable. I know the business has a considerably higher ceiling than what I'm pulling in right now. I'd be thrilled to be pulling in the $5K/month I hit back in January. It's super crappy that some asshole out there is effectively getting away with robbery. This is probably too cynical, but there's a little tiny part of me that says I don't deserve to be on the front page right now. The product is okay, but it's not far and away the best intro maker out there. Yet.

That's not to say the competitors are better — they're not. I could be doing outreach and working on getting more backlinks right now, but it seems like a bit of an uphill slog to explain why IntroCave is better than the other sites in the same space when most of them are pretty comparable. A lot of my current backlinks are list posts with other sites in this niche, which isn't that helpful. I need to give people a reason to write about just IntroCave (or Intro Maker) and then start pounding the marketing pavement.

What are your goals for the future?

The early growth was actually counterproductive towards my initial roadmap. I was spending the majority of my time on support and stability and no time on the larger features I wanted to add. Now that things have cooled a bit, I want to finish rewriting the render system and migrate all my existing templates to the new system. I want to completely rewrite the checkout flow. I want to build out some evergreen knowledge-base articles that I can plug into an email sequence. These are all short-term roadmap tasks, even though some of them are quite considerable from a level-of-effort point of view.

With a strong foundation in place, my operational tasks can shift into marketing and content. On the marketing side, I'll have more time to start doing outreach and start trying to build a strong enough backlink profile that I'm a little more immune to things like negative SEO attacks. Arguably, I should be doing that already. On the content side, I've been holding off adding any new video templates until I get this rendering system rewrite finished. My gut says new content will be a good driver of new revenue, but I could be completely wrong there.

On a more medium-term time horizon, I have two big goals. I want to break even on buying/operating/financing the site. That could take years at the current run rate but, even discounting the hundreds of hours I'm putting into the site, that will be the true "rest easy" moment. Second, I want to build my own motion graphics tools. I don't necessarily think I can do better than AfterEffects for all use cases. For my specific niche, though, I've got some pretty good ideas for how to build something an order of magnitude faster and more suited to customization. Render speed is directly tied to conversion rate (faster previews = more sales), but it also opens up opportunities for marketing. If I can get the render cost down low enough, I can do things like offer free intro videos with no watermark to draw more customers into the funnel.

On an even longer time horizon, I don't see myself being out of game development for years. I don't currently have the mental bandwidth to do a day job and IntroCave and work on games. Until IntroCave is fully paid off, all my spare energy is going towards that goal. Afterward, I'll re-evaluate. If I can get it to consistently throw off $4-5K/month, it's probably worth keeping around indefinitely. I would look to automate as much possible and start hiring out the repetitive tasks (customer support, blog, newsletters, new content), which would free up my time to take on another project. At $10K/month, I would start considering whether or not to make IntroCave my full-time job instead of a side hustle. Assuming it was still fairly efficient to operate at that scale, I think a great schedule would be something like two days a week on IntroCave and three days a week on new projects (whether that means games or possibly buying another small website to grow).

What are the biggest challenges you've faced and obstacles you've overcome? If you had to start over, what would you do differently?

It would be easy to say I wish I'd structured the earnout differently or paid less due to the weakness of the backlinks profile or the relative youth of the site. There were multiple offers for the site, though, so there's a good chance if I'd pitched too much of a fit I wouldn't have been able to buy the site at all. Over a long enough time horizon, $20K-30K really doesn't make that much of a difference, so assuming it doesn't truly drop to $0 and I can continue to make money and pay down the debt, I'm glad I bought it. It's a fun project and I still see a lot of upside in it.

My advice to my former self will probably be: "You should've just done it sooner, idiot."

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The hardest part has actually been more on the identity side. I don't have a huge Twitter following or anything (600-700 folks), but those that do follow me are likely following me for game content. I've felt a bit paralyzed since taking over IntroCave. A lot of the stuff I'm doing is fun and interesting, but it feels somehow disingenuous to me to suddenly switch my Twitter feed over from talking about cool game stuff to talking about bootstrapping and web development. As I get into content creation and working on cool visual effects stuff, some of that dissonance might go away, but in the meantime, it feels like something I used to value has been taken away.

To fill that gap, I spend a lot more time on Reddit. Reddit has a bit better support for changing interests — you just unfollow your old subs and follow some new ones. But it also feels a lot less valuable. I'm not gaining anything by participating there, and so that doesn't feel as rewarding. Twitter was probably always a waste of time, too, but it didn't feel like a waste of time in quite the same way.

I know I just need to get over it, merge my digital identities, and post whatever the hell I feel like posting, but so far I haven't managed to follow my own advice. Once I finally get over that hump, my advice to my former self will probably be: "You should've just done it sooner, idiot."

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What's your advice for indie hackers who are just starting out?

Salaries are great! Don't be afraid to work for a few years and tinker on the side. For my first few years out of college, I was pulling in $30K/year doing Flash games on top of my entry-level web developer job. I turned that experience into higher paying jobs doing Facebook games and then eventually running a small game studio, but it also gave me a sense that unemployment doesn't necessarily mean zero income.

If you're specifically considering buying something instead of building: find something that will be interesting to work on for years at a time. I knew going into IntroCave that it would likely be three to five years before I hit the breakeven point. I'm not even at the one-year mark yet. This is going to be a long journey. Committing to IntroCave means saying "no" to a lot of stuff over the next few years.

With a sample size of one, I would also add that any listing you see that says you can completely run the business in five to 10 hours a week is full of shit. I'm not exactly following the playbook from the previous owner, but those digressions are probably the reason I'm down to $1,800/month and not $200-300/month after the big search traffic drop. These things are not rental properties that you can hand off to a property manager (maybe there's a business model there?), so definitely make sure you have the bandwidth to support it if you're going to jump into an already operational business.

Where can we go to learn more?

You can follow along on the IntroCave blog, message me on Twitter @SimianLogic, or just email me. I'm figuring a lot of this stuff out as I go, but if I can be helpful in any way just reach out!

Will Hankinson , Owner of IntroCave / Intro Maker

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