Acquiring an Old Online Scheduling Business: Yay or Nay?
Hey fellow IndieHackers 👋,
I'm at a bit of a crossroads with my company, meetme.io, and could really use your entrepreneurial wisdom.
Recently, an old online scheduling company has approached us with an intriguing proposition. Due to personal reasons and dwindling time, they're considering selling their business. This isn't your modern, sleek scheduling tool, it's a bit (read: a lot) of an antique with, most likely, a hefty amount of technical debt and demands for support.
Here's what's tempting about their offer. They've amassed over 150k users in their address book, with 80k of those still active. However, their ARR is just $30k, a touch on the lower side given their substantial user base.
The business is a solo, bootstrapped endeavor that's been chugging along for about 15 years. They're open to discussion on selling the entire company, including their address book, for around $80k - a figure I'm pretty confident about negotiating down to $50-$60k.
But here's the twist. I don't particularly fancy taking over their operations, just their address book. My goal would be to wind down their business and guide their users towards our tool at meetme.io. They are interested in this approach.
Adding another layer to this, they also own two domain names with DRs of 54 and 66, attracting a decent amount of traffic.
So, the big question is – should I go ahead with this purchase? If yes, then what might be a fair price for the standalone address book? I'm picturing a scenario where we acquire their domain names and their user directory, sunset their product, and work on transitioning those users to meetme.io.
My next call with them is in 7 days, on Thursday 31th.
Looking forward to your thoughts – any advice or insights would be greatly appreciated!
Cheers,
As @dqmonn mentions I would also investigate merging the existing product within your product umbrella.
I would look if it was possible to merge certain parts towards meetme app. For example use your meetme API within the existing application. This could for example be done by adding a background synchorinasation job for migrating any changes in the aquired app towards meetme app.
This gives you time "learn and implement" what works from the aquired product and what are must have features. The last thing you want is for you to loose a hugh portion of the aquired customers, because if they have to switch over to something else, why not browse the market for something else.
My 2 cents :)
Maybe too romantic of an idea, but I'd suggest you buy "everything" for 1.2-1.5x ARR (so, $45k tops), and keep the existing stuff running, while telling paying customers something along the lines of: "Hey, we got you, we'll keep this machine oiled, and for any new features, you need to checkout meetme, which is really funding this."
That should get you:
You know, an old-37signals-style kind of thinking of not "sunsetting" products. It seems tragic to kill a product that's working for so many people for so many years.
This is what i think ... the work is already full of boring schedulers ... boring work reunions ...
Why don't you change the idea to something like:
meetme for:
Pedro
The worst thing you could do is shut down the original business that's been successfully chugging along and working for 80k users for the past decade right away. I think an "address book only" deal could hurt your brand substantially.
You should figure out who the users of the other tool are. Do they potentially fall into your own niche, or will you have trouble monetizing this specific user base?
You could take over the tool, and bring it under your brand, but communicate that you're keeping it alive until 202x and there are no further updates. You should also limit support and potentially offer an easy way to migrate.
Over time, you can convince these legacy users to move over to your superior solution, especially the ones that have already been paying and may have a legitimate professional use case.
If you kill the business right away, users don't really have a connection with you and could jump to the next-best competitor instead.
As someone who has been involved in acquisitions in the past, here are a few things to consider:
Confirm that the users of the address book match your target ICP (Ideal Customer Profiles). For example, their ICP might be small businesses that are less modern/technical. Before making a purchase, you need to validate this. This validation can potentially be done during due diligence when interviewing customers.
Consider the switching costs you will inherit when converting customers from the tool you are purchasing to yours. Typically, when you acquire a business for its users, you keep the app running for at least a year before migrating users. Ask yourself if you can afford this and whether you have the bandwidth for it. Additionally, calculate any expenses you will incur to convert users, including but not limited to engineering, email marketing, copywriting, etc. All these costs can impact your ROI.
Ensure you're not overpaying for those users. Use this simple formula: [total users of the app you are buying] * 0.10 (assuming less than 10% will convert) * [your product's average LTV] = ROI from the purchase.
I hope this helps. Let me know if you have any questions.
@romaindewolff