I've built or bought 18 businesses in the last 12 years, and run a profitable 6 figure ARR SaaS. AMA!

Thanks for your question @dawidzamkowski!

Pricing for businesses is hard. It seems wildly inconsistent when you look at sites like MicroAcquire, Flippa and through brokers like FEI, or Quiet Light Brokerage.

There are multiple ways to price a business--based on SDE (seller discretionary earnings) or EBITDA, based on strategic value, or acqui-hiring the team. The one I know best is the SDE-based one and it's certainly not the best fit for where you're at right here.

The SDE method puts a multiple based on market sales for similar businesses, growth rates, how well documented/process oriented the business is, and so on. The other methods are more nebulous to me because I don't know what gets valued in those scenarios.

I would strongly recommend reaching out to Thomas Smale of feinternational.com or Mark Daoust of quietlightbrokerage.com or possibly Andrew Gazdecki of MicroAcquire (in that order, based on their experience in this kind of stuff) for details on that. It's not something I'm all that familiar with unfortunately.

Hi @Thomas_Mack,

Thanks for your question. There are no secrets here anymore...most of what you need to know on this subject is 100% public info. But people rarely want to do the hard work of:

• finding customers
• talking to them
• getting to the heart of what pains they experience
• making sure they are big enough pains
• they are willing (or are already paying) to solve that pain
• and finding that their solutions today are sub-standard at best

There are some advantages that I can see where you get some shortcuts in the process:

• buying an existing business that needs more sales or product love means you're derisking that process up front (already have demand! already have some customers!)
• you have experience in a particular space yourself already. For example, if you were in construction, and you worked in an office with their software, you probably have a strong idea of what sucks about that, where everyone hates it, and how it could be better. You might also have friends and connections in that industry you can talk with as well about it.

Both give you a leg up on the process, but it's the same across the board no matter what. I've used advantage #1 several times to great success so far.

I hope that helps.

Thanks @johnmartyn!

Hi @oli_typified! Thanks for the kind words.

I haven't done any serious development on Recapture, which may come as a surprise. But I can tell you a bit about how the architecture is organized on that product.

The core SaaS is platform-neutral now. Originally, it was geared to Magento, but as we ported to Shopify, we were able to genericize it quite a bit and made it so it was easy to support new platforms by bringing the data into our models.

So in terms of ease of support, we're able to add support to a new platform relatively easily because there's some integration layer where we translate the platform-specific data into our core model, usually via webhook calls. But the specific stuff is mostly pushed out to the integration piece (Magento extension, Shopify app, Woo plugin, etc). That simplifies most of it.

There's still some logic in the app dashboard where we say things like if (platform == 'WooCommerce') then <do something for Woo specifically> for things that only that platform supports, but they aren't scattered everywhere, which makes it a bit easier to manage.

If you're talking in terms of patterns, we're using a combination of Bridge, Facade, and Mediators here to make it work.

Hi @curiouspm! Small world. And thanks for the kind words. I read your AMA about transitioning back to a job after bootstrapping for a few stressful years. Sorry that didn't work out, but I'm glad you've found something that's working better for you now.

The work involved with bootstrapping is mind blowing sometimes... and sometimes it works, sometimes not. 15 of my 18 businesses were crap, so I totally feel where you're at. You got way farther than I did in yours than I did in many of mine.

Great question @daveagill.

First, I need to say that IANAL and you should seek legal advice from qualified professionals. Your mileage may vary, tax, title and license are extra...blah blah blah.

With that out of the way, my businesses operate under a single legal entity (my consulting business) but they are run financially as separate entities in case I need to sell them. So each business has separate accounts, books, etc, but they're all under one company and EIN here in the US. I could change that if I wanted to, but as a single founder, who doesn't need to issue stock or split holdings with another founder, this is the easiest and simplest way to handle it for sure.

As for other boring legal issues, one thing I would note about buying a business is that you should always buy the ASSETS of a business and never the business itself. The assets of something can't be sued, they don't have ongoing legal issues themselves, and can be moved between legal entities with ease using an asset purchase agreement (APA). Never buy a business entity because you have no idea what that business entity's liabilities are/were/could be definitively.

The legal process of buying something is surprisingly simple:

• You create a prospectus (a document describing your assets for sale, how they performed, FAQs about them etc)
• Post the sale and vet those asking about the business with NDAs
• Give them a prospectus after they sign
• If they like it, they provide you a letter of intent (LOI) with the terms of the sale (price, timing, qualifications, restrictions, etc)
• If you don't like the LOI, you can negotiate it. If you like it, you sign it and move to due diligence (DD)
• During DD, the terms of the LOI are verified (revenue, assets, etc) and if everything is satisfactory, an asset purchase agreement (APA) is created
• The APA is reviewed by legal teams and signed if it's all good
• Money transfers hands at this point, usually via escrow
• Assets then transfer, usually directly
• The deal is done

That sounds more complicated than it is, but the only time I've ever had to involve lawyers was the APA step where I hired one to review it just to make sure nothing was funny. Cost me about $600 each time (YMMV on that).

Again, that's with my experience and comfort level of risk. Not all business sales need to be that complicated (above $100K in total price, this tends to be the case...but I did several sub-$100K deals where I didn't go through a full APA like that one above, it worked out fine). Depends on the complexity, your appetite for risk, etc.

Hope that helps!

Thanks for your question @jeffreyfate!

I sure wish I had a magic wand for this one because it was trial-and-error for the most part.

It's one thing to identify channels, but another to really understand them, do well with them, and full optimize them accordingly. And all channels I've noticed have a half-life. It's usually about 18-24 months before it starts to decay and stop being as effective as it used to be.

Which means you're always looking for new ones, even when you have a good one.

For the WordPress plugins I had, it was about being on the right blogs and in the WordPress.org repository with a listing that had the right keywords, the right slug, and good reviews. A bunch of other things I tested just never had the impact these things did.

Talking specifically about Recapture, there were obvious places I needed to be (other ecommerce platforms, like Shopify) so being in the App Store was a clear need and a win, once I got there. But even that wasn't a win forever. Over time, competition went up, the cost of ads on there increased dramatically, the optimization tactics don't last over time as others do the same things, and so on.

I'm always on the lookout for channels I think might be worth testing within my budget and time capacity. There are channels I just know I can't tackle because I lack the resources of my well-funded competition to go after in an effective way (content marketing is a great example--there is SO MUCH good stuff already out there and even more being produced daily. Getting noticed is harder, getting to the top is harder than that...it's possible, but I'd have to dump so much MRR into it, the process would kill me).

Hey @derrickreimer! Thanks for posting a question here.

Due diligence is always a tricky time when you're trying to buy or sell a business. Having been on both sides multiple times, I think it's harder to be the buyer than the seller because you're operating under far less info.

My top things about due diligence these days always include the following:

• Verifying revenue from original sources
• Confirming that the technical side of the product isn't crap that is waiting to bite you after transfer
• Understanding the real reason someone is selling
• Understanding the most important thing to the seller for this transaction

The first two are pretty obvious I think, but the second two are probably the ones that matter more. The reason for selling is almost always never what is publicly stated. You'll hear a lot of "I'm ready to move on" or "I don't have time to focus on the business anymore" or stuff like that--and on the surface, they're 100% true, but they're not the full, complete reason.

It could be negative--they're moving on because they found a problem with the market and they're dumping that on you (Had that happen to me with one business where they neglected to tell me the platform they were on already identified them as a risk and planned to shut them down).

It could be positive--they suck at marketing and you don't, so you can turn their weakness into your gain. Totally depends, but you have to dig on it to get something useful.

The last one is probably the most important of all. You might think all sellers care about is price and that may be true some of the time, but it's not always their most important thing. I've had transactions where it was more important that the sale was quick, painless, and lacked contingencies like seller financing or earn outs and they'd take a price cut for that.

I've had transactions where it was more important they found a good fit on the buyer for the business because they want their customers taken care of (this was the case for Recapture). Asking the seller or the selling broker this one question is what distinguishes experienced buyers from amateurs IMO.

Thanks for your question, @bobburch.

Well, this one is definitely embarrassing but I'd have to say it was the $50,000 I spent building a product (that was maybe 30-50% done) that I spent 0 hours validating in any way aside from "Oooh, look at that person and they shut down a product I liked and it was making money...I can do that too!"

This was my first failed SaaS called SupportVine, and it was entering in a crowded space (cloud based helpdesk software). It was 2014 and the space was already crowded with really excellent competitors (HelpScout, Zendesk, Freskdesk, Groove) and a bunch of smaller ones too. My solution was almost entirely a "me too" play and what I thought was compelling/different about it wasn't something that anyone was really wanting.

I spent 18 months and $50K before having some brutally honest conversations with folks about it and they pointed out what I already had heard before and knew I should have done, but ignored anyway. I then did some market validation, tried to niche down with a specific target market in mind, and not a single customer out there found my solution compelling. After 30 days of that, I shut the whole thing down.

Now, I wouldn't put money into something that wasn't easy to test, quick to build/validate, or that I have an audience to talk with about the pain.

Oh, good question. "Marketing" is probably the general answer, but the specifics are more interesting. I'd say these moved the needle the most:

1. Platform expansion: It was pretty obvious when I bought the business that I needed to move to other platforms to get more customers. It was Magento-only to start, so Shopify was a natural move. But doing that also required that we understand our specific niche here and why we're different/more applicable to certain types of stores. Had I moved without that, we would have been killed.

2. Partnerships: The name of the game is getting more customers and with the right partner, that gets much easier. However, finding willing partners is hard and finding good ones is even harder. So that factored into our growth quite a bit there. Cultivating those relationships takes time, energy and patience. A lot of each.

3. Being ready for big tailwinds: File this one under "luck" but being prepared means you're ready to leverage opportunities when they come along. We were one of the first to start running Shopify App Store ads, and that gave us a nice boost in growth (I asked to beta the program when it came out). I integrated with a few key partners before they were ready to have a partner relationship, and when their existing relationships broke down, I was already there, ready to go.

Thanks for your question @zerotousers! Recapture was something the prior founders created based on their Magento stores and the existing products available. They very much scratched their own itch there. But after 15 months of running it, and realizing it was a distraction from their existing 6-figure-a-month ecommerce biz, they decided to sell it. Along the way, they had basically talked to other store owners and got them to sign up as well so when I got it, it had existing customers and demand built in. Didn't have to do much validation there. It was on one platform (Magento) so the expansion strategy was fairly obvious from there (add Shopify and WooCommerce, look at others)

Validar was a bit different--this one was derived from talking to merchants and looking at existing solutions out there. Basically, it was gap analysis where we saw existing solutions didn't really meet the needs of the merchants so we talked to more, found they had the same issue, and built it. Time will tell if we're right or not because it's early but so far, it's looking good.