Selling part of my business? (but not equity)
Hoping people can help with experiences, or stories they have heard, so I know if this is possible or not.
I have a few products currently for sale under the same brand. I started out with two products, one of which has been profitable and has customers renewing annually, the other one not so much. (Let's call them type A). I've since created another, bigger app (type B) that I want to focus on entirely, traction already apparent, much bigger potential, but pre-revenue.
These are all apps available in a marketplace, with almost zero marketing collateral, etc. which is why I think they might be attractive to buyers.
If I wanted to carve off type A and sell that portion of my business, customers, code etc, but not brand, website or domain, how would I do that?
Reasons: I struggle with the time to support the profitable product having a full-time job (which I love) and a newer product (which I also love). Building and selling it has been a great learning experience.
My thinking is:
Create a separate instance of the backend (really minimal)
Clean up the code.
Set up a new marketplace account & transfer over the assets.
Share the email lists associated with those products. (2k)
Any help on what other steps I should take?
Is this possible?
This is possible and the approach you described is sensible.
As long as the shared brand assets (website, social media channels, etc.) are not driving conversions, you are good. The buyer shouldn't care that they won't get those or that they have to do a minimal rebranding. Most likely the installs are driven by your organic ranking in the marketplace/app store and not by your brand assets.
Of course, it would be even better if you did this split and held onto the asset for a little while just to show prospective buyers that this whole transformation has no negative impact on the revenue. Otherwise, the risk of this will be baked into your valuation and impact it in a negative way.
That's a great idea. It is all organic so far, so proving it makes it much more obvious and less risky. Thanks for the tip.
My clients often want to sell only part of their business or one of the assets (not an ad). The key rule is that this isn't only a technical process – but also a legal one. The buyer has to feel that they are properly protected legally.
In such cases, I advise setting up a special purpose vehicle – a separate company – and transferring type A products to it. This would allow you to have a separate balance sheet and show the specific profits associated with that company.
We typically work with physical assets, not software, so I cannot advise on the nuances of transferring IP. But I guess googling or an hour with an IP lawyer can help to sort it out.
If type A products use a domain name you are not selling, it's preferable to have a contract between companies according to which type A products pay royalties for using the domain name. This way, the balance sheet would more accurately reflect the value of product A without the domain.
Hope it helps!
I would highly suggest you to split the entity and run as two different entities before trying to sell this. This way the buyer would be confident enough to acquire.
That is one of the reasons why payment handles like Paddle suggest you to have multiple accounts - one each for each business. This will make things simple when you actually sell the business.
In this case, as your traffic is more from the marketplace, I hope changing the names/assets wouldn't impact much.
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