Selling My Bootstrapped SaaS Business (2017)
tylertringas.com
tylertringas.com
It took us less than two years from founding to exit. I write about it at https://thebootstrappedfounder.com/from-founding-to-exit-in-... . Danielle, my Co-founder, and I did an interview at https://www.sureswiftcapital.com/blog/bootstrapped-saas-foun... as well. Both articles give some insight into the process of selling the company and how we got it to that point.
Our experience was very positive. We had structured our business to be as sellable as possible, even when we didn't intend to sell it. Having documentation and automation in place at every corner made the due diligence and transition phases a joy.
I see a lot of people in the comments here asking for valuation and structural information. In researching the process before we sold, I had the same questions, and never really found reliable answers. It seems that every transaction is inherently unique. All numbers we throw around, MRR, EBITDA, multipliers, they are thrown out of the window once you look at the actual business, it's internal workings and dependencies.
My suggestion for fellow SaaS bootstrappers who want to sell their business: make sure you can hand it over easily, make sure you are not required (to remain part of the operations), make sure your infrastructure is either easily migrated or well-documented.
You will want to negotiate, as value is in the eye of the beholder.
I am currently writing at length about this whole process. I'll release it on the blog before the end of the month.
In many ways.
Additionally, we also lost access to a service because we used "Google login" with name@company.com and in the hand over the new owners deleted name@company.com in G suite. We couldn't access the account since the email no longer existed.
You want to sell to a party who will run it as if it was their own product (or who will hire a capable team to expand it further). That is possible for a $400k ARR product, but much harder for a website doing say $50k through one-off sales.
landing page does a decent job describing what we do. we're a general purpose analytics app tightly integrated with other SaaS apps.
I won't get into specifics on MRR, but we currently have thousands of users and hundreds paying
I never hired. I should have hired. I had alerts waking me at night dozens of times as well. I planned family trips around internet availability. I thought I was needed to solve any problem. That's why I never hired. I thought it would be too much effort to train someone.
Selling the business resolved all these issues at once. Hiring someone to take care of these things for you will allow you to have time to yourself and wind down. I trained my replacement. Turns out other people can do this job.
You don't have to start with the sale. You can start with delegating.
Whenever I consider entrepreneurship as an option for myself, it is always the customer-facing sales part which leaves me feeling like I would struggle.
It's incredibly hard to let go of something you built from the ground up and hand it over to someone you trust enough to run it the exact same way you did.
The idea of hiring somebody to run the day to day operations of the business is financially sound.
Finding, incentivising, managing, monitoring and collaborating with that person/people is a separate set of challenges most solo/bootstrapped people do not possess the skills to undertake. Moreover, their business is their "baby" and letting somebody else take the reigns is emotionally difficult.
https://www.sideprojectors.com
Lot of interests in the past few years around "indie makers" and "life style businesses" and "side hustles" have attracted quite a few interesting projects to be posted on my site. It's been cool to see these projects being exchanged.
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</div>The alternatives, i.e. selling equity for capital, usually means the founders mitigate some of that risk. For example their salaries would not come completely from their own capital anymore.
I think that's important to keep in mind. Bootstrapping is not the optimal solution for everyone. If you fail, you pay dearly, especially in opportunity costs, but many also touch their savings or their families' money.
Also now that its running on its own, I also feel that I have less risk, because with a profitable company there is no requirement for growing a specific amount that investors demand or otherwise they take your control away.
Also, you may be confusing risk with outcome. Your outcome was positive. If your business had failed, at any point, you would have lost any benefit from the work you put in. It's also not quite fair to assume that the time you worked on that project is worth 0 Dollars.
Through contracting I make about 30% less than I did as a salaried employee, but I am immensely happier than when I was employed full time. Even if I wasn't bootstrapping a business, that tradeoff feels worthwhile to me.
In your situation, no, your opportunity cost from working on a side project is probably bigger than you think. First of all, I wasn't talking about the contracting/employment choice, so you need to compare the time you lose for contracting.
And then you need to differentiate between cost and risk. You sound like you are comfortable with the cost you are taking on (good for you, nothing wrong with that!). But when talking about the risk, you need to compare it to the possible outcome that your business completely fails.
That's what I am talking about when I say that bootstrapping means you carry the complete downside risk for the business.
I don't know what kind of risk appetite you have, or what percentage of your total net worth got tied up in your side business. So it's completely possible that this is a rational and beneficial choice. But it's not as easy as "I think it's worth it."
And people also forget about the upside risk of outside funding. Yes, your piece of the pie shrinks, but the pie also gets larger.
And again, I don't want to make people feel bad about their decisions, I just wanted to point out that risk management, with respect to their own personal capital, is something that start-up entrepreneurs need to think more about.
Sure, the capital injection helps grow quicker but many businesses could have been comfortably bringing in a few million dollars per year but end up dying because they were forced to grow too quickly.
No outside funding means the founders carry 100% of the risk. No amount or form of outside funding can increase that percentage (duh!).
And if you are putting in your time (with the associated opportunity cost), you should be asking yourself what kind of growth you are willing to accept in exchange, shouldn't you?
You don’t carry “all” the risk but your risk still goes up.
There are all sorts of crazy agreements one could think up, but basically if a funding agreement increases your downside risk, it's really not so much about the funding but rather about a fundamental change in the venture. Otherwise, why do it?
Of course you can enter an agreement where you increase the risk of the venture failing significantly. But that's not fundraising, and it's probably not smart, either. And the risk of staying small is sometimes underestimated.
If you enter into a funding agreement where you put in your own money, or a loan you personally guarantee, that would increase your downside risk. But it's also not fundraising, because it's your money.
I especially liked this paragraph:
The absolute most important factor in getting a great deal in a sale is not having to sell. All of the work here happens well before the sale. Craft your business in a way that you would be perfectly happy to run it indefinitely. Get your work/life balance in order and your stress level under control. Go into a sale process with the idea that if you don’t get exactly the offer you want, you are 100% willing to just wait it out and run your business for another year.
Bootstrapping isn’t always easy but it seems to have been worth it so far!!
Typically it’s ARR x 4
Emphasis mine, but that's why I love reading about these things. It seems somewhat realistic compared to moving to silicon valley and doing the VC fueled rocket ride.
I worry that perhaps the advice isn’t quite the same for all businesses. My SaaS business is fairly technically complex. I don’t think it would appeal to a non-technical buyer that gobbles up simple Wordpress sites. I think it makes the available market of buyers a lot smaller. I hear less stories about this kind of business being acquired (although I know it happens)
I am curious though if the team also had equity in the company?
Even if it's an asset only sale, those people still own X% of a company that now has $Y Millon on the books.
Seconding the desire to know the corporate structure and how it worked out for the team. Any equity split? How did these factors add or subtract to the sale process? Cash sale or some interest in the acquirer? It's really baffling that these would be left out.