Thomas Smale: “A Winning Exit – Your 4-step strategy for building a sellable SaaS business” – FemtoConf 2017

The FemtoConf 2017 Notes and recaps can be found on the central hub page.

Website: FEInternational.com
Twitter: @ThomasSmale

  • Started of with writing a book on selling websites
    • People started asking whether we offer a service for that
  • We’ve continued to buy & sell businesses for ourselves
  • 95% success rate on selling businesses
  • Now offices in Boston, London and Saigon
  • Did 100 deals in 2016

What Buyers Want

  • Important to understand from the beginning – need to position yourself correctly
  • What buyers look for
    • Low churn (sign that product & customer service is good)
    • Growing MRR 
    • MRR > ARR
    • Documented Code
    • Evergreen
    • Growth Opportunities

Process

  • Establish clear protocols
  • Document everything
  • Create a model that can operate in your absence
  • Make the business sustainable
    • Will the business still thriving in 10 years? 
    • Remove single points of failure
      • important employees
      • co-founder
      • yourself? 
    • consistency vs. one-time
      • Hacker News is not a great marketing channel (no predictability, no control)
      • do the boring stuff often if it works
  • Monthly beats annual
  • Consistent cash flow
  • Focus less on new customers
    • instead focus on retention

Step 4 – Sell at the right time

  • Sell while you are growing
  • Exit before you become stagnant
    • No new clients
    • Maxed out what you can sell to existing customer
  • Take emotions out
  • “If you wait it could be too late”

How we did it

  • Building a great team
  • Existing customers
  • Consistency
    • Employees are way better at being consistent than entrepreneurs!
    • When you find things that work, continue on doing them
  • Removed owner
    • Whether you’re buying or building – remove the owner!
    • Make sure you’re in a position where a buyer can take over from you
  • Systems
  • Platform agnostic

What is it worth? 

  • FEInternational Valuation Model
    • Proprietary data
    • Data from 400 deals, over 20,000 data points
    • Multiple of seller discretionary earnings (SDE)
      • SDE takes differences in owner pay into account
    • SaaS: 3-6x annual SDE
    • Content: 2-4 annual SDE
    • E-Commerce: 2-4x annual SDE

Key Takeaways

  • Your mileage may vary… 
  • Make yourself dispensable
  • Document your processes
  • Outsource as much as you can
  • Create recurring income & repeat business
  • Sell while you’re still growing
  • Know what it is worth
  • Complimentary e-course: http://feinternational.com/femto

 

Social Share Toolbar
About Christoph

Christoph lives in Munich, Germany and is bootstrapping his own SaaS application as a part-time entrepreneur.

He likes to write on this blog about anything of relevance to single-founder bootstrapped software startups.

Trackbacks

  1. […] Thomas Smale: “A Winning Exit – Your 4-step strategy for building a sellable SaaS business“ […]

Speak Your Mind

*