Thomas from FE International here, thanks for the mention! Most SaaS deals are being done with cash buyers at the moment so generally no need to work with a buyer who needs external financing (e.g. SBA). I know there are some firms who push SBA on most of their deals, but it's a slow process and unpredictable in comparison to a cash buyer, of which there are many.
Also wanted to clarify that we do not literally share buyer lists with others in the space. I expect there is some crossover, particularly from regular industry commentators but not as much as you might think. Our on and offline presence is on a completely different scale to the others.
At FE we have over 30,000 investors in our network and not that many overlap with other firms in the industry as we only specialize in SaaS, e-commerce and content businesses, so have a highly targeted audience. Our buyers like working with us because we are well-known for only listing high quality, vetted businesses and follow a very consistent process each time. Serious buyers like a predictable process and that's what we provide.
Hi Erik, thanks for the mention! Glad you had such a positive experience. Definitely think the market has improved for sellers in recent years - we are seeing more and more deals with competitive bidding and multiple buyers involved.
Completely agree regarding getting financial and technical affairs in order. However and wherever you try to sell, this element is essential. Expect a broker/M&A firm to do a lot of the legal legwork for you but you still need a reliable and practical attorney.
Glad to hear it was helpful! A lot of the digital businesses we work with were finding themselves lost in the noise, so we wanted to make sure there was a complete, straightforward guide to compliance they could follow.
Thank you! We are trying to lead the way with content in the space - we've written a lot about SaaS in the past, but not much about apps in general. It's a hard topic to find credible content on as it's a relatively new space and most of the exits you here about are huge apps like Snapchat and Instagram. 99.99% of apps will never fall into that same bracket but doesn't mean there is not a market to sell.
Overall we look at thousands of variables with varying degrees of weighting. Can't just use the same generic approach to each different business model as would over-simplify and ignore (or overplay) nuances of specific businesses that could be strengths or weaknesses.
It would be a little small for us at FE International (we generally look at businesses generating at least $1K MRR).
Your post is a little confusing - you said you chose the former (i.e. raising money) but also that you looked to sell it as a side project.
It's hard to give specific advice without knowing the business itself but you could always try looking for a partner who has time to work on the business. Trying to sell a new product that isn't making any money isn't impossible but you're unlikely to get much for your time.
Sorry to hear you had a bad experience - happy to take on all constructive feedback so I appreciate you bringing it up!
The reason we ask for a 2 year NDA is that this is the generally accepted length of time that NDAs are enforceable in all 50 US states. We do ask buyers/investors to re-sign after 1 year so that our sellers are comfortable that there is at least 1 year remaining on all NDAs at the point of us listing a business.
That being said, on some listings sellers request that new 2 year NDAs are signed with all buyers/investors irrespective of how long is left to run on a pre-signed document. This is usually limited to 7 and 8-figure listings.
Sellers and buyers/investors both generally appreciate our strict approach. Making sure that we are operating diligent process when it comes to NDAs and sharing information is important for sellers as well as a new owner of the business.
Lots of reasons. Just beware on marketplaces (Flippa, EmpireFlippers) etc. which have varying levels of vetting (from none to basic verification) as sellers often make up reasons or are lying about hours worked.
Some legitimate reasons to sell something "passive"
- Have another business growing that needs cash
- Need a lump sum of cash for X
- Lower tax rate (generally) paying capital gains vs. income tax
- Cash in the bank often beats future uncertainty
- Being passive doesn't mean it's low risk or doesn't keep you up at night
I'm founder of FE International (mentioned quite a few times in this thread already). We've done over $100m deals in the online space and have won various awards (e.g. for my business partner, Ismael: https://www.ibba.org/press-releases/2016-ibba-member-excelle...)
When searching for a business to buy, make sure you do your due diligence. There's a lot of junk out there and many "brokers" just make up their numbers/claimed legitimacy to win business. Once you've got past that, you then need to do due diligence on the business itself.
Passive businesses are not impossible to find, but it does depend on your definition. You can't buy any business and do absolutely nothing (truly "passive"). Even something low maintenance will require 1 hour a week, especially if you want it to last for years. Expect to pay a premium for businesses like this but be very cautious around claims from a seller. Number of hours worked is the easiest to misrepresent (and the hardest to prove). Almost every seller claims to work "2 hours a day" but IRL I've never met a business owner who works less than 10 a day :)
To answer your question directly, don't just look at marketplaces, check out brokers and advisors too. If you're upfront with what you're looking for and budget, most will send you options that are a good fit.
That's often the best time for an acquisition! Leadpages got the chance to acquire a successful and growing product, Rob and Derrick managed a successful exit to a motivated and engaged buyer.
Sorry we couldn't help - our focus tends to be on businesses that are primarily US focused with their customer base (although our sellers are based all over the world). Not aware of any established UK brokers who focus on web businesses - there isn't a huge market with UK buyers for online businesses so not overly attractive to enter.
Thanks Jason, glad you found it useful. You make an excellent point on the "fixing". I usually advise people to do it at least 3 months before a sale (ideally 12 months) to fully benefit from the potential valuation upside of improvements.
Our data is related to outright sales of [generally] self-funded SaaS businesss.
It's not the same as the VC/angel world where they are investing in unprofitable or pre-revenue SaaS businesses based on potential or estimated future cashflows. The multiples we discuss will not apply in these situations and it's really not our area of expertise.
The multiples we discuss are related to SaaS businesses below $5m valuation. Fortune 500 companies are indeed valued differently, usually on a multiple of EBITDA or similar.
10x is very high. Sure, there will be a few deals at that level, but the majority are not. Our data is based on over 50 SaaS sales below $5m we have completed so is not just made up or an "estimation". It's where 90% of SaaS businesses will fall if you want a high degree of certainty when selling.
There are lots of reasons people sell businesses instead of hiring someone to run them:
- to reinvest into other growing businesses
- they are no longer interested in the business (it's not always about money)
- the business is a mental distraction. Sure, you can hire someone but you still have to think about that business
- to benefit from a lump sum of cash now vs waiting 3/4 years, usually at a lower tax rate (capital gains vs income tax).
Also wanted to clarify that we do not literally share buyer lists with others in the space. I expect there is some crossover, particularly from regular industry commentators but not as much as you might think. Our on and offline presence is on a completely different scale to the others.
At FE we have over 30,000 investors in our network and not that many overlap with other firms in the industry as we only specialize in SaaS, e-commerce and content businesses, so have a highly targeted audience. Our buyers like working with us because we are well-known for only listing high quality, vetted businesses and follow a very consistent process each time. Serious buyers like a predictable process and that's what we provide.