We Sold Our SaaS Business! Learnings & Process

Brent and Colin discuss selling their first SaaS acquisition in Blinksale and the process and learnings from doing it.

Apple Podcast / Spotify / Google Play / Overcast

Want to get more breakdowns? Subscribe to my free newsletter here: https://www.colinkeeley.com/newsletter

Enroll in Colin's "How To Buy a Small Business" Course & Community https://www.indiepe.com

Sell your SaaS at https://www.vernehq.com

Grow your local business https://www.maplejoin.com

[00:00:00] Colin Keeley: All right. Hello and welcome back. This is Colin Keeley here.

[00:00:02] Brent Sanders: And I'm Brent Sanders.

[00:00:04] Colin Keeley: And we are two guys buying and building wonderful internet

[00:00:06] Brent Sanders: companies. And in this episode, we're selling, or we did sell our first company. So not just buying and building, but buying, building and selling wonderful internet companies.

[00:00:19] Colin Keeley: It is. It's the first, our first acquisition together and our first sale. So it feels good. It's been quite a process.

[00:00:27] Brent Sanders: So, so much first off, so much for a hold co. I think we've talked about this a bunch, but you know, what's the point of, of holding stuff if you know, you get the right price for it and, and I think we, we started this out thinking, Hey, you have a portfolio of cash flowing businesses and we got to three businesses and realized, Hey, this is, we're not even paying attention to one.

So I guess, we should start with that. Like why sell? Why did we, why did we want to sell?

[00:00:55] Colin Keeley: Yeah, I have a few different points there, and then like I would say I'm not religious about anything, really, like we mostly do vertical sass, I'm not religious about only doing that, we mostly hold for the long term, but I don't think we have to be stuck to that forever either, but why sell, so This one was our smallest acquisition.

It was stable. so we were just reinvesting in the cashflow and other things. We're basically both ignoring it. so we didn't want to hold it to the point that it started declining and that we wouldn't get as much money for it. I think we had good ideas for growth, but the base was too small. It didn't make sense, like for the effort involved to really push it. Like we talked about niching it down on previous podcasts. I still like that idea. I just think it was going to be too much work for like too little reward. and then we had this opportunity, you know, scouts going well.

We could take a multiple that cashflow that we're reinvesting, basically bring it up front and invest it now. and , I think the last thing is that it's putting like a, a win on the board. So on paper, you know, we were doing well and all this stuff, but you know, this is a real, you know, we have money in the bank.

[00:01:57] Brent Sanders: Yeah, so, I think, I agree with you, I mean obviously we made this decision together, it's not like you went out and sold it, but, we were just ignoring it, and it didn't make any sense to like, really dig in much more time. I put a lot of work into the improvements we did make and those were like marginal improvements are fine.

But like, to really broaden the product, I think it was going to need, uh, a whole bunch more work in this space and the revenue just, we already have other stuff that we've committed to doing that we need to do that, is a bigger opportunity. So that it felt right. how long did we hold it for? Was it three, two years or three years?

I think it was three years, two and a half. Okay.

[00:02:38] Colin Keeley: Yeah, it'd be about two and a half. Because we closed it, I think, in February. after like a big snowstorm.

Right. That's

[00:02:48] Brent Sanders: right. Yeah. So I guess we've probably already talked about the experience of, you know, the first one and what that was like as compared to the other businesses. It was definitely our smoothest purchase that we did. as we went through the, our first time on the, the sale side, uh, it was a lot rockier, I guess, like once we found a buyer, but But, like I'm jumping around a little bit here, but we, we marketed it, uh, on Acquire.

I think that was the only place, right? Like it was, it was just a listing on Acquire to start and we had a lot of interest and it was a couple of folks that had taken your course, I believe, or both of those individuals that, that initially signed LOIs. Yeah. So

[00:03:33] Colin Keeley: we, we bought it on Acquire. so we, you know, resold it, or we were thinking, resell it on Acquire.

So we listed it, got a ton of interest, a ton of tire kickers, and like, not credible people. which, to me, I hated. I took so many meetings where it was clear people didn't do any of the work. Like, didn't read any of the materials I provided. And asked, you know, somewhat stupid questions. so, I respect people that put in the work.

I really don't respect the people that don't. so that was frustrating. And then we eventually went under LOI with two separate folks. I think, so a lot of people have taken my course at this point. I can't remember, I think maybe both of them had taken my course too. the first one, we're all good to go.

And then, I think his dad was backing it. And if I were to guess, his dad kind of backed out. and so he tried to renegotiate for a lower amount. And we're like, look, no new information came out. We're not renegotiating. Then we went under LOI with another guy from Acquire. and he ended up backing out because he didn't seem to really have the money.

Or he had the money to close, but not really to sustain things. You know, if, you know, it required any more capital infusion. so at that point we were just like, you know, maybe we should just try this, like managed by acquired process, like a lightweight broker process. cause we had wasted quite a bit of time on this.

And so we did that. and that's how we ended up actually selling it.

[00:04:51] Brent Sanders: Yeah. in going through like the, being on the seller side of diligence, it was kind of nice to like. Have it so recently put together that we could just kind of, I guess a couple of things that our listeners might know about this product is that it has like a new version and over and there's a blink cell classic and blink cell next and classics on an older version of software.

And next is the rebuild and a lot. It's funny. The more we look at deals, there are a lot of companies like this where it's like, Oh, they did the rebuild, but some people are still using the old version and you have to support these two. And I was, um, I was nervous about going to market with this. It wasn't a concern for me when, when we bought the business.

I mean, it was, but it was like, Um, I think the, the one thing that we did in preparation for this, I think we spent money on this last year around this time. I feel like it was at the end of the year last year. was to get an independent, like a third party study on classic as to like, okay, You know, what, what are the technical risks?

And so it was third party. I mean, we paid for it, which is maybe influencing some of it, but it really truly was like a straight up evaluation that the buyer could come in and say, Hey, we're looking at the riskiest, ugliest part of this product. And someone else has already given us a report card and they say it's good.

It definitely is old. And if you want to use it, you need to update it. But. The test coverage is like nearly I think we're at 92 percent something along those lines, which is great, right? That's that's something to be said for and that I mean, I think that fed into our decision also to you know Sell this is like, it has warts on it.

And, but I think more so going back to your point of, of like, it's really nice to have the track record down. I guess the thing that I, I, I'm looking forward to, to touch on that point from earlier is like a lot of the times when we speak with investors or we speak with people that are interested in what we're doing, they're like, well, what's your background?

What were you guys doing before this? I would really like to. Talk about my background and all, but I would really like to make the background be about what we're doing now. Like, so the more track record we can talk to of like, Oh, we had this business and we bought and acquired, we transacted this transacted that, and make it more about the, the here and now about what we're relevant doing, you know, as it relates to either investing or, you know, putting a new deal together, or, you know, we're talking to a, a, a seller.

It's like, I. I think that that is a lot more valuable now that we're done with the deal. actually I'm putting way more weight on that and realizing how important that is because I mean, we did have people that, you know, we're experienced in the private equity space and we're like, well, you guys have bought three things and how's it been selling and it casts kind of a, a significant amount of doubt as to like, well, sure you guys can buy stuff like a sucker, but can you sell stuff as well?

So, I think it definitely validates that.

[00:07:46] Colin Keeley: Yeah. I always found that feedback to be quite. Odd and inconsistent because everyone would say, we can't buy these things. They're too expensive. Everyone wants to buy them. And then, then the back half of it, people are saying you can't sell these things, no one wants to buy them.

So it's like, well, choose one or the other. It doesn't make any sense to say both. But yeah, I mean, there is a bit of a no man's land, I guess, where it's like bigger than individuals. So this one, we could talk about who we sold to is basically, you know, younger versions of ourselves. So much more of like individuals starting out, and not like the big, you know, traditional and private equity that's more, you know, up market.

[00:08:24] Brent Sanders: So the, I guess that let's talk about the managed process by acquire. So we gave up on these two other individuals. We. I think that the best use of our time was to use some form of broker. Like I didn't want to use a broker broker, like a real broker, because we already kind of do a lot of that work. but having somebody just helping a little bit, and I think that was again, priced into their fee.

It just added a little bit more, pre screening, but not, we still had to screen people. And actually like, I think I interviewed the, yeah, I was the person to do the first interviews with the buyer. So you, you went on a two week vacation in the, in the midst of this process and we still got it done. So we, you're in Italy.

And then I met with, I think I met with like five or six people. They were all great. And so essentially we got sort of like highest and best offer. Everybody sent them in. We got maybe a dozen of these offers and we just went from the top priced down. first couple were people that, I don't know, just the radar wasn't really screaming as reliable or, made sense.

There was also a category of people that I feel like. Clearly we're not interested, but did that, you know, not, not a lowball offer, but they put stuff in here, but it seemed like they would be coming back with like, you know, other, other things to knock down the price, but met with the seller. It was a partnership, so it's a business guy and a tech guy.

And I immediately kind of got the sense that they were great. I mean, their offer was not the highest. it was. Within the realm of where we wanted to be, but it also kind of made it seem like in our first conversation that they were very serious about this. I think it was somebody that had looked at the business before.

Is that right? Did, did they look at blink sale before or something else? No, maybe

[00:10:14] Colin Keeley: six months ago. I think they've only been looking for like a year or something, maybe less than that. yeah, acquire, I think they tried a more hands on holding approach and then they sell settled on this more lightweight approach.

So they have an M. A. A. advisor and they're very nice and they like kind of give you templates and you mostly fill them out yourself. and the most valuable thing they do is they just blast you out to like an enormous list and then they create this kind of huge funnel and they. Put some time pressure on everyone to be like, get your offers in by this date.

So yes, could we have done that? Like we kind of did it, but I think we were a little loose about it. And it's clear that they blasted it out to a much larger list than they give us on the free plan. and so that was, I mean, it was super worth it. You know, we. They also gave us a pretty accurate estimate of what they thought we could sell the business for.

and so, yeah, it was super helpful. And we ended up selling, we can't say the price, I guess, but for amount that we were happy with and amount that they said we could roughly get, which is good.

[00:11:14] Brent Sanders: Yeah. I would also say they had a couple of mechanisms built in where it's like, once I chose the buyer, I mean, you and I discussed, I'm like, all right, I'm gonna click the button.

All the other chats shut off. Like I couldn't communicate with anybody until. The buyer said, I'm no longer interested, like I've committed to this, which I thought, that and the time pressure are really good. Like for forcing functions of like, let's get this deal done. so we entered into the LOI, we signed it, you know, move really quickly.

We, uh, I did maybe four or five pretty in depth texts, tech. Sessions with the, the buyer, which I thought every time I did that, I got more and more convinced that they would the right fit because I think that was the thing with some of the other buyers. They're like, do you think I need like a tech partner or how much is it gonna cost for me to hire somebody?

And it's like, as we had the first one kind of realize or the other way that fell through realizes like you're gonna have to invest in this and it's, it's a real cost. So having another partner that is technical is was really appealing to me. Yeah.

[00:12:18] Colin Keeley: yeah. Where do you want to fill in next? so. This all sounds like it was super smooth and everything.

I think this whole process took far longer than it probably should have to get to this buyer that we liked. and then as soon as we got there, interest rates kept creeping up. And so this is pre approved for financing. And then every time we were looking at like setting a closing date, the financer was just like, all right, the interest rate is, you know, 5 percent higher now, and it's, it just kept creeping up.

And eventually I had to go back to them as the seller and it'd be like. You, we can't do this. You can't like be on a closing date and change the terms every single time. We can't trust you then. So eventually they, you know, after beating them up by email over and over again, they honored their original terms.

So we're able to get something done.

[00:13:06] Brent Sanders: Yeah, that was, that was pretty concerning. Cause that would have definitely changed timing and the economics for the buyer, which I think had a meaningful, by meaningful amount. So that was kind of the, the, the first thing. And. I feel like we kept having to resubmit to underwriting and at some point they thought we were buying the business from ourselves.

So that, that got kind of backwards where we were providing so much, uh, information to them and so much contact that they were like, they thought we were the ones buying it. And then they, they kind of took issue. We were like, well, there was some statement like, well, you know, we haven't done business with you or something along those lines.

It's like, you're not doing business with us. We're, we're the ones selling it. So it's like, yeah, it turned into a kind of a spaghetti. situation. and I don't think that everything else was really smooth. Legal process was smooth. We, we kept, I think the lawyers out of it until the very end and they came through, looked at everything, made some suggestions and nobody got overly obsessed over it, which was.

We did structure a deal that has, I don't know, would you say that it's not really an earn out, but it's like a hold back for a period of time. I don't know if we can talk about the details of it, but I think it's important to mention that there is like a, an element of it.

[00:14:21] Colin Keeley: so I guess on the legal front, we used acquires templates, which was pretty nice.

and so neither side changed them up very much. I would say they could be better. Our lawyer took issue with a few things. We felt there was enough trust there that we weren't gonna like, go back and go crazy on the red lines. but I thought that was helpful. Definitely saved on legal costs on both sides.

And then, , there's Like a transition hold back component to it. that, you know, we're going to take monthly meetings with the buyers until everyone feels good that we're like, , set to go basically. And then the last tiny, small amount of funds will be released as well.

[00:14:58] Brent Sanders: Cool. Yeah. I mean, and so like they're off to the races it's so far, it's been.

You know, as described as received, I mean, support is quiet. It's, it's kind of what, what it's turned out to be. one of the biggest challenges, that we ran into that I think if it was weird because we acquired this business and transitioned, there are two credit card accounts, one's with Stripe and one's with.

NCR, which is weird. We're like NCR. It's like a old school cash register company. Right. So, um, when we had the transaction on our end, it took two days. It was a little weird. Right. And then you log into NCR and it's, it's kind of strange this time. It took what 18 days to, to transfer the, the NCR account.

And we just did it, which is holding everything up.

Ahead. The saga was, is, yeah, the story goes this way. It's like you reach out to just like the old seller did. You said, Hey, we sold blink sale copied on here. The new buyers, can you please transfer the account to them?

And they're like, what? You can't just do that. We're going to shut down the account. Now, if you're, if you've already done this and we're like, no, no, no, no, don't, don't do anything. Don't disrupt anything. So their support team scare the shit out of us. Thinking like, oh, and they wouldn't even like respond after that.

They, there was something along the lines of, if I don't hear from you by the end of the day, end of the day, what time zone, by the way, but like end of the day, I'm going to shut down the account. An account that's been around since like 2006, by the way. So thankfully they don't do that. We were, you know, try to reach out to the right person.

Nobody will respond to anything. Nobody will respond to their support. There's payment support. There's, but there's all these different products. So first of all, NCR purchased the payment. Provider that, that bling cell was built on like in 2018 or something. It was called jet pay, I think. And so anyways, it's like one of these things where it gets absorbed by some giant company.

Nobody knows anything. So I finally, I think you reach out to a bunch of people. we get connected with some folks that are like on the enterprise sales team and they still think. Again, week two into this, they're, they're like, yeah, okay, we got your account set up thankfully. And they're like, you just need to change, you know, your terminal.

I think we're, you're like a restaurant or something. You need to get new terminals. And it's like, oh my God. So the saga continues. I finally got somebody wonderful to call me and I just start picking up the phone and dialing. People that are on these email threads, cause they all have their phone numbers and their signatures.

And it was this lady who's been there for 20 years and was like, Oh, I know. I, and she knew the guy who transferred our account, who had since left. And she explained, well, he left and he brought the whole team with him. And, you know, there's just kind of skeletons and you got to know how the, you know, where the bodies are buried.

And thankfully I've been here for 20 years, but I still don't know how this is done. So we'll get it done, but you know, bear with us. So she gave me some confidence and that was three days. Later, we finally got it closed. So we got the, the account closed up. So, yeah, that was a fucking nightmare. That was, I guess, uh, I don't know what to even advise on that.

Like, what do you do?

[00:18:02] Colin Keeley: I think I was out of town too, when we got the threat that they were going to close. I was at a wedding or something. They're going to close the account if you don't reply in like the next few hours. that was insane. I don't can't believe that's a customer support person. Yeah, it's a 2 billion company.

I mean, it's publicly traded. They have like 30, 000 employees. It is completely impossible to get in touch with anyone that's helpful over there. It took me and you like calling every number we could find and emailing everything we could find to get anyone that would be like remotely helpful. And these guys are trying to set up a new account, which should be like, this is your sales process.

These are new customers. Like maybe follow up with them. Yeah, I, I don't know how businesses like that exist. like you think these big companies are, you know, so smart and so put together and it's just like, it's momentum, I guess, that they got to this point. but they are, you know, barely functioning disasters.

[00:18:55] Brent Sanders: Yeah. So, that was a little, little bit of a wrinkle, but other than that, it was really smooth. process. There were no issues with this, the buyer, there were no, you know, major issues with, with any, except for the payment account for the older product. So it got sorted out. They're receiving the cash and our first deal is done.

So, I don't know, what do we want to talk about next? Like, I guess proceeds is not quite a public discussion, but largely it's going into, I think largely going into scout, going into improvements on. The other larger businesses in order to, you know, get a, get a better outcome from those. Yeah.

[00:19:34] Colin Keeley: That's not really a discussion for the podcast quite as much.

I guess, you know, what could we have done better? is always, you know, interesting. It's anywhere we messed up.

[00:19:43] Brent Sanders: yeah, if I did this over, I would done the managed, I think we should have just done the managed process to start because it is a very reasonable percentage that, you know, maybe it'd be nice to, to have pocketed, but our time spent with the other two individuals, which was probably what, three weeks each, two, two to three weeks each.

I mean, that was a lot of time that, I mean, I spent on doing tech diligence calls and like, you, you want to prioritize, I think we've experienced this on the buy side of like, you know, You expect the seller to devote however much time you need. And that's the way I take it. It's like, if we're selling something, you're my number one priority.

Even if we're. You know, under LOI, and then you get under LOI and you're stuck for you. There's some exclusivity sort for a period of time. So we're just like stuck in the mud for a period. So I would have done that sooner. I would highly recommend anybody who's selling their business to, you know, a SAS business to use their managed process.

it just got results way faster. So ringing endorsement for them. And, that would be the only do over that I would, would say. Yeah,

[00:20:49] Colin Keeley: they were fantastic. I would definitely do them again and earlier in the process. So they take 4%. I think they tried something more involved, like eight to 12 percent and they were taking more of the meetings and preparing more of the like documentation, which is more of a traditional broker.

I would definitely entertain using a traditional broker just based on. How much time is wasted with like kind of door knockers of like people that aren't really serious, but just want to take a meeting. I hated doing those that I really, you know, trained me doing that over and over. So I would think of trying like a traditional broker as well.

if it could be more of a managed process that like, we just have to talk to them once they're serious and they're like, you know, very well vetted.

[00:21:34] Brent Sanders: Yeah, I agree. no, but as far as like choosing the. the buyer, once we, we got the one went through the process, I, I felt consistent. They were consistent in how everything they said and represented themselves. And there was no like, well, now that this is real, like, I don't know, we got, there was no retraining.

There was no bullshit. And it was. Very clear, inconsistent the whole time that they wanted to do this and were like, Oh, well, I didn't think about, you know, six months down the line, I'm going to have to like pay for this or that. It's like they knew what they were getting into. and I, I did, I did appreciate that part of the process being like, just people that were really straight and honest with you.

[00:22:16] Colin Keeley: Yeah. One of the things I think we did well is we kept exclusivity with these LOIs to be really short. I mean, for a small deal, there's no reason, there's no like, you know, crazy hidden things or months of due diligence that should be going on there. So like when those deals kind of fell through, we were able to return to the market relatively quickly.

but if we were tied up for 90 days or something like this whole process would have taken forever.

[00:22:39] Brent Sanders: Yeah. Well, it was a sort of an easy deal to start. And I say it's fairly easy deal, despite the NCR debacle to get out of. But, you know, it was an interesting process. The, the entire arc of it, I don't think it could have gone much better.

Like I don't regret, I don't really wish I was working on, I think I feel a little bit less stressed out that I don't have to deal with the, you know, for every single company we have. I think that's one. thing to look back on is every single company has a monitoring support and just, just weight that carries on our shoulders of like, Hey, we have to manage it.

Even if it's autopilot is blink cell was, there's always this, you know, you wake up every morning, you check your email and you see like, Oh, do I have an alert? Do I have something like, it's one less source of alerts, I guess. So that, that definitely feels a little bit lighter. You know, naturally the, the return is, is enjoyable too.

[00:23:36] Colin Keeley: And now we're freed up for the, the next few acquisitions. we gotta spin up here shortly. Yes,

[00:23:40] Brent Sanders: sir. Cool. cool. Is there anything else you wanted to chat about or is that it?

[00:23:46] Colin Keeley: my internet is barely functioning, so I think I'm gonna throw my computer out the window after this call. . I don't know what's going on.

I don, it's a computer. It is so frustrating. I don't really,

we use Riverside. Okay. 'cause it works. Works better for like, we'll leave that. Yeah. For posting to YouTube and it is, I do zooms all day. No problem. We use Riverside once and it is completely non functional. And Brent and I are just talking by ourselves. We got to switch it up. Independent conversations.

[00:24:15] Brent Sanders: Kind of. Yeah. I just got to wait.

[00:24:19] Colin Keeley: Okay. Well, take care everyone. I'll keep working on my internet.

[00:24:24] Brent Sanders: All right. Thanks for listening.

Continue reading

Subscribe now.

Get the occasional update with helpful guides and insights.