Expert Deal Review - Best listings in September on Acquire.com w/ Andrew Gazdecki and Ky Pratt

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Well, thanks so much for, for coming, everybody. We're super excited to go over some, some awesome deals with you. Kai, you ready?

Ready to go?

Okay. All right, without further ado, this is the September 2024 deal review. Just a quick agenda. We're going to be doing introductions, we're going to go over why you're here, what you can expect, and then we're going to review some of our best SaaS opportunities for you on acquire.com and then we'll go over how you can get matched with the best on the team if you're interested in potentially buying or selling a business with us. And in terms of our impact, we've been in business about four years. We've helped over 2,000 entrepreneurs get acquired. We facilitated over 750 million in closed transactions. We have about over half a million registered buyers on the platform, 600 plus live listings on the marketplace today, and we've served over a hundred different countries. So truly a global marketplace and a very active one as well. Brief Introduction About Me I am the founder and CEO of Acquire.com prior to this business I built and sold a company called Business Apps and also a company called Altcoin. Business Apps was a drag and drop mobile app builder and then Alcoin was a a crypto platform. And then below that is some awards from my day is running Business Apps, which is an awesome time. And Kyle, pass on over to you.

Thanks Andrew. My name is Kai Pratt. I'm an Acquisition success advisor here at Acquire. Good to see some of you guys again here at the webinar. Thank you for attending. You can see some of my Acquire accomplishments there on the screen. But in my past life I had been working in Panama leading a client success team which was an awesome experience. Each one of the transactions that I work on here at Acquire is also a wonderful experience. It's always a little bit different each time, but that is the uniqueness of the acquisition journey.

Right on. Okay, so while you're here today, we're going to be going over some of the best deals we have and really what makes them special. We're going to show you a monthly showcase of our biggest and best acquisition opportunities. These are all pre vetted and recommended by our advisors. Advisors@acquire.com Excuse me. And we're going to be giving some expert analysis as well with some key insights and then some Q and A at the end. So if you do have questions, feel free to put them in the chat. We'll get to those towards the end of the webinar and without further ado, let's, let's dive right in. Okay, I'll take the first one and then I'll pass it over to you. Does that sound good?

Sounds good. We can alternate.

Okay, so the first listing I'd love to go over with everybody is a Shopify SaaS startup. And just reading the description, I'll just go from top to bottom and then just give my my thoughts on this listing and how I would evaluate this initially. So this is a top Shopify app offering session replay and surveys. Has 2,600 reviews, 4,600 active clients, currently looking to sell for 750,000 at a 4.3 times profit multiple. And then just scrolling down a little bit to learn more about what this business does. This Shopify app is designed for session replays, recordings and customer surveys. Think of it as the hot jar for Shopify. Been in business since 2019 and reason for sale is lack of time. So overall this seems like a really good acquisition opportunity. And the first things that are standing out to me, number one is the asking price. It's selling at a reasonable multiple that I think a lot of buyers would be very interested in. I also like the profitability margins on the business. Out of $251,000, 173,000 of that is profit. I also like the market that this is in. I personally have used Hot Hot Jar in the past. It's essentially a a way to understand how your users are using your website, what are they clicking on, what are they not clicking on? So you can use that to optimize your website or in this case your e commerce store to increase conversion rates. So these can be really, really powerful tools. I also like that it's been in business for over five years so it shows some longevity in the Shopify app store space. And the last comment I'll make and I'll hand this over to you Kai to get your thoughts. But what I love about Shopify SaaS applications and I have acquired one in is it's kind of like SaaS on training wheels. It comes with built in analytics, comes with built in distribution, and obviously a built in customer base as well. So it's really easy to manage. And if you're able to find a good profitable Shopify application like this one, it can truly be passive income. You still have to maintain it, you still have to answer customer support questions. But in terms of just being able to acquire this and just maintain where it currently is today, if churn is under is manageable, these can be Great, great acquisitions. But I'd love to hear your initial thoughts. Guy.

Yeah, absolutely. I like this listing a lot. I happen to be working with this seller, so I know for a fact that it's well prepared behind the scenes as I have a guiding hand in all of this. What I like about this is you think about running a business and you have to make non emotional decisions. Data analytics allow you to do that. You get to make data driven decisions with this type of a product. But then comes the question, how do I have a product like hotjar but not compete with hotjar? Well, that's within this niche. This is the hot jar, if you will, for Shopify. So you're isolated to that niche of Shopify, which allows you to have a little bit of control around who your competitors are. I also like that this runs with lean operations with a noted 15 hours per month. So this already presents itself as a candidate for passive income if with minimal demands, if that's what you're looking for. And then in previous webinars I've talked about growth opportunities sometimes being overly generic. There's at least two of these growth opportunities that I believe are a little bit more detailed than most. It is the ability to get the Built for Shopify badge and the ability to potentially expand to wix. Seem like low hanging fruit in terms of what would I do as a buyer to cause this to grow and mitigate some of that risk too.

Nice. When I bought the Shopify app that I was talking about, it was a small one, but one thing we focused on was just increasing the search store ranking. It was on page three. We pushed really hard to get it to page one and when we did that, we basically doubled the growth. So if you have experience in any of these things here, it could be pretty easy to get this thing to pick up on some growth. So yeah, I love this one. Kai, you want to move to the next one?

Yeah, let's take it to the next one in which we have an agency here. And so what this company does, it provides scalable link building to improve SEO performance for large portfolio companies. When we talk about agencies, my focus is how do you set yourself apart from other agencies? What is your quality of work? How do you achieve that within your profit margins? And how do you maybe combat the natural lack of recurring revenue here? And so with this listing we see some things that we like. The relationship based approach, highly detail oriented to be executing on a high level. So it seems like this agency is taking the time to do things right and is looking to find a new operator to help them scale. So naturally a conversation comes about is, would the owner stay on in a certain capacity? Is there an opportunity to grow from what they've built over the years to something even bigger and better? When we look at how the system is built, we see some language around proprietary systems on Airtable and so when it comes to SEO, it could be a dime a dozen. But we want to know how unique is this SEO link building in what they do, right? We don't want to make sure, we don't want to have a business that is white labeling a service and just selling it as their own. We want something that's unique and can differentiate itself from all the different SEO competitors out there. Last thing that I'll put here is how do I dive deeper? So as I get to know this listing and the seller, I want to know about proof of performance, I want to know customer testimonials, case studies, and I want to know the ins and outs of SEO link building in terms of what are they doing to get these links? Are they deploying white hat tactics to get these and not running the risk of maybe getting some links that can expire or be a threat to the business in the long run.

The first question I would have Kai, and let me know if you know the answer to this. Is the revenue recurring or is it one time?

So this revenue is on contract. So essentially the contracts are about six months at a time and then they have repeatability. So it's not a full on subscription. I actually happen to work with this seller as well. Not a full on subscription, but it is contractual based for about six months at a time and they have a good history within their panel of showing that customers come and go and then decide to come back again for that six month period. So in an agency, unless it's productized, you want to know what is my reliability factor and that's looking at the historic data within the customer base and saying who's using our services and was our execution of the service good to say that they would come back again to use it when they need it.

Gotcha. I think for a new buyer there's probably huge opportunity to implement some sort of recurring subscription service. Because search engine optimization is pretty ongoing. You're always improving your search engine rankings, you're always going after new terms. I remember we had a different business where we were helping them sell and they had purely recurring revenue based services and that one had gosh, more offers than I could count. So I think this one I Could see doing really well. I also like the tech stacks just being airtable. So this in my mind is a great acquisition. If you own a different agency and you want to add SEO services to your existing business, or if you're just an individual and you want to have a company where you don't have a lot of R and D, you don't have a bunch of engineers, you can just focus on the sales and the marketing of these services or the delivery. This could be a great business. I've seen some very, very profitable SEO agencies. Another thing I like about these businesses too, guy, is you don't need to be the number one agency for SEO services to win here. There's 500 of them, I should say 500,000. And if you come in a thousand place, you're going to have a really, really substantial business on your hands. So I think that would be my question is around the specifics, around the services they do offer. Have they tried different type of pricing models or subscription models? Would any of their customers be interested in something like that? But overall, I love this business. I think the margins are great. I think the asking price is right where I'd like to see it as well. I think this one's going to sell quick.

Yeah, absolutely. And I also like that the customer that they target, larger brands, portfolio companies based in the uae. We want to know where are these customers coming from to see how much of a global reach they have. And to the question in the chat on the team size, we see just the natural acquire listing brackets. We have the 2 to 20. That's a pretty big range. I know for a fact that this is not a 20 person team. This is a smaller team with some of the founders wanting to stay on if needed. So we want to say, hey, if we are to expand, if we are to scale, can the team handle that increased capacity or is this a situation where we start to think about hiring more to allow us to achieve the same results we have at a large scale?

Completely agree. Great business. Cool. All right, moving on to the next one. Kai, you care if I kick this one off?

Yeah, go right ahead.

Okay, this is a SaaS company, a portfolio of five productivity apps. Asking price 1.3 million. The multiple here is 3.3 times profit or 1.6 times revenue. Trailing 12 months revenue. 816,404 trailing 12 months profit. Oh, look at all these stats right here. Okay, 4.4 million total installs. Okay, so this is a portfolio of iPhone applications or iOS applications in the itunes app store and they have a premium subscription service which is generating the recurring revenue. And I have to assume that these five applications are possibly somewhat synergetic and recurring revenue over 800,000 annual growth 20%. Okay, so my, my first question on this business, if I was going to talk to the owner, is I would want to understand how many free users are converting into paid customers. For example, they have 4 million total installs. How many of that as a specific number are converting into customers? And what is that opportunity from free to paid customers? Is there a lot of free customers where we could implement some things to increase the number of paid customers on a subscription each month? But overall, like, like the, the multiple they're asking for, I think the longevity of the business is interesting as well. Six years. So you know that these applications aren't just riding some sort of hype or are gonna maybe decline in revenue quickly. Overall, looks like a healthy business to me. Kai, what are your, what are your initial thoughts on this?

Yeah, my initial thoughts with this is as a group of apps, I want to know exactly what the apps do. I did some diving on this one and this seller actually has a very thorough overview document behind the scenes. Perhaps some of that information could be extracted onto the listing to better its cause. But since we're here on the call, I can tell you a little bit about it within confidentiality. So these tools work as office tools. So things like call recording, fax sending, vpn, doc scanning, those types of things. And you're absolutely right. With that sheer amount of installs, we want to know who's sticking around. And we see that there is an LTV here of a little over a year for the clients that stay on. We also see a lean team in terms of the risks that I would be evaluating is what continual innovation would I have to do with these apps. One of them on that list being fax sending. And we think about our faxes getting phased out or will they have a place as time continues. So to keep this moving forward, innovation always has to be one of the items you think about as the head of a business. My one question to you, Andrew, is as a group of apps, if a buyer were to come forward and say, hey, I like one of the apps, or maybe two, three of the apps and wants to only buy a portion of the five, is that something that you would be open to? Is that something that's even allowed on the marketplace?

That's a great question. I think it depends on the size of the applications. So there's five of These in this listing right here. But is one of them really large and the other four are really small? Is there an equal size to each of them? Is one more valuable than all of them by a quite a large margin? I think that would be the biggest hesitation I would have. But you're free to ask. I think it's a great question. The owner of these is welcome to pull these out, sell them as individual applications or sell them in a a bundle and that's the only thing they're looking to do. It's entirely up to them. But I think that would sway the decision. Is like one large application and four smaller ones. And if they sell the large one, what happens to. Because then the four smaller ones would probably be harder to find a buyer for. But absolutely, yeah, you can ask and see if it makes sense. But that would be the reason where I could see things making more sense for the bundle if they're not all equal size.

Yeah, absolutely. Certainly as a buyer when you ask these types of questions, you always want to put yourself in the other side's shoes and vice versa. If buying one of these apps out of the five negatively impacts the ability to sell the other four, that might be a deal breaker for the seller and just talk it through with them and perhaps it's not an obstacle and then it happens to just be a multi sale on the bundle instead of altogether S5.

Yep, well said and completely agree. All right, Kai, you want to, you want to kick this one off?

Yeah. So this one is a 10 year old time tracking solution within the Microsoft ecosystem. So in terms of tenure, we like to see the businesses that have eclipsed the three year marker. And one of the main things that I look at with this one is we do have a growth rate even in that long timeline. So it's not declining at least over the last year compared to now, which is good to see within the Microsoft ecosystem. That's great because Microsoft is certainly a predominant name. So it's streamlining with tools like Outlook, Teams Planner, things like that. What I also really like about this listing is the reach. It states 800 companies served worldwide. So customer concentration risk certainly isn't a factor here. If you have 800 clients, I'd like to know more details about that. And really we look at the growth opportunities then is with my flag planted in this ecosystem, if I'm looking to expand, are there other offerings that I can synergize with in the Microsoft ecosystem to allow me to continue onward and upward through the following years as we get to year 15 as we get to year 20. So I really like these things. In terms of the only caveat, and I'm sure you see this too, Andrew, we look at the last month's profit of 2 negative 2k and we want to just know a little bit more about that and assess the expenses at a more detailed level.

Yeah, I think that's a good call out because with the negative profitability here, were they investing to grow the business? Was it a down month compared to other months? So diving in on that would probably be my first question. I also think a, a good question to ask is how are they getting to the 7x annual recurring revenue multiple? How are they viewing this compared to other SAS businesses on the market today? 28.6 times profit. That is, it's a pretty high multiple from what we tend to see in this size of business and category. So just understanding and asking the owner of the business could be really helpful in terms of understanding how are you getting to that? What are you basing that on? And then also what I would love to know is how are they acquiring customers? Are they in a Microsoft Teams Store? Potentially? Is this a standalone application that is just integrated with Microsoft Teams and Outlook? But overall, I love these businesses. I've used all the competitors here. I think this is a great business to acquire. If you, if you're extremely bullish on remote work and you want to make a bet on that just growing in the future, which I think would be a pretty good bet. I like how this has what appears to be a B2B play and also a B2C play. So you could sell to companies that have remote teams. And for more context, what this, this tool specifically does is if you have a team of engineers or you work with freelancers and they're working remotely and you want to pay them hourly, you have them install this software on their computer. It tracks their time and gives a report of how much they work at the end of the day. Whether that's a few hours here and there or eight hours at one time, you can catalog that specific time and pay them accordingly. So I love these tools. But again, I'd wonder, you know, what is opportunity? Is it on the B2B side? Is it the B2C? Are you able to sell into larger companies or smaller startups or individual freelancers? I think all those markets are really interesting. I also like how it's international surprising. I think that's actually a plus. If you're in the United States, I think you could potentially replicate what they're doing in Europe and just bring that over to the United States. It's in my opinion, it's usually harder to start in the United States and then go to Europe rather than acquire business that's operational in Europe and profitable already and bring that back to where you live, which I assume might be the United States. So overall, I love these tools. I think It's a great SaaS application. I like how it has integrations with some well known names. It's at. It has some sort of scale. So there's enough there to really work with existing customers, enough to learn from to potentially go get more of those customers in the same way. So that's my initial thoughts. Kai, would you. Anything else you want to add to this one?

Yeah, more so just conceptually we talk about the asking price and we talk about this as being a great business because it certainly is. There is this concept with all listings if you're a seller on this call or a buyer, where the asking price can put up a psychological wall and prevent a buyer from getting to the other side and seeing the true value of business. So as you create your listings, the more you can articulate the value, the more you can describe the path to profitability and where the expenses are going early and often the better. So one of the best parts about this listing is that kind of secondary area in the description where it lists a lot of the metrics. Any more around that is valuable, ltv cost of acquiring a customer, et cetera. And then as a buyer, explore, get behind the scenes, come to the seller with the key questions that allow you to execute your evaluation process. Literally pepper the seller with questions and find out what you need to know so both parties can move efficiently and make a decision on whether this business is for you.

I like that 100 agree on the, the asking price too. And if you're looking at these, these multiples, generally most of our buyers are going to be looking below this. And we could tell by how they're setting up their filters, so how they're looking at different opportunities within the marketplace. So just getting an understanding of how they're getting here would be huge. Because there might be something that we don't know. Maybe they have some exclusive partnership or the product is far more difficult to build than we know. There could be a number of factors that would influence the valuation to be on the upper end that we see. All right, let's move on over to the next one. Kai, you care if I kick this one off?

Yeah, yeah, go ahead and take this one.

Okay. I'm fairly familiar with this business, so I, I really like learning more about this company. But it's a SaaS startup. It's located in Australia. Payment processing software to manage and process payments from bank accounts and cards. Asking price, 1.3 million multiple, 4.1 or 4.5 times profit or 2.4 times revenue. This company is essentially think of it like a Stripe or a Square competitor that's been around for over 20 years. Really healthy margins based in Australia. What I love about this business is creating a payment processing company is not easy. There's definitely some technological barriers, then also some regulatory barriers to ensure that you built a product that can handle credit cards at scale. So I think this one has a great base to buy the company and potentially improve it to a point where it's a little bit more competitive in today's market. And that's not to say it's not competitive with other solutions, but these markets are just so big. These are multi billion dollar markets. I believe Stripe's last valuation was $90 billion. So there's definitely a way to grow this to, let's call it 1, 2, 3, 4, 5 million a year, 10, potentially, potentially beyond that. But I think there's some feature parity you need to catch up to. So learning where those gaps are would be the first thing I would do. But again, I think this one has a lot of potential, either as a standalone business or one that you integrate into an existing company or even look to expand to different regions or to different markets. I again, I really like learning more about the owners and this business and just how it's been able to stay around for 20 years in this market. There's been a lot of changes. So, Kyle, I'll pass it over to you. I'd love to hear your thoughts on this one.

Yeah, absolutely. This is a rare one in terms of the length of time it's been in operation on the marketplace here. We see that 20 year going on 21st year marker. And that's great to see. Not only do we see that, we see a 5% growth rate in terms of the last year compared to here. When you talk about the opportunities, you hit the nail on the head and you talk about expanding from the Australian markets into other markets. So a lot of my angle as a buyer is looking to understand the tech and the functionality. While there's a stronghold on the Australian markets, what do I need to do to go into other countries and take this international from where we are? If the product is built to scale, I Need to make sure that I have someone available to talk to on the team to give me that confidence. And certainly within the niche here we have FinTech. FinTech's very popular FinTech often viewed as a vertical SaaS like isolated within that financial industry. So this is a really exciting one. The one thing that I would ask for here is over the 20 years, what do they do for security purposes? Is I a lover of security, cybersecurity and all sort of data security. When you're dealing with people's financial information, one wrong move and you're going to lose your customer base. And clearly they haven't done that yet. So that's a great thing. I want some confidence on the security measures that are intact so I can ensure that I am a safe place to reach out to in terms of using my credit card and items like that.

I think that's a great question to ask because 100% their entire reputation is based on security and be able to process payments for people, people without bad things happening, without getting hacked, without losing that information. And if that does happen, the business will, will definitely take a hit in the wrong direction. So you're right, they're definitely doing something correct. But understanding that on deep level, I think is, is a great move if looking at this business.

Yeah. And the hacks are getting stronger and you could argue that people aren't paying attention to what to do to avoid the hacks too. So it's, it's an ongoing battle.

That's true. You're the, you're the expert on those as well. So I'll, I'll believe you. All right, you wanna, you wanna take this one, Kai?

Yeah, yeah, let's take this one. So this one being the web development for bubble plugins. So this one specifically is a very unique one. Right off the bat, if we look at the profit margin, we see that Profit margin of near 99 in no math involved in that estimate, but great profit margin. This is a income stream, a passive income stream to the seller. So in terms of candidates for that, if that's something you're looking for as a buyer, this is immediately something that you want to look at and explore because that gives you a low maintenance, low time cost ability to just make money on the side and then we start thinking about the growth opportunities. So these plugins are geared for mainly bubble developers that use them to improve the functioning of their web apps and it allows for customization that wouldn't otherwise be achieved. Other things I like about this is, you know, we see that this was a side project on the side for the seller. So that happens in the entrepreneur life. We see a lot of these listings that they may be stumbled into and all of a sudden they have a full fledged business that they just haven't realized to its full fruition. And given the other priorities they've taken in their life, they're looking to get this off their hands into someone who has the time that is more capable. So an interesting angle in terms of talking to the seller of why they're looking to sell here. I think this is a great one, especially if you're familiar with the bubble world. They have an established presence in the bubble marketplace, which is also good if we're trying to stack up against the competition. So overall, I would get in here and talk to a seller on the profit margin alone. I would imagine this is going to be highly 100%.

And I, I've spoken to the founder too. Normally when I see this, my, my eyebrows, my raise, you know, you. Is the margin really that high? And it is, it is definitely that high. We took a call about a month ago, month and a half ago, before they went live, and you know, he was at work and he came out and hopped on the call and described how the business works. And this is one of those just beautiful, healthy, profitable, passive businesses where he just has this on the side and it's bringing in over a hundred thousand dollars in TTM net profit. So great business. I also like how it's not too technical. So again, if you're not tech savvy, if you're looking to enter entrepreneurship through acquisition, I think this is another great potential opportunity for you. Also, I think there's a lot of room here in terms of experimenting with pricing. I think overall there's just a lot of room to grow this one as well. It's not the most complex business as well. And I think that really speaks to just the quality of the products that this person has, has built. So I love this business. I really loved getting to know the owner. Great guy. I know I have kind of the inside scoop here, but really, really great individual. I think that's important when you're looking to acquire business from someone and just a beautiful business that really does kind of require very minimal time per month, but is very profitable at the same time. So again, I think this is a great acquisition for really anyone, but maybe specifically for someone looking to enter entrepreneurship through acquisition.

Yeah, absolutely.

Did you want to?

I would say yeah, yeah, yeah, absolutely. I'm going to chalk that up to Internet connectivity. I would say on this one too, you look at the multiple we see, you know, high fours, and you want to ask the seller what matters to them in the deal, right? Is it cash down, is it total valuation? You think of it from such a high profit margin. As a buyer, what's my return on investment and how am I going to get that back? Obviously, if it stays consistent, then you have the math there. But you think about what the growth levers are, what new plugins are available to add to the suite, what plugin maintenance is there to be done, and is there any plug in shelf life on some of the existing plugins? The more you can think about that and combine that with maybe if I just put a little bit more time into this. Given the seller right now is only putting in a certain number of hours, my rate of return is actually much swifter than the asking price multiple that you're going to be.

I would agree with that. Cool. All right, Last, last one. Are you ready, Kai?

Ready to go?

All right. Am I doing this one or are you gonna kick it off?

I think you got this one, but I'll contribute after.

All right. Okay. Another SaaS startup based in the United Kingdom. AI powered platform for a seamless voice, music and video production with minimal churn. Asking price 375,000. 7.5 times profit, 2.5 times revenue, lots of great stats. I love the look of the, the listing on this one. Let's go down here. I have not seen this one, so this is kind of the, the first look for me, if you will, right off the bat. I think this is an interesting product. I think the AI category today is just building a lot, a lot of interesting companies. And I like the traction within five years. I like how it has a, I always like this B2C and a B2B opportunity. What I would want to drive into is what which side is taking up the majority of the revenue, where is the opportunity? And what I mean by that is on the B2C side, you're typically going to see some pretty high churn, sometimes as high as 4 to 5% per month. So I noticed on this listing they said minimal churn. So the first thing I'm wondering is, is the B2B side of the business larger or the B2C? And if it's a B2C, how are they keeping the churn under control to be lower than those averages, which is pretty high. So 4 to 5% per month, that's turning around 50 to 60% of your entire customer base per year which is surprisingly averages for B2C applications. B2B is typically much lower. That's where you're going to see potentially net negative churn where businesses buy the the product or service and they'll subscribe for more usage to increase their subscription over a period of time. I'd also want to dive into the the competitors as well. Just understanding what differentiates their product, what makes their competitors better, where is the opportunity compared to others in the market. And then I always like to see why are they selling. This is always such an important question when you're looking to potentially buy businesses. Just understanding what is the motivation behind the seller, what is driving them to sell the business and this one looks like business challenges and, and health reasons as well. So I think overall this is a a great business. Great growth rate. 20% 220000 annual recurring revenue. Kai, that's, that's just my initial thoughts. What do you think?

Yeah, I like this business. It's. It's a little unique in terms of what it does. Yes, it's AI, but it is advanced content creation. From my analysis, doing things like the voice dubbing, music generation, video creation, things like that. I think I even read doing things like the voice dubbing, music generation, video creation, things like that. I think I even read AI assistants in there. So a little bit of versatility in what it's providing in the content creation field. What I like about this too is a lot of active users. We see 7,500 there. We also see the 80% revenue coming from repeat users. And in the business model I think we have at least a micro lens on the direction of churn. You see it's heading in the right direction over the last three months, 9% to 5% and also a reason for that. Obviously when we see trends we want to tie them to a legitimate reason. It seems the seller has a good temperature on his business as they should and is attributing that to UX UI improvements. That's also great to see. The only thing that I maybe don't like here or at least want to get more information on is it there are some lifetime deals within that and I want to know what are the expenses to customers that are on lifetime deals? What are the upsell opportunities and cross selling opportunities there? And my last question is more so for you Andrew. They mentioned an additional offering in the asking price reason which seems slightly adjacent to the offering itself. I wonder if this is synergistic with what's being offered or Maybe deters the buyers from what's at hand. So that's, that's my first question there. And then I have actually a second question, but let's, let's start there. With this additional offering, do you feel like this is a good move or maybe we should focus on the, the predominant offering first?

Good question. I mean my first question is if I buy the core product, what happens to the additional offering? Is it competitive? Is it, was it created by the, the same team? Why isn't it just bundled all together? I think it's a little odd, to be honest. I think I definitely want to drill down on this because again, I feel the core product and the additional offering, it would probably be best if they go together, but maybe there's a clear reason for that. Yeah, but I think I'd just start there, just under understanding what is the logic behind separating them? How do they work together, if at all, what is the benefit of, you know, if you acquire the core offering, why would I want the additional offering? Do I need the additional offering then if so, I started to have questions. Well, why don't we just bundle everything together? What was the thought process for having these separate? So that's a great question. I think something that needs to be discussed with the owner.

Yeah. And for the sake of transparency, I do appreciate the owner putting it out there because that's how you have to lead. And given it's in beta, it's in the open to offers category, it's worth the conversation to see if it's going to be part of the deal or not. Very quickly in the conversation, my last question to you here is on the main offering we see a close knit Facebook community of 2000 plus. What value, if any, do these types of communities add to the deal? Whether it's Facebook community, maybe a discord Twitter account, things like that.

Another great question. I mean any sort of community or social account, I'd also throw in newsletter with a lot of subscribers they can reach really be the marketing engine behind the business. So maybe it works as a word of mouth flywheel. Maybe it's a giant feedback form. Maybe it's a core part of what makes the product special, where people are constantly talking about it helping others so you don't have any customer support costs. But typically, I mean if you have a large social following, that can be beneficial because it's built in distribution, it's a built in marketing channel. Same with the, a large newsletter as well. If it's separated where it's used to, you're Used to sending it, sending the newsletter subscribers content, you can promote your product or service and then you can also grow these assets as well. You can grow the social media following, you can grow the community as well and then finding a way where they work together. So the first thing I would want to ask the owner is what do you use the community for? What? How did you grow it? What are you using it for today? What's the biggest benefit of having this? Why should I be excited? And just getting those answers alone will give you so much context in terms of where is the value, what is the opportunity, how far can this potentially how much more can you grow it? But that's how I like to think of them is distribution channels and sometimes also channels that can cover customer support, product feedback, some really valuable channels.

Yeah, that makes a lot of sense.

Okay, I had, I had two questions. Let me see if I can bring these back up. So the first question I would have is when it mentions Churn, one really important question here is is this monthly or annually? 9 to 5% annually is top tier. That is excellent, excellent retention 9 to 5%. That's where we start to get into the, the B2C averages. So I think that might answer my first question with the majority of customers being on the B2C side. If it's on the B to B2B side, I think this would be probably more pause for concern because now you're over the average turn of a B2B business. And the next question I would have is more around just the technology and how it's being powered. Is this open AI wrapper, Is it using its own large language model? How is, what is the use case for AI here and how does that power the product? I'm not a voice software, music software expert, so I, I don't know exactly how this works but that's what I want to dive in understand are they maintaining a very complex product feedback, some really valuable channels?

Yeah, that makes a lot of sense.

Okay, I had, I had two questions. Let me see if I can bring these back up. So the first question I would have is when it mentions Churn, one really important question here is is this monthly or annually? 9 to 5% annually is top tier. That is excellent, excellent retention 9 to 5%. That's where we start to difficult, challenging to build piece of software or are they just using an API for a larger company like OpenAI? Right. But overall I think this is a very interesting product. Again, I think AI products in my mind can be a double edged sword. They present a lot of opportunity. It's really interesting takes on new markets. But at the same time just what is the longevity of this? Is it something I get into the, the B2C averages? So I think that might answer my first question with the majority. Is there platform risk? Are there other products that are already surpassing this? Because AI is moving just so incredibly fast today. So that would be my initial questions. So that's all the listings. Now I think we'll do a little bit of Q A majority of customers being on the B2C side. If it's on the B to B2B side I think this would be probably more pause for concern because now you're over the average turn of a B2B business. And the next question I would have is more around just the technology and how it's being powered. Is this. Oh that sounds good with you Kai, what do you think?

Sounds good. Looks like we got a lot of questions.

We do. Okay, so if you have questions just feel free to put them in the chat. We'll try to get to them. We'll go to the top of the hour here and see how far we can get. All right Kai, this is, this first question is going to be for you. How can I verify the accuracy of a SaaS company's recurring revenue or financial figures?

Yeah, with recurring revenue you hope, and it really should be this way that they're using a solid and well known payment processor. Processor stripe itself being one of the predominant ones. But you really want a well organized listing as you get into due diligence. Financial diligence is the first thing you got to do and that's where you're matching up dollar for dollar. So you're looking at subscriptions, you're looking at AI.

Wrapper. Is it using its own large language model? How is, what is the use case for AI here and how does that power the product? I'm not a voice software, music software expert so I, I don't know exactly how this works but that's what I want to dive in understand are they maintaining a very complex churn?

You're looking at contracts even in some senses to validate the early numbers to the legitimate numbers. And sometimes that is looking at not only accounting software but bank statements and cross checking these numbers. On the other side of the coin, if you're a seller, prepare for your sale early and make sure that your numbers are easily trackable because that could be a deal breaker.

100 I think the easy answer here is just have them connect charm mogul and integrate that into the listing. You can actually ask potential sellers to do that. You can say hey could you connect your metrics with acquire.com they have an integration with Charmogul and then we can actually verify the recurring revenue the churn and give you a trend line of everything as well. That's, that's just one way. Okay, next question. Difficult, challenging to build piece of software or are they just using an API for a larger company like OpenAI? Right. But overall I think this is a very interesting product. Again, I think how much importance should be placed on the business's technical debt and future product roadmap in the acquisition process? Okay. In my opinion it's obviously important but not above traction, revenue, profitability, those types of things. I think if there's some clear technical issues, those should obviously be brought up and as a buyer you want to catch those in due diligence. But understanding the product roadmap I think gives you a lot of insight into again as the owner, the, the former owner of the business, what would they build to grow the business more or satisfy existing users or customers? So there's a lot to learn. There's there. So if you're looking to build out the product roadmap, if there's a lot of technical debt, AI products in my mind can be a double edged sword. They present a lot of opportunity. It's really interesting takes on new markets. But at the same time just what is the longevity of this? Is it something I should, is there platform risk? Are there other products that are already surpassing this? Because AI is moving just so incredibly fast today. So that would be my initial questions. That's just going to slow everything down and if that's your plan post acquisition is to really ramp up. So that's all the, the listings now I think we'll do a little bit of Q A if that sounds good with you. Kai, what do you think?

Sounds good. Looks like we got a lot of questions.

We do. Okay, so if you have questions, just feel free to put them in the chat. We'll try to get to them. We'll go to the, the top of the hour here and see how far we can get. All right, Kai, this is, this first question is going to be for you. How can I verify the accuracy of a SaaS company's recurring revenue or financial figures?

Yeah, with, with recurring revenue you hope. And it really should be this way.

That their development and R and D and start acquiring more customers and address a lot of the suggestions or feedback that they may have. That's going to slow things down. So knowing about that up front I think is hugely important. Kai, do you want to add anything to that?

Mainly just around what technical debt is to anyone using a solid and well known payment process processor stripe itself being one of the predominant ones. But you really want a well organized listing. As you get into due diligence financial you may not know it's essentially you're assessing your future costs based upon some decisions that were made previously within the tech. So it's usually a decision in the scales around are you trying to achieve a short term goal over quality or are you trying to reach a timeline for the sake of achieving that goal completely? But does that impact the business's ability to scale? So it is a balance, it is a teeter totter about technical debt in terms of what you're accessing there. But looking at the roadmap and its implications is a great place to start.

100%. And technical debt, you know, can, is very, very typical. It just can be caused by different engineers, you know, writing code over a period of time.

Diligence is the first thing you got to do and that's where you're matching up dollar for dollar. So you're looking at subscriptions, you're looking.

At fixing small bugs and they start to add up to big bugs. So it's something to be expected.

But the level of churn, you're looking at contracts even in some senses to validate the early numbers to the legitimate numbers. And sometimes that is looking at not only accounting software but bank statements, technical.

Deck and obviously very. All right Kai, this one, this one's for you. How do you assess whether the seller has fully optimized their SaaS business before selling?

Great question. I would look exactly at product market fit and by that I mean you're looking at key KPIs like retention and cross checking these numbers. On the other side of the coin, if you're a seller, prepare for your what's the churn rate? What's the lifetime value of the customer? If you have this business that is sticky with clients, next thing I look at is pricing. Have I increased the prices? What would the impact of that be? There are so many knobs and levers that you could think about upsell early and make sure that your numbers are easily trackable because that could be a deal breaker.

100 I think the easy answer here is just have them connect, charm, ogle and integrate that into the listing. You can actually ask potential sellers to do that. You can say hey could you connect.

Your metrics with optimizing. But I would start there and then not even lastly. But last in my answer here, I would look at the P L. I would look at the expenses and try to assess what's discretionary.

What is wire.com, they have an integration which are mogul and then we can actually verify the recurring revenue.

The churn truly critical to the business. And that will give me a nice insight on if this is optimized in my mind or not.

I like that answer. I think in my mind, I don't think anyone's fully optimized the SaaS business for selling. I think there's always opportunity. I think there's always different customers to go after geographies to potentially expand into. I know that's kind of the maybe the optimistic view, but I always like to say when a buyer sees an opportunity with a SaaS business, just the ability to breathe in new life and new ideas and new excitement around a business can sometimes reboot. Even a business that may look like it's maybe seen as as much growth as it can. I can see.

I agree with you. I agree with you there. There's a saying more so in my life that I say is once you believe you are the best, you can never become better. And to the sake of a business never being optimized, the moment you think you're optimized, you're probably never going to grow again. So there's always that optimism you need to have about what can I do to grow next.

It's true. Okay. What role does a seller's involvement post sale usually play in SaaS deals? How long should the transition period be? Careful. If I take this guy, we'll just go kind of back and forth on these.

Yeah, go ahead.

Okay, cool. I mean, it depends. So this is a big negotiation, Chip. Sometimes there is no transition period. Sometimes there's a really long one. Sometimes the the founder goes and gets a job with the acquiring company and they run the business similar to how they were when they owned it. So there's extreme, you know, that's the extreme low end and high end. But I think minimum, I like to see 90 days. I think it's important for the, the new owner and the the original owner to just transfer knowledge. How does the business work? Who's the most important customer? How to just how do you run the business day to day? So it's successful in the hands of the acquiring party. But again, it's a negotiation. So usually on the high end you want to compensate the founders for staying on, helping for everything. And then on the low end I typically will see that either the businesses just seeing so many competitive offers that they're able to negotiate a really reduced transition period or they're getting no offers and they sell at a reduced price point. So again, it's, it's a negotiation chip in my mind. But I think minimum 90 days is, is what I'd recommend and what I'd expect from any, any acquisition earn and give you a trend line of everything as well. That's, that's just one way. Okay, next question. How much importance should be placed on the business's technical debt and future product roadmap in the acquisition process? Okay, in my opinion, it's obviously important, but not above traction, revenue, profitability, those types of things. I think if there's some clear technical issues, those should obviously be brought up and as a buyer you want to catch those in due diligence. But understanding the product roadmap I think gives you a lot of insight into again as the owner, the, the former owner of the business, what would they build to grow the business more or satisfy existing users or customers? So there's a lot to learn there. So if you're looking to build out the product roadmap, if there's a lot of technical debt, that's just going to slow everything down. And if that's your plan post acquisition is to really ramp up development and R and D and start acquiring more customers and address a lot of the suggestions or you have any thoughts on that? Kai?

I would just say I agree with you on the 90 days, three months being pretty typical and most deals just says good deal hygiene 100.

Okay, how do you evaluate the competitive landscape of a feedback that they may have that's going to slow things down. So knowing about that up front I think is hugely important. Kai, do you want to add anything to that?

Mainly just around what technical debt is.

To anyone who SaaS business being acquired.

My answer on this one is be a customer or pretend to be a customer. And as you're searching for that need, you can see who else comes up. And if the business you're looking to acquire comes up, then they have, you know, good marketing, good brand impact. But you also get to who may not know. It's essentially you're assessing your future costs based upon some decisions that were made previously within the to see who else is out there. As you go through the customer journey, you start to see what the threats are. So that's one angle to take on it and Then deeper in diligence you look for customer reviews, testimonials, tech. So it's usually a decision in the scales around are you trying to even assess, you know, whether I'm in a marketplace like if I'm in the Shopify marketplace, what are the threats to Shopify? Can Shopify build something like this? Is there a likelihood that they're going to build something like this to pose a threat to achieve a short term goal over quality or you're trying to reach a timeline for the sake of achieving that to my existing business no matter how good it's doing right now. So a lot of angles to take in it but I think that the main takeaway goal completely but does that impact the business's ability to scale? So it is a here's try to be a customer and see what appeals to you see what comes your way in terms of other options if you were to be searching for that need.

100 I'm going to take a cop out answer here. I'll just type it in a chat GPT. I use chat GBT for so many things now but seriously just a balance.

It is a teeter totter about technical debt in terms of what you're accessing there. But looking at the roadmap and its implications is a great place to start.

One hundred and technical debt, you know can it's very, very typical type in company name who are the top five competitors and you'll just get a list how is company and obviously double check the answers. But if you have five minutes and you're looking at a lot of different deals that could be a quick way but guy your answer and and suggestions were were great. I can't, can't agree with them more. So let me.

Can I ask you a question on this one too?

Yeah.

So so how do you feel about.

Well it just can be caused by different engineers, you know writing code over a period of time not fixing small bugs and they start to add up to big bugs. So it's something to be expected.

But the level of using things like similar web or Crunchbase to take a look at some of the industry trends.

Do you think that technical deck can obviously vary? All right Kai, this one, this one's for you. How do you assess apps? I use them all. Similar web is great for analyzing inbound traffic, whether the seller has fully optimized their SaaS business before selling.

Great question.

I would like organic traffic. What I love about similar web is you can stack a bunch of different competitors and analyze all their traffic inbound so that's a great resource. Crunchbase is good to just give you insight in terms of what investors do they have.

That's exactly at product market fit. And by that I mean you're looking at key KPIs like retention. What's the churn rate? What's the lifetime value of the customer? If you have this business that is.

The reason I would use it. Similar web is powerful to analyze. How many backlinks do they have?

What's their sticky with clients? Next thing I look at is pricing. Have I increased the price?

Is it most of the traffic coming from social organic direct.

So I'd recommend this is what would the impact of that be? There are so many knobs and levers that you could think about optimum and.

Similar web before Crunchbase but both are great resources.

Yeah, awesome.

Semrush is another good tool if anyone, anyone needs a third.

Okay, absolutely.

I'm gonna, I'm gonna take this one.

And then I'm optimizing. But I would start there and then not even lastly but last in my answer here I would look at the P and L, I would look at the expenses and try to assess what's discretionary, what is.

I'll get your thoughts on it.

But okay.

What are common mistakes buyers make when.

Reviewing truly critical to the business and that will give me a nice insight on if this is optimized in my mind or not.

I like that answer. I think in my mind I don't think anyone's fully optimized the SaaS business for selling. I think there's always opportunity. I think there's always different customers to go after geographies to potentially expand into. I know that's kind of the maybe the optimistic view but I always like to say when a buyer sees an opportunity with a SaaS business, just the ability to breathe in new life and new ideas and new excitement around a business can sometimes reboot SaaS financials. And how can we avoid them? Well the first one that comes to mind is just taking everything at face value. Like if Something says exactly 200,000 in TCM profit and you just believe that that is a huge mistake right there. And also depending on, you know, the size of the business, I think everyone should do this. But it's just not easy food. Even a business that may look like it's maybe seen as as much growth as it can.

I can see I agree with you there. There's a saying more so in my life that I say is once you believe you are the best, you can never become better and to the sake of a business never being optimized. The moment you think you're optimized, you're probably never going to grow again. So there's always that optimism you need to have about what can I do.

To potentially getting a third party to review the financials. You can sometimes find discrepancies. Sometimes just it just happens, you know, depending on how you're looking at them. So I'd say kind of the main two is just not knowing how they should be reviewing them.

And I think the big growth next it's true.

Okay. What role does the seller's involvement post sale usually play in SAS deals? How long should the transition period be? Careful. If I take this guy we'll just go kind of back and forth on these.

Yeah, go ahead.

Okay, cool. I mean it depends. So this is a big negotiation chip. Sometimes there is biggest function of that is some buyers just aren't financial whizzes and they aren't going through the Excel P L that deep enough and that's okay. I'm not a financial wizard myself and sometimes that stuff can look like hieroglyphics to me. But if that's you get someone who knows how to go over that material and to really model out how things are being presented so you can get another opinion. Kai, I'd love to hear your thoughts on that one.

Yeah, I think one of the common mistakes is assuming that the growth will continue.

No transition period. Sometimes there's a really long one. Sometimes the the founder goes and no.

Growth is going to continue forever. So similar to our previous question assessing.

The competitive gets a job with the acquiring company and they run the business similar to how they were when they owned it. So there's extreme, you know that's the extreme low end and landscape.

Doing the SWAT may give you insights on when that wave is going to stop.

My end but I think minimum I like to see 90 days. I think it's important for the the new owner and the original owner to just transfer knowledge. How does the business work and what.

You can do as the new operator to combat it or start a new wave. That's one thing that I think maybe gets often overlooked. And then if we're also looking at the expenses and the revenue and the P and L overlooking things like lifetime values, one time payments, those types of things those have to be evaluated differently.

Than who's the most important customer. How to just how do you run the business day to day so it's successful in the hands of the Acquiring party. But again, it's a negotiation. So usually on the high end, a.

Subscription revenue with a low churn rate. So just deep diving those financials to a point where you feel comfortable as a buyer, it is your responsibility to conduct DD and it is a buyer driven event. So make sure you're asking for the things that you need to feel confident to close the deal and on top of that in an efficient amount of time so you, you can stand out.

To the seller 100%. I was taking a question too literally like who, what mistakes do you make when you're actually looking at, you want to compensate the founders for staying on, helping for everything. And then on the low end I typically will see that either the business is just seeing so many competitive offers that they're able to negotiate a really reduced transition period or they're getting no offers and they sell at a reduced price point. So again it's, it's a negotiation chip in my mind the, the P and L to verify it. But to add on to what you were saying, Kai, I think a lot of buyers will look at just the top line revenue number as the most important number. But if profit is minimal compared to the top line number, that's what the focus should be. But sometimes that large number can stand out to a lot of first time buyers. I think it's important to ideally be looking at profit a lot more than just revenue. All right, let's keep going. So we got five more minutes here, Kai. Let's see if we can get maybe two or three.

Okay.

All right. Should a buyer focus more on the profitability of a SaaS business or its potential for growth and why?

This is a great question. I'm going to start off with both, but then it depends on what your buyer Persona is. The reason I say both is it depends on what you're bringing to the table, what type of business you're looking for. If you're looking at early stage businesses, you probably aren't going to see too many that are profitable. They could be in their growth phase and their profits are going fine.

But I think minimum 90 days is, is what I'd recommend and what I'd expect from any, any acquisition back into the company.

One thing that you can look at too, and maybe you're familiar with this, Andrea, is the rule of 40, which is essentially a benchmark where you're looking at growth rate plus profit margin. And if that is 40 or above, the business is technically deemed into a reasonable state to continue evaluation.

100%. I think like you said they're both important. One thing I don't like about when potential for growth is outlined too much because it just begs the question of why haven't you done this? I always like to look at current execution. So what has you have any thoughts on that, Kai?

I would just say I agree with you on the 90 days, three months being pretty typical and most deals just says good deal hygiene 100.

Okay. How do you evaluate the competitive landscape of a SaaS business being acquired? It's all you got.

My answer on this one is be a customer or pretend to be a customer. And as you're searching for that need, you can see who else comes the.

Startup accomplished today rather than what they can accomplish in the future. Because I think the potential for growth can be wildly over exaggerated sometimes. So I think keeping the focus on profitability is, is better to do for SaaS businesses and then you as up.

And if the business you're looking to acquire comes up, then they have, you know, good marketing, good brand impact, but you also get to see who else is out there. As you go through the customer journey, you start to see what the threats are. So that's one angle.

As a potential operator understanding you know, what growth opportunities can you quickly point out. Are you a sales expert? Then maybe you can figure out some ways to sell the product or service more. Are you a marketing expert or a conversion rate optimization expert? Figuring out the growth model that aligns with your skill set I think is more important than the, the generalized. This is how much this business could grow. All right, what are the best ways to identify hidden risks in the business's.

Operation or to take on it? And then deeper in diligence, you look for customer reviews, testimonials, you even assess, you know, whether I'm in a marketplace, like if I'm in the Shopify marketplace. What are the threats to Shopify? Can Shopify build something like this? Is there a likelihood that they're going to build something like this to pose a threat to my existing business no matter how good it's doing right now? So a lot of angles to take in it, but I think that the.

Main takeaway technology infrastructure. Oh, that's a good question. All right, I'm going to take kind of an easy route out of this one. I would just try the product and service, go through everything, email, custom customer service, get a hold of a salesperson if they're there, click on every button, try to break the thing, you know, you know, be like an intense user and you might find a Couple bugs. You might see that no one's, no one's home when it comes to support. You might not be able to use the product. But using the product from start to finish I think is a great first step to understanding where the, the holes might be. I don't know what your thoughts are, Kai.

I agree. I know you said that was an easy out, but I think that's a logical answer is you do want to get that hands on experience. The other thing that I would add in here and here is try to be a customer and see what appeals to you. See what comes your way in terms of other options if you were to be searching for that need.

100%. I'm going to take a cop out answer here.

I just, I think we saw it on one of the listings. I can't recall which but it literally said on the listing our CTO is available and we'll take calls to do a technical dive. So if you can luck into that situation where the whole team's involved in the sale and they're ready to educate you, they're ready to answer the questions that you have, that surely is a benefit to talk to someone of that technical capability around the questions and concerns you might have.

100%. All right. Well that was, that was fun, Kai and I hope everybody enjoyed that. Will likely be doing another one of these webinars soon. But before I go to anyone in the audience that might be a buyer or a seller, feel free to register@acquire.com as a buyer. You can sign up for our marketplace, get deals delivered straight to your inbox. You can literally set your criteria. Anytime a new business or startup goes live that matches that criteria, you'll be instantly notified so your person know and then as a founder if you need help or support, type it in a chat GPT. I use chat DBT for so many things. Things now but seriously just potentially getting acquired. Reach out. We have expert MA advisory. We'd be happy to talk with you more about your stipend company name, who are the top five competitors. You'll just get a list. How is company business and how we can, how we can assist. So thanks again everybody. That was fun and hope and obviously double check the answers but if you have five minutes and you're looking at a lot of different deals that could be See you all next time and.

We'Ll see you next time. Thanks for being here.

A quick way. But Kai, your answer and suggestions were great. I can't agree with them more.

Can I ask you a question on this one too.

Yeah.

So how do you feel about using things like Similar Web or Crunchbase to take a look at some of the industry trends? Do you think that helps apps?

I use them all. Similar Web is great spray analyzing inbound traffic, organic traffic. What I love about Similar Web is you can stack a bunch of different competitors and analyze all their traffic inbound. So that's a great resource. Crunchbase is good to just give you insight in terms of what investors do they have. That's the only reason I would use it. Similar Web is powerful to analyze. How many backlinks do they have? What's their. Is most of the traffic coming from social, organic, direct. So I'd recommend Similar Web before Crunchbase, but both are great resources.

Yeah, awesome.

Semrush is another good tool. If anyone, anyone needs a third. Okay, absolutely. I'm gonna. I'm gonna take this one and then I'll get your thoughts on it. But.

Okay.

What are common mistakes buyers make when reviewing SaaS financials and how can we avoid them? Well, the first one that comes to mind is just taking everything at face value. Like if Something says exactly 200,000 in TCM profit and you just believe that that is a huge mistake right there. And also, depending on, you know, the size of the business, I think everyone should do this. But it's just not easy potentially getting a third party to review the financials. You can sometimes find discrepancies, sometimes just. It just happens, you know, depending on how you're looking at them. So I'd say kind of the main two is just not knowing how they should be reviewing them. And I think the biggest function of that is some buyers just aren't financial whizzes and they aren't going through the Excel P L that deep enough. And that's okay. I'm not a financial wizard myself, and sometimes that stuff can look like hieroglyphics to me. But if that's. You get someone who knows how to go over that material and to really model out how things are, are being presented so you can get another opinion. Kai, I'd love to hear your thoughts on that one.

Yeah, I. I think one of the common mistakes is assuming that the growth will continue. No growth is going to continue forever. So similar to our previous question, assessing the competitive landscape, doing a swot may give you insights on when that wave is going to stop and what you can do as the new operator to combat it or start a new wave. That's one thing that I think maybe gets often overlooked and then if we're also looking at the expenses and the revenue and the P and L overlooking things like lifetime values, one time payments, those types of things, those have to be evaluated differently than a subscription revenue with a low churn rate. So just deep diving those financials to a point where you feel comfortable. As a buyer, it is your responsibility to conduct DD and it is a buyer driven event. So make sure you're asking for the things that you need to feel confident to close the deal. And on top of that in an efficient amount of time so you, you can stand out to the seller 100%.

I was taking a question too literally, like who, what mistakes do you make when you're actually looking at the, the P and L to verify. But to add on to what you were saying, Kai, I think a lot of buyers will look at just the top line revenue number as the most important number. But if profit is minimal compared to the top line number, that's what the focus should be. But sometimes that large number can stand out to a lot of first time buyers. I think it's important to ideally be looking at profit a lot more than just revenue. All right, let's keep going. So we got five more minutes here, Kai. Let's see if we can get maybe two or three.

Okay.

All right. Should a buyer focus more on the profitability of a SaaS business or its potential for growth and why?

This is a great question. I'm going to start off with bottom, but then it depends on what your buyer Persona is. The reason I say both is it depends on what you're bringing to the table, what type of business you're looking for. If you're looking at early stage businesses, you probably aren't going to see too many that are profitable. They could be in their growth phase and their profits are going back into the company. One thing that you can look at too, and maybe you're familiar with this, Andrea, is the rule of 40, which is essentially a benchmark where you're looking at growth rate plus profit margin. And if that is 40 or above, the business is technically deemed into a reasonable state to continue evaluation.

100%. I think like you said, they're both important. One thing I don't like about when potential for growth is outlined too much because it just begs the question of why haven't you done this? I always like to look at current execution. So what has the startup accomplish today rather than what they can accomplish in the future? Because I think the potential for growth can be wildly over exaggerated sometimes. So I think keeping the focus on profitability is, is better to do for SaaS businesses. And then you as a potential operator understanding you know what growth opportunities can you quickly point out. Are you a sales expert? Then maybe you can figure out some ways to sell the product or service more. Are you a marketing expert or conversion rate optimization expert? Figuring out the growth model that aligns with your skill set I think is more important than the the generalized this is how much this business could grow. All right, what are the best ways to identify hidden risks in the business's operation or technology infrastructure? Oh, that's a good question. All right, I'm going to take kind of an easy route out of this one. I would just try the product and service go everything, email customer service, get a hold of a salesperson if they're there, click on every button, try to break the thing you know. You know, be like an intense user and you might find a couple bugs. You might see that no one's no one's home when it comes to support. You might not be able to use the product. But using the product from start to finish I think is a great first step to understanding where the holes might be. I don't know what your thoughts are, Kai.

I agree. I know you said that was an easy out, but I think that's a logical answer is you do want to get that hands on experience. The other thing that I would add in here, and I think we saw it on one of the listings, I can't recall which, but it literally said on the listing our CTO is available and we'll take calls to do a technical dive. So if you can luck into that situation where the whole team's involved in the sale and they're ready to educate you, they're ready to.