SaaS Acquisitions w/ Ujwal Velagapudi founder of NAVUU

Foreign. We are live.

We were chatting before. We are both from Detroit, which is very rare. But I just want to thank you for coming on the podcast.

Yeah, no, appreciate it. And appreciate you building the platform as well, Microacquire. And it's been a very pleasant journey from end to end. So glad to share it with you.

Appreciate that. So you put out a tweet yesterday that said your best transaction was on Microquire, which I, you know, was thrilled to see. Would love to hear about the deal. I want to hear everything. I want to hear. How did you first spot the deal, what you liked about it, you know, what was the deal structure? Let's just kind of start there and just see where it takes us. Does that sound good?

Yep. So I was. So I've bought a handful of businesses before, and I was primarily looking for a SaaS business because I've never bought something with that technology background or with some sort of software built in. So I was looking on Microacquire for that for months, and I was looking for the cash flow. So that was my whole purpose. And so I knew exactly what it is that I was looking for. And I think that was the key because you can spend months aimlessly searching. But I was very honed in on exactly what I was looking for. And this had popped up. Company called highviron.com, so virtual assistant SaaS platform. And it just attracted me right off the bat. And I think I reached out to the seller within an hour of you sending that newsletter out with the listings. So I reached out and I knew that there were going to be 100 people, you know, 100 plus people reaching out on the platform itself. So I looked, I got his LinkedIn, I got his email address, hit him in every single location, and sent him an email simply stating, serious cash buyer. And I gave him, maybe looking at the email right now, it's about 15 questions that were very, very specific. So I checked out his website, checked out your Q and A that you do with them, and hit them with very, very specific questions that were serious and to the point. And this is one thing that I like to do that maybe folks can use. I said, I will get you an LOI or I'll tell you that this is not the right business for me within two email transactions. So you answer my questions, I'll come back at you with additional questions, and then I'll get you an loi. So he liked that. I've had a few sellers tell me that they like that because it's Very to the point. It's serious cash buyer that's gonna attract a lot of sellers right off the bat. And then that I will be very quick. And we actually had that LOI done within 24 hours, signed and ready to go. And we ended up closing within five days of it going on the market. So it was, I think it hit one day before Christmas Eve, and then we were working all through Christmas Eve, Christmas, and then we closed right before the new year.

Nice. I like that suggestion. Around you have a list of questions, because as a seller, you probably see those and you want to know what the outcome is going to be. And sometimes just getting a no is just as good as getting a yes, at least in sales. So I like that because it incentivizes the seller. Like, okay, if I answer these, you're gonna let me know that this isn't going through, and if it is, you'll let me know. Can you tell me about, like, maybe some of your favorite questions that you asked? You mentioned you had 15, correct?

Yeah. Yeah. Let me actually take a look at them. So in this project, there were. One of the biggest things that I want to hit is in regards to the actual owner and what they're managing. So in this particular case, he said that he was managing only a couple of hours a month. So that sounds, you know, that sounds great in theory, but is that truly the case? So he had his brother, one of his employees, managing it. So I said, how much is he getting paid? Are they going to retain on. Are they going to be able to transition with the business? And for whoever is managing the current operations, do you have any SOPs? And that's pretty big for me because I want there to be a seamless transition. And I can kind of get into that later on how well he made that transition for me. And then I digged into the financials. So there were some details right off the bat that I was provided on Microquire. And so I dug into that and additional items. You know, why was there a decline? Why was there an incline? Why was there, you know, this month? Why were the margins so low? Why are the margins so high in this month? So dug into all the nuances and specifics of that. And then as far as the tech, just the full tech stack, and just digging into where that development cost had gone and where the team is from, how they're doing it. Does he develop it himself? Because I don't have any technical expertise, so that's going to be key for me to dig in and understand Exactly. You know the logistics of that and coordinating that with his development team. So, yeah, just really digging into that. And then also as far as the current clients, the current makeup of the virtual assistants, and just the nuances of the business and current operations.

So based off you got those questions back, everything sounded good. Was there another phone call after that? Was there? Or did you go straight to a letter of intent?

Yeah, so it's actually funny. It's. It's honestly the quickest I've ever done any of it. And it just worked very well because I think I was extremely articulate in what I wanted and I asked the right questions and then he was able to just be on the same wavelength. He answered everything promptly. And we had an loi. We've exchanged maybe a handful of emails, actually ended up being. But we vetted out the LOI and didn't talk till almost a couple days before closing. And because we were going through Christmas and all that time frame as well, so it was a little bit difficult. But I had six different Q& A forms, so we just went back and forth on a Google Doc and were submitting that to each other. So I had I think close to 50 to 80 questions somewhere in that ballpark that we went back and forth on and that he was able to clarify. And then once I signed the loi, we got onto a call and then slowly we worked out additional. I think we had a daily call prior to closing, which was only two, three days. So.

Nice.

It was very quick.

That's extremely fast. Did you have any sort of like post acquisition support in place or anything like that? Like, hey, you'll be around for a month or two in case they have any questions. Did you have any sort of agreement like that in place?

Yeah, so I can go into kind of how it structured the deal because I think I love post seller transition and they've got to be able to support me. Especially this is. This was a new deal for me. It's a small SaaS business, but it's something that I needed and especially when it's coming from the founder. He's not just another owner, but he's the one who's had it since inception. So it was even more vital. And so I put in the contract that he's got to transition everything and I made it a little bit more, a little bit more tangible, a little bit more detailed as far as what he has to transition. So obviously all the assets, all the usernames, passwords and credentials, all the client information, assistant introductions, employee introductions, all those things, the SOPs, everything has to be transitioned within the first five days, and that will provide him a certain milestone so that he can get a portion of the sale proceeds. And then after 15 days, he's got to transition a little bit more. And then after 45 days, he's got to transition the rest of the business. And then I have three months of operational support from his team member that was doing some of the operations. So I structured it in such a way where it's layered, it's tiered, and I can slowly ease into the business as he's transitioning out. And he had throughout that process just such a detailed SOPs in place. And the transition was just that much easier because he had videos for everything. He had SOPs, and if he didn't have them and I requested for it, then he would create them for me. So it was just, it was just such a great experience to be able to work with a seller that understands that and, you know, understands where I'm coming from as a buyer and facilitated that transition.

That's awesome. And I guess my next immediate question is you. You know, I'm sure a lot of other founders looking to sell their business might be watching this and might be thinking, you know, what can I do to best position my business for a buyer like yourself or another buyer, what would you recommend? You mentioned recorded videos, documentation, SOPs. What are like, some of the key things that you think every seller should have when they're starting to speak with buyers?

Yeah, I think, I think there's so much material out there and I know a good book built to sell and things like that that they can definitely keep an eye on when they have that vision a year or two down the road. But most of the time I think we just decide to sell and within a couple months and we looked listed somewhere. So with that in mind, I would definitely say the SOPs and documenting everything, whether they're formalized or not, if you can document every single thing and keep it organized, I think that's what's helped us because all he did was share, share with me a Google Drive, SOPs and videos on how to access and do certain things. And that's it. And that seems simple, but when I go into each and every single folder, it's, it's. There's so much detail in the organization and how he gathered the data. For example, we have virtual assistants. We have every single document from them going back to their college degrees, their, their resumes, I mean, their portfolio of work, everything, and dating back to 2016 since he had started the company, all the documentation from how he had built the framework for the business going back to 2016, all the communication that he had with his development team. And so the full longevity of the history dating back to inception, if possible, that would be great because there's gonna be times where the development team needs to refer back to some of those items to see what worked, what didn't. Email templates, sales campaigns that did work. And even more importantly, probably that did not work. To see are we reinventing the wheel or are we, you know, is this kind of a learned lesson that we can move on from this? So just the history is very helpful, the organization and if there is anything missing, just simply jotting it down. Think of all the things I would say this is what we did on the very last week. We thought of all the things that he currently does right now that is not documented. And then we went and documented it in a actual seller transition meeting. We just had a KT session, knowledge transfer session, and we just recorded that call. So for example, he was doing something with Google AdWords and so he just went through every single thing that he did in the past that worked, that didn't work. Went through all the campaigns and just recorded the session. And so that's just super helpful for me because me as an owner, when I transition off to an operations manager, I have everything, which is actually something that we're in the process of doing right now. We transitioned everything to an operations manager and everything that I had from the seller, I was able to give to this ops manager and it just made for such a seamless transition right now.

Nice. Yeah, I definitely agree with all that advice. So flipping the coin a little bit, if you were to give tips to first time buyers, what would they be like, biggest red flags, things to avoid, Anything you could tell yourself before you did your first deal, what would it be?

Yeah, there's a lot. There's definitely a lot. I've got a list of lessons learned from every single business that I've bought. And yeah, it's a long list.

Let's back up a little bit. I probably should have asked this at the beginning, but how many businesses have you bought and what gave you, you know, your knowledge to make an acquisition as quickly?

Yeah, so it's. I've only bought five so far. Five businesses and they've ranged from sports bar, small gym, to an e commerce business, software consulting business, and so all over the map in terms of what I bought. Physical, online, everything. And then A bunch of real estate, commercial real estate transactions as well. So what really allowed me or gave me the confidence for this was really that sheet of lessons learned that I was mentioning. After every single transaction, I went through and highlighted all the mistakes that I've made or all the positives that had gone on. Because even in a successful transaction, successful business, even if you made money, you're still going to have lessons learned. And so just knowing exactly what to do, what not to do, and what things to look out for, it just provided me that understanding of, okay, I found this business, I know exactly what it is that I was looking for. My criteria is firm, it's set, I'm not deviating from my thesis. And once I found it, I'm going to pounce on it because I know there's 100 other buyers out there. So I would say first and foremost, definitely need to have a strong understanding of what it is that we're looking for as buyers. Because whether it's microquarter, any other marketplace, or even if we're going directly to search and find sellers, there's going to be a lot of folks that are liquid, that are smart, that can act with cash in hand. So if we see something live, that's ready to go and the seller is motivated, we got to be able to jump and pounce on it. So that only can happen if we are comfortable in understanding exactly what we're looking for. So in this situation, I was able to pounce on it within an hour, look through all the details, vet it and request very specific questions. So I'd say that's second to be as thorough and detailed as possible in that initial outreach, because you're saying, hey buddy, is there, can you share a little bit more information about your business that's, that's going in the trash? You know, anything like that, anything that smells like it's very, like it's a novice reaching out. So I would say to step it up to a different level, be very specific, be very, yeah, industry focused specific on the business. It'll just, the seller will appreciate because I've been on the other side and I've just appreciated those questions because they know exactly what I'm talking about. They know exactly what they're talking about. So you just feel like, okay, this person is astute and how they're asking the questions. I feel like they're looking for the right things. And they said that they're a serious cash buyer. They said that they're going to give me an LOI within two Emails. And so they're very responsive, they're very quick and they're asking all the right things. So I feel confidently going forward with this person. So I would say that that's the second thing. And then finally to be able to close a transaction and to go through diligence, I think it's just doing it in a seamless manner. For example, in this case we just shared a Google Doc and went back and forth and it was just great because the seller was responsive, they were taking a lot of their time to respond. But again, sticking with the basics of very, very specific questions that just extracted the process. Because if we were dragging this thing on, had a lot more meetings and I was, you know, taking my sweet time with all that, we would not have closed in five days. So I'd say all those things combined just made this such a seamless process. So of that there's a lot that we can do, like I mentioned. And then obviously on the other side, the buyer or the seller has to be equally a part of that, part of that process for it to be so seamless.

Yeah, I agree with that entire. I really like how you put emphasis on just having emphasis for empathy for the seller, like understanding that, you know, if you just send an email that says, hi, I'm interested, like please answer all these questions, you know, kind of aggressively without a little bit of, you know, what's in it for them? They answer these questions, they're getting an li or they're getting a closed loop response from you. I like that a lot. And then also just building rapport with the seller because you're going to need them for post sale transition and all that fun stuff. I think that stuff's huge. Any, any tips around that? Like, given that you've been on both sides, how can buyers make sure that, you know, they're establishing, you know, really good rapport from the beginning? Do you focus on, you know, the initial out outreach the most? Is it just something you do throughout the whole process? Anything else you could add to that?

Yeah, I think it was just, it was just throughout the process, like once for me, I knew that once they had seen my initial email and responded kindly and they were interested, they were on the hook from the get go. And so I had him at the initial email, they knew that I was serious and that we were moving forward. And even though he's had five other people, I think four other people at the time that he's already spoken to, like within, within 24 hours of us exchanging emails just because it was so hot, there were that many people reaching out to him. And so that's going to be the case with any business, especially if it's really good, it's cash flowing well, there's going to be a ton of interest. So we have to reach out or stand out somehow. So I tried to get him on the hook from the very initial email, which I was able to, and then tried to build upon that by being the first one to put an loi in place. I, I didn't even talk to him, but I knew again, going back to exactly what I was looking for, this was the business that I was looking for. And I was able to do a decent enough diligence up front to know that this is what I want. And so I would say that was pretty key and also to give him the confidence. So everything that I say or every time I speak to a seller, I tell them that if I put down loi in front of you, I am looking to close. I am very serious. I. I'm not giving you an loi so I can diligence. I'm looking to actually close when I put an loi in front of you. And with that thought process, it's because I do so much legwork up front with the seller, without the seller and other diligence, so that once I put it down, I know I'm serious and I'm trying to convey that seriousness and confidence that I have to want to close, not just diligence to the seller. So. So I think sharing that confidence and having him on the same page really helped throughout the process and then also making the terms that were favorable for both parties because one, the seller doesn't want to help us train for a whole year or transition for a whole year. At a certain point, they want to check out. They've had this and they've been working on the sales process for a while. They've been speaking to all these buyers. They want to eventually get out of the business to some degree. Even if they're on a, on a consultancy basis, after some point, they still want to check out. And so I made a finite time frame of three months where you helped me till that point and then thereafter just be on board for a consultancy basis. So. And I had those firm milestones of 5 days, 15 days, 45, and then 90 days. So I think throughout the process, if, like you said about the empathy, just really understanding what they're going through is going to be vital. But every single point, I just tried to keep, keep on pace with them and just make sure that I was eliciting that comfort of my confidence in closing to the seller as well.

That's awesome. This is also helpful and awesome to hear too. So congrats on the acquisition. But with final questions, I'm kind of just curious what's like your goals for the next year or two? Are you going to be looking to acquire multiple businesses? If someone's looking to sell their business, should they reach out to you? What can we expect from you for the next year or two?

Yeah, for sure. So for me, I just love business and I just love to buy, so. So I'm always looking and I'm always interested. This one in particular I wanted as a small portfolio company because it is staffing related and I think I can always keep it in the pipeline for my next business. Right now I'm really looking at a much larger scale business that's about a half million to a couple million in cash flow and to really work on that as my core business. So to build around that or even auxiliary businesses, you know, I'm always looking. So that's my primary focus for the next year or two is to find a larger business and to secure that, to work on that and scale it. But in the meantime, I've got a few other businesses on the side as well that got an operations manager or various managers operating one or multiple businesses. So just building out a portfolio right now. So if anyone's interested, I'm always, always looking.

Awesome. Well, congrats on all your success and if people want to learn more about you or just reach out to you, where can they find you?

Yeah, I'd say probably Twitter is the best spot. It's going to be my first name. Yeah, that's how we got in touch. So yeah, it's going to be at ojwolavelagapudi or you can feel free to always reach out via email. U J W a l@navvu.com and yeah, feel free to shoot me any questions or anything at all and I'd love to help out. Right on.

Well, thanks so much for coming on the podcast, sharing all this knowledge and congrats again on the acquisition.

Yeah, thanks so much, Andrew. Appreciate what you're doing.