Kalzumeus Podcast Episode 13: Selling Online Businesses With Thomas Smale
Summary
Patrick McKenzie discusses selling his SaaS business, Bingo Card Creator, with FEI broker Thomas Smale. They cover valuation metrics like SDE, the 25% premium for recurring revenue, and preparation tips such as separating finances and documenting code. The episode details the end-to-end sales process, from initial qualification and prospectus creation to due diligence and closing via escrow, emphasizing the importance of maintaining business performance during the sale.
Topics discussed
Introduction to FEI and types of online businesses sold
Valuation multiples for SaaS vs other online businesses
Understanding Seller Discretionary Earnings (SDE)
How market data and growth affect valuation multiples
Preparing financials and separating business entities
Code documentation and reducing owner dependency
Maintaining growth and avoiding pre-sale pitfalls
Deal size ranges and FEI's team structure
Due diligence processes for small vs large deals
The initial consultation and valuation estimation process
Building trust through referrals and honest advice
Buyer profiles: Technical vs non-technical buyers
Infrastructure separation and common seller mistakes
Positioning the business for the widest buyer pool
Data gathering and creating the sales prospectus
Marketing to buyers and managing the offer process
Letters of Intent, due diligence, and closing deals
Contract terms: Non-competes and practical clauses
Transition periods and ensuring a smooth handover
Post-sale life, finding the right buyer, and resources
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