DA (03:00):
Hey Greg, thanks so much for joining me today on the SaaS breakthrough podcast. Excited to have you and Empire Flippers here. We're big fans at Demio, so I'm excited to have this conversation. How are you doing today?
GE (03:10):
Yeah, yeah. Thanks for having me on. I really appreciate it. I'm doing great. We were just talking about it earlier today, about enjoying the tropicalness of Vietnam. So yeah, doing fantastic. It's been an awesome day. I've been diving through a lot of analytics, which is always fun from a marketer perspective, right? So.
DA (03:27):
Yeah. Yeah. That is fun for marketing, kind of that data perspective. And yeah, Vietnam and probably similar weather to Tampa, Florida here, hot and humid. I don't, I don't really know how weather it's like out there.
GE (03:38):
You're about right. It's like walking through a pool. Right?
DA (03:42):
That's exactly what it's like. I hear you. Yeah, exactly. But why don't you give us a brief background on Empire Flippers when it was founded, who your customers are and what you're doing uniquely in the marketplace.
GE (03:54):
Sure. So the high level view is we're the number one like largest curated marketplace in the world when it comes to buying and selling online businesses. Usually those are like bootstrapp businesses that, that entrepreneurs have built. As far as where we came from, we actually originally used to sell our own businesses. So we started off selling very small like Adsense sites way back in the day, almost 10 years ago at this point. And what ended up happening, we blogged about that journey and you'll probably notice throughout this interview, I'm very content marketing focused. We blogged about it and built up a pretty big audience. And what was interesting is people started reaching out to us to ask, to ask us to sell their business. And they're like, Hey, we'll pay you a little commission. You have the audience, all that kind of stuff. And we said, sure. And as time went by, that became way more profitable, profitable for us rather than building our own sites. And over the years has now developed into selling, you know, million dollars worth of Amazon FBA, e-commerce affiliate sites and SaaS. So yeah, it's been a crazy ride. Like in 2016 when I first joined the company, there was about, I think five people in the company and now we have about 65. So it's been quite the growth. Yeah.
DA (05:11):
That's awesome. And now from a business perspective, you guys are a marketplace so you list it and you guys take commission of the sale, but you help with the whole M & A process or what you guys actually provide in that kind of marketplace area?
GE (05:23):
Yeah, that's right. So what we do is, so from the buyer side, that one of the unique propositions that we offer is every business that's on our marketplace has gone through our vetting process. So that means we make sure it's a legitimate opportunity that is being represented correctly to the best of our ability and all that good stuff. Make sure the seller is someone that's workable, you know not a jerk and all that kind of stuff. We actually have rules. We don't do business with jerks, so they usually don't pass our vetting process. But yeah, so from a buyer perspective, we help them find deal flow really, really quickly because have so much deal flow. They're able to sort it through our marketplace. Can get a free Empire Flippers account and they're able to use a bunch of different filtering tools and all that, but we also help them negotiate on that business and help them understand where the sellers coming from.
GE (06:11):
And on the seller side, we provide them a ton of buyers. We have probably the most amount of buyers at any given time on our site than anyone else in the industry. And we also help migrations, which is something that I believe we're the only ones that do as far as I know. And that is where we actually help you transfer the asset over. So everything from vetting, negotiations to actually handing the business over to the new owner, making sure the seller gets paid out. I make sure everyone's following the terms, they agreed to all that good stuff is what we do.
DA (06:42):
Wow, that's awesome. Super helpful in that process for anyone who's gone through M & A, you know, how tough that is and what it can be like. And I've heard so many horror stories on like that private M & A process. So that's super exciting. And when you came into the team of five people, what were you initially focusing on? What did the landscape kind of look like from a marketing point of view?
GE (07:02):
Oh man. I was, I focusing on, I came from a pretty different industry when I joined four years ago. So I used to be an oil field roughneck up in Alaska. So I was like, you know, drilling for oil. And then I came into the apprenticeship and I was originally just the blogger. Like I was I got hired as the content managers. I start writing a bunch of blogs. But one of the things I had to learn, like I knew a bit about affiliate marketing, but I didn't know a lot about the other business models that we sold. So I focus on learning that. And there's a little marketing lesson in there I think because by focusing to learning on that, I came up with the idea of writing about the popular online business model series, which is still today one of our most popular pieces of content where I basically break down every model there is, and when new ones come out, I add to it.
GE (07:52):
Now it's up to like a 13 part series of business models, but that gives a high level overview both from a seller and a buyer perspective. Because one thing I thought it was like, all right, well if I was coming to EF to buy a business and I see, Oh, Amazon FBA or SaaS business, Oh, this sounds great. I have no idea what a SaaS is. Well, I don't know if I should buy it. I wish there was an article that could help me. So I wrote that to help people out to understand the business better and just a lot of data-driven pieces too. So that was definitely my first goal was content and I'm still very content heavy. Obviously that has evolved now as I became the you know, the head of marketing over here. But yeah, that was what I was focused on.
DA (08:32):
From that journey till now. How have you guys had to shift your product market fit? I mean, you're a company that works with all types of industries. You talk about all the different business types that come in. One, do you have an ideal customer profile, like a type of business that sells best? Is that what you're focusing on or do you really focus on just any sellable business? And is SaaS part of that as well?
GE (08:55):
Yeah, those are all good questions. So we're not, when I first came on board, our main market was basically digital nomad entrepreneurs. If you're familiar with that term, you know, most of them are running like lifestyle businesses, et cetera. Now as we've evolved, the landscape has changed dramatically. So we still serve digital nomads. That's where our roots are actually in, the digital nomad community. But now we have institutional buyers that raised hundreds of millions of dollars at this point. We have one client that's bought over 15 million from us in the last year now. We have sellers listing seven figure businesses. When I first came on board four years ago, like a really big business, like an earth shattering business to us was like a $200,000 business. And now that is pretty normal. In fact a little bit below normal for us.
GE (09:43):
So the market has shifted quite dramatically there. I wouldn't say we ever give up what we had as we go to the next level because we want to be there for everyone at every stage of their journey on entrepreneurship, whether they're just starting out or whether they are that institutional fund, we want to be that person to help them. And not just with M & A, but with like any problem that they come up with is really our content goal. And company goal is to help people out. But yeah, so it has shifted. One, one thing that is interesting is we have to learn about these people as we grow. So I'm learning about family offices now, private equity, all sorts of interesting things. As far as SaaS goes. SaaS was actually not a big focus of ours until this year, to be honest. We really became the leader in affiliate sites, content sites, and Amazon FBA and e-commerce over the last two years. And we, we really rode that and we're still riding it. But now we're looking to start getting into SaaS more more effectively. And we're starting to produce content around that, you know, starting to figure out, okay, what are the problems that SaaS entrepreneurs face and how can we help them, you know, how can we help solve their problems now just like we did with everyone else.
DA (10:57):
That makes sense. And then from a marketing point of view, if we talked about actual initiatives you're doing, so let's say this year you want to put your focus on SaaS companies, how do you create that funnel process or that marketing initiative to attract them in? What, what's the approach? What have you seen that works well? Maybe you've done it in other verticals for those other industries, the nomad business, the lifestyle business, what else have you done or how do you build that funnel when you make that swap of industry?
GE (11:25):
Yeah, it's a good question. And SaaS itself so far I'm finding is more unique than the other monetizations in a sense. So in the other ones, say in the content marketing space, or sorry, content site space or eCommerce space, there are usually like pretty obvious leadership in there that people follow. There's groups. There's courses people take with people that they trust as experts. So there's a lot of really, for lack of a better word, an easy place for me to target from a content standpoint. SaaS is a little bit more distributed in that from what I've seen so far, there are definitely influencers and leaders in the space. But a SaaS business can be so wildly different from another SaaS business. It's very diversified. So there is some issues there. Now what we are focusing on is strong content marketing.
GE (12:17):
We're pushing deeper into LinkedIn as well, and we're trying to help SaaS people understand that they can sell their business. Because one thing I noticed, I was at a conference back in the land when conferences still happen. At a SaaS conference and it was mainly bootstrap SaaS founders. And I was talking to a few of them and a lot of them who have built a SaaS business to say 2, $3,000 in MRR, they're just bootstrapped solo entrepreneur. Nothing big. Not, not like life changing, but good side project money. They had no idea that they could sell their business. They thought literally they were a failure because they couldn't exit with a VC. So I told them, no, there's tons of investors that want to buy, you know, your little 3000, $5,000 a month MMR business. They're definitely there and it just like their eyes opened wide at the concept, they couldn't believe it.
GE (13:03):
Right. Very motivated then. So just getting the word out there has always been a big part of us. And that is something that is common with other monetizations too. I still meet eCommerce store owners with pretty big stores and they had no idea that they can sell it. You know, a lot of them, they started as a side project and that's what they always kind of view it as. They don't ever view it as enterprise even though it has developed into one over years as they scaled up.
DA (13:28):
Was that conference you went to was that MicroComp?
GE (13:30):
That was, yeah.
DA (13:31):
That's what I figured you said bootstrap. So I figured out that.
GE (13:35):
Yeah, it was really fun. I got to meet a lot of really cool people.
DA (13:39):
Yeah, it's, it's really quality and yeah, Rob is amazing. And, and let's talk about content marketing. You talked about a piece that you have that already, you know, generates a lot of traffic for, you know, different business breakdown types that you did, but you know, what have you guys done on your site for your blog to really, you know, bring in strong traffic that we could talk about for SaaS marketing. Like what have you took away from, from the different types of content you've produced, YouTube, Facebook, all the podcasts you've done. Like what, what have been some winning techniques?
GE (14:15):
Yeah, so the first, first off, the boring answer in terms of how I get traffic is, you know SEO, so really high quality content, backlinks, guest posts outreach and time to rank in Google, right? That is my favorite form of traffic. But in terms of what kind of content we are, we are actually experimenting with video right now. Our main mediums are long form podcasts and blog content. We do have some videos, but that's used for different purposes, more for a sales purpose than marketing purpose. But across all of those mediums, the best kind of content you create, the content that always works the best for us at least is data-driven content. And if you can make that data-driven content part of your data-driven stuff, that's even better. So for example, last year my team, we huddled together to come up with idea of an industry report where we would come out with all the data from our marketplace.
GE (15:10):
And since we sell the most businesses of anyone in the industry and we have access to real sales prices, we were able to take this idea, which originally started off as just supposed to be like a little infographic and then I, I made the problem bigger and scaled it up to 80 page industry report. We were able to analyze over 700 businesses that we sold, right? And we could reveal actual time on market, actual sales price. Everyone else in the industry, they had to scrape you know, different broker's listings to come up with the list price. Then they'd never knew what it actually sold for. So they didn't have the real sell data cause they didn't own it. But we owned it. We were able to do that. And we came out with our second one this year. Also featuring like earnouts and all sorts of interesting new data, and that is a huge hit.
GE (15:54):
And every time we do that it becomes even better. So as SaaS businesses you have like SaaS businesses are so data heavy, you have so much interesting data you can share and if you are stumped on what you can come up with in terms of data, it can be as simple as asking what does my SaaS solve? Like what's the problem I solve? And then going to Quora and asking that problem and seeing what people are asking. Right? and then creating a data around that. I just, the beauty of that too is you get to use it over and over again that the first piece takes forever to create, cause you have to research all the data. But once you have the data, now that data is infusing throughout all the rest of your content and making that all the other pieces of content, even more authoritative because of it.
DA (16:38):
I love that. That's amazing advice. Really powerful. So when you're coming out with these reports, are you from an SEO perspective just trying to get keywords around the question of data or are you looking at more of like a generic keyword? Like how to sell your business and then you're pushing to, you know, the 17 things you need to notice all your business or you're doing it as a report and driving ads to it or all of the above. You're just kind of multi purposing it in different areas.
GE (17:06):
Yeah, that is a really good question actually. I just hired a few new content specialists and they asked me this question and I always give them the answer that frustrates them the most. Would say like content can live at any part of the funnel. It just happens to live in one part of the funnel sometimes then another. It's never quite clear often. But yeah, so how we do it or part of how we do it is we will do, I don't know if you're familiar with this concept but like shoulder niche keywords. So we have a very strong domain rating. So shoulder niche is basically I find a keyword that isn't necessarily super related to my business. It's not about buying or selling, but maybe it's about you know, SaaS sales or how to set up a SaaS analytics or something like that with Google analytics, some keywords around the business I want to attract.
GE (17:51):
So then I write that piece. They come in, I rank for the keyword they come in, they read my article and the article is geared to get them involved with us a bit to get the seed planted to sell their site because or sell their business rather. Cause the time from someone who's coming in cold to the time that they actually sell their business with us often is a 200 to 300 timeline, 300 days that is. It ranges by quarter to quarter. But usually (inaudible) years, about 200 to 300 days from the time they get into our CRM to actually becoming a seller. So it's a very long sale cycle, right? So what I need to do is I build trust. Now I get them onto my site. Now I can start retargeting them and hopefully they get into my funnel.
GE (18:32):
And once they're in my funnel, like actually email subscriber, I don't stop retargeting them. I now am retargeting on the next step of the funnel. And that can include content that has no SEO value at all. One of the examples I give for that is we have this article that's called winning the wire race. And this is something all SaaS entrepreneurs can do. Cause I'm sure there's content that you guys, those entrepreneurs should write that has no SEO value but still has a lot of sales value once the people are in their funnel. So we wrote this piece of content. It's one of my first articles I wrote called winning the wire race. And I came up with this idea because at the time in our company, we always joked if someone's bank wire came in first say there's two competing bank wires for business and one came in first, that person would get the business and the other bank wire we would have to refund that money to the buyer.
GE (19:17):
And the buyer's like, well what the hell happened? I thought I just bought the business like, well sorry your wire came in two minutes late, you didn't, someone else beat you to it. And obviously a very frustrating process for buyers, right? So they didn't know about this or at least not clearly. So I wrote the article about how to win the wire race and the call to action on that piece was how to leave credit on file with us. So if you want to buy a business instantly to make sure you win the business, send us money and then you can just say, Hey, I want this one and we can take it out of your account just like that. And that that single blog post, which has no SEO value, someone's searching how to win the wire race, they're probably not talking about what I'm talking about. But that article has led to millions of dollars in our, in our bank account as credit on file and actually sped up the time to sell a business for us pretty dramatically.
DA (20:03):
I love the fact that you're using content in the different parts of your funnel. So I think of it as like you have that top of funnel attract the industry questions, then it's using retargeting to bring in the next piece of content for maybe more sales intent. And it's really interesting you mentioned, you know, the length of time of your pipeline. I'm sure there's a lot of SaaS companies that have that too. Probably more enterprise and stuff like that. These very long sales cycles. From the personal perspective that it takes to get someone to sell their business. Obviously there's a lot of, you know, relationships that have to be built. You have to have that trust in that process. I know you guys, like you said back before COVID, like did a lot of events. How did that, kind of, how the pipeline and how are you guys approaching these events to build those relationships, to advance those conversations in real, real time?
GE (20:54):
David, I'm so sad about 2020. I had 700 conferences I was outreaching to.
DA (21:02):
700? OMG.
GE (21:02):
So I, I've been trying to speak more, speak on the stage and sometimes, you know, if you, if you're a sponsor they'll allow you to speak. Right. And I was at this one conference where I spoke and I wasn't allowed to have a Q & A because I was sponsoring right. And this guy came up after me and he just was so bad at it and he wasn't a sponsor. He's just like a guy who got to speak for free selling like a course or whatever that he was selling. Like, ah, if he can do that, I should definitely be allowed to speak for free. Cause I got like all these upvotes in my audience.
GE (21:30):
I was like, I've got to do it in 2020 man. Event outreach to all these conferences. But we did sponsoring conferences has been actually quite new to our strategy. So pretty much only a year and a half, maybe two years at this point, that conference really been part of our mix before it was all built on content marketing. And that is a real testament to your power. So if you're, if you're a SaaS entrepreneur, you should be investing in content marketing from day one, even if it doesn't bring you in money for the first year because over time you'll build a moat that your competitors just cannot compete, compete against you. Our competitors, a lot of them get deals through conferences, they don't do a lot of content marketing. Ironically, they don't do a lot of internet marketing. So we, we just outcompete them there.
GE (22:15):
And now that we're getting into the conference space, it's been very interesting to watch. This year we were really focusing on a lot of big e-commerce and SaaS conferences and we've made some amazing connections. But one of the things that we do at conferences, we always try to, we always bring at least two people to the conference and we try to, if you're a SaaS entrepreneur with a bigger team, this is good advice I think. We try to always bring a sales person and a marketing person to that event because those two people have very different goals at a conference. The sales person goal is to get qualified leads, right. Get the customers and all that good stuff. The marketing person at the conference, their goal is to connect with the influencers, people with, you know, addressable audiences, people that they can collaborate.
GE (23:01):
You know, just like what we're doing right here, David, talking on this podcast. I got a blog post that became the third highest traffic post on Moz. I found this out cause I'm friends with Tim Solo over Ahrefs. He told me about this, which led to me writing a guest post for Ahrefs. But I, cause I've met that guy at a conference and he asked me to write that. And yeah, so like that's the marketing goal is like who can I connect with and hopefully do something that's mutually great for both of us versus the sales person is like, how can I meet people, do you know, show them the solutions on my product that helps them solve their problems to make them want this solution. So that's how we approach conferences and we try to be a little bit goofy when we're at conferences as well. You know, we get a booth, we try to get a speaking spot, but we also just try to be friendly and we usually throw like a little unofficial networking event as well for everyone in the conference.
DA (23:54):
You mentioned be goofy and we've had a lot of SaaS companies come on here, some really amazing SaaS companies talk about like their unique strategy at events, like doing things that stand out, especially at a marketing event where everybody is doing marketing. You have to be, I guess to use your word extra goofy. How have you guys kind of pushed that to really stand out uniquely when you're at these events?
GE (24:16):
Yeah. So one of the things I often do, and this has become a, so I have a circuit now that I kind of go to over the last two years of just conferences over and over again, especially out here in Asia. And so a lot of people would know me from these conferences and it's become kind of a like a joke where people come up to my booth and take a big stack of my business cards and then they'll bring them, bring those business cards to their booth and they start handing out my cards with them because I just go up to people and I'll give them like 10 of my cards. Like, here you go. Like, would you like one of my cards? Like, great, here's nine more for you to be my unpaid affiliate for this conference. Right. So like, I was making a joke and all this stuff.
GE (24:55):
There's this one person, she started like just slipping my card, like everywhere. Like she's just like throw them into people's, like purses or other (inaudible) and stuff. It just became like a funny joke in the conferences, but that is an example of taking something that is very normal and very boring and turning it into something that's memorable cause there's nothing more forgetful than someone just handing you a business card. I'm, I'm kind of like I'm a very lighthearted person and I like to troll people for fun and all that stuff. And I remember one of my good friends who runs a conference, I was talking to this guy and he was like right next to us and he was talking to someone else and he was like, yeah, you know, that's what I love about running this conference because it's not just about someone just pushing a business card into your hand.
GE (25:35):
And I looked at my friend that I was talking to, I just pushed my business card and all of a sudden he looked at me like, Greg what are you doing?
DA (25:44):
That's how you build those real relationships there right?
GE (25:49):
Just be genuine. One of the more, I guess, official goofy things I did. There was a conference in Thailand and there was this guy that used to work for me. He was my special projects guy. You know, every company has this guy that's just like, does so many random things that there's no real way to describe his job role sometimes. And so I looked at him and I said, Hey, how much is it a billboard in Thailand? What do you mean? Like I want you to find me a billboard. We rented this billboard in Chiang Mai, Thailand that had Empire Flippers on it saying, welcome to Chiang Mai if you want a free valuation of your business, go to here.
GE (26:26):
And then we had to put it to meet Thai laws, we had to put in Thai welcome to Thailand as well. A Little bit, every ad has to have a little bit of Thai. But we did that. It was super cheap. It was like three grand for several months as it turns out. But but yeah, so as people came to this conference everyone had to pass that billboard. There was no way for you not to pass that billboard. And I got to give a speech and I told everyone the secret to internet marketing is obviously billboard advertising. I can show them the picture of the billboard and where it was at. And I told everyone to go take pictures with it. And that led to a bunch of UGC user generated content on social media, people taking pictures of the Empire Flippers board.
GE (27:06):
Cause it's just so audacious, you know, like, like why, like why did you do this? This is so weird. And it became like a whole thing throughout the whole conference. And when people went out, they're all talking about it. And one of my friends who's actually a competitor of RSC, he was at the conference. So he got to drive past that billboard like all the time, go to the hotel too, I thought it was extra hilarious. So did he. We have a pretty good friendship, but but yeah, just stuff like that stands out. It makes people remember you and just be genuine. That's what I like to do. Another quick conference tip for networking, I highly recommend instead of just taking someone's business card, connect with them on the social media platform of your choice, whatever you tend to use.
GE (27:46):
So for me it's Facebook and LinkedIn and every time you post something on LinkedIn or Facebook and you know, obviously it should be genuine and always be you. Like I post poetry and fiction on my Facebook because I, I'm really into literature, but every time you post stuff on there, you are passively nurturing that relationship you built at that conference without really any extra work on your part. And I get people all the time that I haven't spoken to in over a year. They happen to see some blog posts or some status of mine on social media and they connect with me and they sell a business. It literally just happened to me last week where a person was able to build up a Shopify app to one point eight million. He happened to see something like random and funny I wrote on Facebook and submitted his business with us.
DA (28:28):
That's amazing. Yeah. It's so funny how that can be. So so good for nurturing those relationships and really, really good tips there. I think the big key is you know, you can be outrageous without being like overly annoying when you're doing that stuff.
GE (28:44):
There's a very fine line there. I remember I was at one conference where this, I guess they read some guerrilla marketing book or something. They took my business card idea at least like just 10x and they were like putting it on urinals and all this stuff and like, like the strategy doesn't really work if you're not having like fun conversations with someone that you're working with, it just becomes like annoying and kind of gratuitous.
DA (29:06):
Right, exactly. Yeah. No, that makes sense. Yeah. You don't really get much return from a business card in a urinal, I guess.
GE (29:13):
Right not the best look.
DA (29:16):
But based on time, what I want to do is I want to flip over the conversation and talk a little bit more about you know, buying and selling a SaaS maybe you know, some of the things and trends you've seen. This is a very crazy year. We kind of mentioned that already. It would be interesting to know if you saw, you know, any unique behavior from buyer or sellers like in the first quarter so far, I guess first and second quarter. Here we are in the end of May. Have you seen a surge of SaaS companies coming up? You said a friend reached out. So with a SaaS company, what's that look like? What's the landscape kind of look like?
GE (29:50):
Yeah, so at the end of, most of Q1 was fine for us. We were not hit hard, but at the end of Q1 we got hit very hard. And living in Vietnam, Vietnam has been dealing with the pandemic since, you know, late December. So I kinda knew that this was probably coming that way. You know, thankfully Vietnam has been very good with it, but I kind of knew that was about to happen. But we, it's not like something you can do to prepare against, it's such a black swan event. But yeah. What we saw was a bunch of businesses taint in Q1 and buyers specifically got very scared. They became very hesitant. So it wasn't that the sellers weren't there, it wasn't that there weren't still profitable businesses. It was mainly the buyers were not willing to pull the cash.
GE (30:32):
And some businesses, obviously they did tank. A lot of eCommerce businesses tanked that were playing too close on their inventory. And like I mentioned offline, Amazon changed their affiliate program. So a lot of content site owners got hit and SaaS businesses that were considered non-essential got cut. So a lot of businesses did tank, but just as many of them were very profitable. The real issue was the buyers. Now, what we're seeing and what we predicted at the end of Q1 is it would probably take a couple of months for buyers to get used to the new normal to make good decisions again in terms of investing because I think the need is some sort of certainty right. Now that we're a few months into this worldwide pandemic buyers are very much back. We just broke over $10 million worth of sales, which is our biggest ever in (inaudible) of our company. Yeah, thank, thank you very much. Unexpected, like I was telling you but you know, a very nice thing to see. So buyers are coming back. It's, it'll be curious to see what happens cause there's still a lot of unknowns, but that was definitely something we saw in Q1 was that hesitation to buy.
DA (31:33):
Do you have any kind of, I mean, obviously like you said, it's a black swan event, so I'm asking you a, just a generic question.
GE (31:39):
I'll be a hundred percent wrong at three months, right?
DA (31:41):
Exactly. Do you have a forecast for what the rest of 2020 will look like just based on how you've seen buyer behavior, buyer or seller behavior in terms of like, you know, fear and maybe this is opportunity now that they have a little bit of certainty. Now buyers are going to come back. This is a good time to sell. Maybe you should hold a little bit longer and see what the landscape going to look like.
GE (32:00):
Yeah, a good question. So what I think personally is going to happen and several other EF employees also think this as well, is I think buyers are going to come back big time in Q3 and now we're already seeing it obviously in Q2 but I think it's going to become even bigger. And the reason why I say that is I do think that there is a recession coming based off all these events. The shock to the system. And people spending power will shrink and that will likewise lead to smaller PNLs, smaller revenues, people canceling their software services if they're non-essential kind of things. And that will lead to sellers wanting to sell. And because of the revenue is going down there is a good chance that might be one of the first times, at least in the last 10 years, where digital assets enter a real buyer market.
GE (32:46):
It's always been pretty much a sellers market because the multiples keep going up and up and there's never been like a, as far as I'm aware of, a really industry wide dip in these kind of assets. So we, this could be the first time that happens. I don't know if I'm like, I'm not a hundred percent confident that's going to happen, but there's a good chance that happens. One thing that I am pretty confident it's going to happen is on the buy side, I think smaller buyers, so people who are just starting out who have say 150, $200,000 to invest into a digital asset, I think they're going to be squeezed more because they have less room, like less margin of error versus like an institutional fund that's raised like a hundred million. So they might be less active in the market. I think the very affluent investors, those institutional funds, they'll probably become more active. So they'll probably be scooping up a lot more. And we already have one in particular told us they have no intention of slowing down their acquisitions for the rest of the year.
DA (33:40):
We had a podcast with someone earlier this year and this was before the pandemic maybe was end of last year before the pandemic. And they were just talking about how they felt that you know the market was getting so big, so saturated that it was going to flip into that buyer's market. And then he saw an opportunity, a possible fire sale, the opportunity to you know, for cash heavy companies or investors to start acquiring great assets. And of course this kind of macro economic hit also changes the landscape. So it's kind of similar to what you're saying here. This could be almost a fire sell for a lot of these businesses for those who have money or the institutional investors.
GE (34:18):
Yeah, I think there is potential there. I think there's still going to be great businesses. I don't think it's like, you know, brimstone, like there are various successful companies that come that are born during depressions and recessions. Netflix was one that was born in the great recession and look at them now they're doing just fine, right? So.
DA (34:36):
They're doing all right.
GE (34:36):
They're doing all right. So I'm not trying to like scare your audience by any means. I gave a speech not too long ago when this whole pandemic thing was a lot more hysterical, in the eCommerce community especially is very hysterical, they're going to get their products and do some of their warehouses, especially their Amazon FBA. And I told them like, look, this is nothing new. This is something that happens all the time. The reason why it feels new is because last time it happened, you weren't born yet.
GE (35:04):
It was in a history book. But this is something that happens all the time is cycles. And in every cycle there's always going to be challenges and opportunities. So there's always a mix of those two things. There's never a time where there's not both of them present. It's just one of them might be in more demand than the other. But in recessions, the opportunities that do exist are often the ones that are going to create massive wealth for you. So take it with, you know, a little bit of a silver lining. If a recession does come, that means opportunities are even greater for what you can do for your business, in my opinion.
DA (35:33):
Yeah, no, that makes a lot of sense. And I think it also is like, just a good reminder to like, think about running a healthy business. You know, you can't run, you know, your business into the ground using VC capital. A lot of times people do that, right? And then you're just like, Oh, what do we do now? So it's like, you know, a good reminder, keep a healthy business. If you have cash in the bank, you're going to be in a good place for weathering these types of storms. And with that in mind, you know, obviously profit margin is a huge thing for SaaS company valuations. But what are other things that, you know, SaaS founders or SaaS marketers are going to be thinking about? Obviously churn is a huge one. Pricing models, those things affect valuations. What else are you guys seeing that's kind of helping companies, you know, walk away with a really good kind of maybe acquisition or at least valuation?
GE (36:19):
Yeah, so a couple things on that. By the way, what you said about cash in the bank is totally true. Liquidity is so, so powerful, especially in times like these. But as far as SaaS valuations go, the most important thing is MMR. So monthly recurring, monthly recurring revenue, right? Some SaaS owners, when they want to go sell their business, they were like, all right, I want to make my valuation go higher. In order to do that, I need to increase my net profit. Quick way to do that is sell a bunch of lifetime or any other subscriptions. That is actually a pretty bad move to do. You shouldn't do that. Now, if you're starting out a business, doing that is great because it can increase your your runway, right? If you're trying to sell the business though, you should be a hundred percent focused on increasing MRR and nothing else in terms of ARR, lifetime licenses or anything like that.
GE (37:04):
Because investors don't like to see that as much. MRR to them is far more predictable than ARR, which could have wild swings, right? You can't really predict it as much. So that's one thing. Another thing, if you are a bootstrap SaaS founder, and this doesn't necessarily help your valuation, but it's very important when it comes to selling the business is realizing that most buyers are nontechnical, nontechnical buyers. They don't usually have a coding background. So it's very important that you have someone on your team that can be that person for that buyer to make them feel comfortable in taking over that over the SaaS or at least provide them support to help them get that person in place. So definitely consider those two things. As far as other things, if you have, you know, good healthy ratio of costs or, you know, your CAC, if you have a good ratio of CAC versus like your net profit, I think the ratio is usually like one to three, then you're in a pretty good place.
GE (38:01):
And churn, yes, churn is important, but it's probably not as important for most small SaaS businesses as they think. As long as you have a healthy CAC that healthy CAC ratio where you're bringing in new blood all the time, that's probably actually more important to get your valuation up than focusing on churn just because churn can be difficult to handle. And it's always good to have more people coming in. Now you should increase lifetime value of course, and all that good stuff. But, but those are some tips. Some other things to have is good source code. This is something that can actually be a problem. As you might imagine, especially with a bootstrap SaaS founder as well, you know, one person only, he's built up this first company, this side project, all that stuff. You might not have documented the code very well.
GE (38:47):
Likewise, he might've put it on a you know, a payment service like PayPal. This is more common than you might think. So a SaaS person comes to us, we have built one of these side projects. It's a very good business, you know, a very good small business and he does all of his payment processing through PayPal. With PayPal, you can't transfer that to another person unless you give the entire account over to that person. And most people, they have it mixed in with their personal and business accounts, right? So they don't want to give their personal PayPal account to this buyer. And so they can't really sell the business with us because we won't allow them to sell it unless they rip that band aid off and move to a different payment processor that is transferable. So those are some other things to think about.
GE (39:29):
In terms of valuations, SaaS tends to get really high because they're a very sticky business. I think they're probably performing some of the best in the market right now with everything that's going on. They, that MRR is just so, so attractive. But keep all of those things in mind and also look at your 12 month average of your net profit. It like take that 12 month average of your net profit and then times it by 40 and that's just like a conservative number of what your valuation might be. Obviously there's a lot more nuance that goes into it, but that's some napkin math. And if you are excited by that, if that number you know, excites you or intrigues you, then it might be a good time for you to look at selling. If that number doesn't intrigue you, then you need to work on increasing the average net profit to the point when you do that quick napkin math, you are excited by that number. So those are some quick tips on valuation.
DA (40:17):
Are there any major things that you need to be aware of? That you mentioned you know, people are running away from buyers, investors are running away from, so you mentioned one being on PayPal, that's a huge one. So those are some things you can think about early. You mentioned lifetime accounts, for us when we first launched, we didn't want to do lifetime ever. So we did reduced annual sales when we first launched to use that to extend our runway. But any other things that you can think of that you just kind of want to have in your head or think about or avoid along that process? Because at some time you may get to that point, like you said, where you're thinking about selling and you want that exit opportunity.
GE (40:54):
Yeah. So this is a little bit more ambiguous and it's going to be very different for every SaaS owner, pretty much. But one thing, an investor, especially in SaaS where it is a heavily, heavily VC occupied territory if you will, or there's a lot of private funding in this, in this territory. So what the buyers will be looking at is why should I pay this 40 to 50X 60X on this business and I'm using monthly multiples by the way, (inaudible) multiples there. But why should I pay this when there's this competitor that just got like a hundred million dollars in funding or some crazy amount of money to go and destroy this entire, you know, niche that the SaaS businesses is in. So ask yourself, what is your unique selling proposition? What is your moat? The bigger moat you can have with diversified traffic.
GE (41:41):
So maybe you have good SEO come in and you have good ad words, campaigns, good email marketing funnels, all that kind of stuff. The more you can nurture that brand and the more you can just really diversify even your revenue streams. Maybe adding in multiple different pricing plans to meet different demos, if that makes sense. The more you can do that and stand out where someone can't just come in and raise money and destroy your business because they take over the entire market, that is going to become a very attractive business to that investor. And that is something that people in the SaaS space do look at. They ask what is the defensibility of this business? Probably more than any other monetization.
DA (42:16):
This is a very tough question to answer, but one of those moat items is brand obviously a huge thing, but when you're going through a selling process, how can you really, I guess show that or make it into data to talk about like, so maybe that's content, maybe that's referrals that come in, you know, how do you like data ties? I don't know if that's a word. You know.
GE (42:42):
It's a word now. It's a word now.
DA (42:43):
It's a word now yeah.
GE (42:46):
Yeah that is a difficult question to answer. Cause brand is a very soft kind of metric, right? There's a few things you can do. If you want some actual numbers, one thing you can do is just type in, like if anyone's into SEO, you can log in and pay for an account with Ahrefs or get their seven day free trial and just type in the brand name. So you can type in Empire Flippers into the keyword Explorer. And you can see how many search, how much search volume it gets for a month, and you could compare against other months. You can see the graphs and all that stuff. Like is this volume growing? Is it trending up? Is it trending down? Also look at the niche. Is the niche of the problem that the SaaS solves? Is that growing up or is that going down?
GE (43:25):
So those are some things to consider. Another thing is to look at social media is sometimes a bad example. So we're, we're pretty bad at social media, for example. So if you looked at us to see how good our brand is, you'd think we have a terrible brand as a metric. But sometimes social media can be a really good measurement of brand engagement. Another thing is you can look, depends, and this would be very dependent on the size of the size for this last one. But you can look at the team that the person has built. So a person who has like a $200,000 SaaS, they may not have a big team, a person with a $10 million SaaS, they may have a pretty sizable team and you want to look into that team to see if there's any thought leadership that's developed.
GE (44:03):
If there's thought leadership where people within that company are going out to conferences, going on podcasts, et cetera, then there's a good chance that that company has a pretty good brand. You can also talk to various customers to get their stories, to see how they feel. If, if people, if the customers are like, yeah, this is a great product. But that's all they say, then maybe the brand isn't as good. But if that customer says like, my life has become so much easier, this is one of the most amazing products. I increased my productivity by 20X or whatever. Now you have someone that's, you know, evangelist. How many of those customers are evangelists? Those are all part of doing that. Detective sleuthing for a good brand. But you're right, it is very difficult to tell. You know, diversity of traffic is another one.
GE (44:46):
Cause if you have a good brand that means other people are probably talking about you. So you can look at the referral traffic, seeing who is referring to them and go to those links, see what they're happening to say. For instance, one thing I did, and if you're the seller, you can go into your Google analytics account do this. I went in to our analytics account today and found this person who wrote this post on Medium cause I saw, Oh we've gotten like four valuations today from Medium, what's going on. We don't have a Medium. So I found the article through analytics and this guy who sold his business with us for 150 million or 150,000, sorry, one less zero. Yeah, that would have been a good deal. 150,000 it was talking about, you know how he did that as a side project in his college dorm and the article went a little bit viral and led to people coming to us.
GE (45:33):
So that is a sign. Are people talking about it and what are they saying about you? So you can use analytics, you can use software like Mention or PeakMetrics is one that we use quite a lot. It like tracks all brand mentions. So you can load it into there and really just see wh at the audience is saying. Go into subreddits, which often has some of the most fanatically opinionated people, whether it's positive or negative. You could go in there and see what they have to say about that software brand, right? So there's a bunch of different things you can do, but there's no clear cut answer. What makes like a valuable brand. You just kind of have to fill it out.
DA (46:07):
I love that. That makes a lot of sense. And yeah, definitely a tough one. But you know, completely agree that building a moat, building that differentiation is key right now in SaaS as it gets, you know, more and more competitive. I think having these conversations or thinking about these things earlier is also really helpful for a company, for a team. Like how are we building our culture? What's making us different, you know, how are we getting in strong CAC and all those things because we want to move into like healthy areas. And I guess looking forward in 2020, obviously we already know it's going to be a new landscape, a new world. What are the challenges and opportunities that you guys are looking forward to from, you know, maybe the industry point of view or maybe even from, you know, growing into that SaaS niche itself. Is there anything exciting that you're seeing kind of laid out there?
GE (46:54):
Yeah so this, this is going to sound a bit like what was the word? A platitude I guess. But one of our core values and something I really believe in is helping entrepreneurs both on the buy and sell side. So we, that is always the thing I look forward to the most is what could we do, cause you know, when a seller sells his business. Say it was a $2 million business or even a 500 or $100,000 business, that is often life changing money that is probably the most capital windfall they've ever had. Now they like their next stage of life, who knows what's going to happen because of that. That's a lot of capital to get. And we've changed so many people's lives from, from that. And that always excites me. Same on the buy side. We've had a lot of people say quit their job or grow a just gigantic portfolio based off the business advice. So that's stuff I'm always excited about. One thing I'm excited about in particular with where we're growing is getting into businesses that are worth 10 to $20 million in the marketplace. I'm not sure if we'll get to it this year, but we're pretty close. We did have one business on that was 27 million not too long ago. But I'm wanting to see that more consistently. It took us a long time to break into seven figures. But once we did, now we get seven figure businesses all the time. So I'm looking forward to the eight figure mark on the sell side and on the buy side, I'm really excited, especially when conferences start back up. To get more into the institutional investor conference circuit, like family offices, private equity. I just find that industry really fascinating. So it was cool to get to, to start talking to those people.
DA (48:20):
Did you guys close that deal for the $27 million company?
GE (48:23):
No, now there's a story right there. What happened? Poor guy, I felt bad for him. Basically he ran a coupon and he forgot to put a limit on the coupon, so, so sold all of his product at cost on accident. So we had to delist the business unfortunately. Yeah, talk about a bad day.
DA (48:48):
Oh man that's terrible. That's terrible. But that is the, the risk you run when running a business. You gotta just pay attention to all the small details there.
GE (48:55):
For sure. For sure.
DA (48:57):
Cool. What I want to do now is I want to flip over to our lightning round questions. Just five quick questions that you can answer with the first best thought that comes to mind from your past four years in marketing. You'll be able to answer these pretty easily, but you ready to get started?
GE (49:12):
All right, let's do it. No pressure.
DA (49:13):
No pressure, no pressure you're going to do great. What advice would you give for an early stage SaaS company starting marketing today?
GE (49:23):
Yeah, obviously day one, content marketing, but also in day one, do things that don't scale. So go to your highest value client and just chase them, you know, start building value with them. Start having those conversations to get that ball rolling. And even though your content doesn't get traffic, it will still build you authority with those dream clients when they see that content. So it will be useful right away for you. Go after adn outreach to those people in ways that don't scale and you can learn how to scale later on.
DA (49:51):
I love that. Love that. What skill do you think is vital for marketing teams to improve and build on today?
GE (49:58):
Content marketing and copywriting. Content literally lives in every part of the funnel. We have mini funnels within our funnels using content. To me is the most powerful thing. One person told me like, Oh, there's, there's not enough to write about in the buy and sell space. Like, Oh man, I'm glad. I'm glad you said that. Cause I, there's like too many ideas in my, in my opinion. So content and copywriting, I think, the most quintessential skills in marketing.
DA (50:24):
Best educational resource you'd recommend for learning about content marketing?
GE (50:29):
I'm a big fan, so I'm not a big fan of mini content marketing books. I feel like a lot of them just say, you know, give value and here's how to set up Google alerts. But there's this course content marketing Institute. I'm a big fan of what they have done and that is probably the most like enterprise level of content marketing I've ever gone through. So that's a place I recommend as a resource.
DA (50:49):
Awesome. We'll link to that in the show notes. That's amazing. What about a favorite tool you can't live without?
GE (50:55):
HubSpot. And Google Analytics, also Ahrefs. Those are my three main tools I use.
DA (51:02):
Three great tools. Love those three. And what about a brand business or a team that you admire today?
GE (51:08):
So this might be a weird answer for your audience, but my favorite marketing team is Burger King. I think they're hilarious. I think that what they do is just amazing. You know, they troll their competitors. They're always lighthearted and never really like nasty. They're just are just in it for the joke. You know, I think that it's, I think it ,works. They last October for Halloween, they dressed up one of their restaurants as the ghost of McDonald's and they're like, Ooh, Big Macs (inaudible) like it went viral. And so their marketing team is just so good at PR. I still remember like the wake up with the King commercials stuck in my head. So that's one of my favorite brands. I was just like, what amazing PR people they have working for that team.
DA (51:53):
That's a really interesting, really interesting company, but I totally agree with you. I think they're so good at so much and you actually look at the fast food industry as a whole and there are some amazing marketing departments out there and right now, like social media teams, I know, like you said, Burger King. Wendy's has an amazing social media team. Like they're doing some really cool stuff to stand out there.
GE (52:14):
Yeah. I think it's a fascinating thing when you ever, you find marketing that's intriguing on a inherently boring product, like a hamburger. You know, not most people are getting fanatical about hamburger. Then that's a sign of good marketing to me that they're able to make something that's boring almost into a piece of art. And that to me is a sign of good marketing,
DA (52:34):
Hey, buying and selling businesses as well. Right.
GE (52:38):
That's right. Yeah, that's right.
DA (52:41):
Thank you so much for your time today, Greg, you've been fantastic. I've loved this conversation. Got to go through some marketing stuff. Really learn more about the SaaS landscape and what's happening right now with selling and really what to look forward to for the rest of the year. So, you know, I appreciate your time. Thanks for coming and joining me and sharing so much great knowledge.
GE (52:58):
Yeah, thank you for having me. And hopefully your audience found it valuable.
DA (53:01):
It was great. Thank you again for coming on. We'll talk to you soon, Greg.
GE (53:05):
Thanks.
DA (53:07):
Awesome. Thank you so much for listening to episode number 108 and a big shout out to Greg and the entire team at Empire Flippers. They're doing an amazing job of creating this great marketplace. I relistened to the SaaS evaluation and SaaS process twice. I thought there was such amazing nuggets of wisdom throughout. (…)
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