Are you thinking of owning a Saas business? Sure it is a great business and can be very passive. But, are equipped with the right tools and knowledge in doing due diligence before acquiring it?
For today’s podcast, I interviewed Andrew Pierno about buying and flipping small SaaS businesses. Don’t skip this episode. Andrew will share his expertise that could be life-changing for you!
Andrew is a UC Berkeley grad. He has built 3 profitable companies, exited 1 and currently acquires small saas companies at XO Capital. XO has done 7 acquisitions to date and is on target for $1M in revenue in 2023.
We had a discussion about why startups are so hard and why Andrew started buying SaaS businesses? What type of businesses Andrew wants to buy and why? And what to look for during due diligence?
We also discussed the cost of owning a small SaaS business. How to do software due diligence and why do you need a dev to partner with? And where Andrew finds deals and where to sell them.
Lastly, Andrew shared the deals that he has passed on. You should listen to Andrew’s point of view and avoid being in a tricky situation.
Owning a SaaS business could change your life. Tune in to this episode and discover how you can start buying and flipping SaaS businesses!
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05:48 Why buying Startups is a no-brainer?
13:22 What are the things to look out for in SaaS software due diligence?
22:15 Why owning a SaaS business is risky?
24:15 Flipping vs. Keeping – What are Andrew’s goals with his businesses?
29:57 Where does Andrew find online businesses to buy?
31:20 Where can you find Andrew?
Courses & Training
Courses & Training
➥ Andrew suggested that if you want to buy a SaaS business but you’re not technical, you’ll need a partner to help you. This person can be on the cap table, buy the business with you, or be someone who helped build the startup. He also mentioned that it’s best to buy a business with a small surface area, meaning it has a narrow focus, like a screenshot API.
➥ For Andrew, being frugal with spending is helpful because you can start your business even with limited funds.
➥ When investing, Andrew shared that it’s important to think about what could go wrong and do a “premortem” exercise first to identify potential risks. For example, in the case of single purpose apps that are similar to commodities, competitors could release a free tool that could put your business at risk.
About The Guest
Andrew is a UC Berkeley grad. He has built 3 profitable companies, exited 1 and currently acquires small SaaS companies at XO Capital. XO has done 7 acquisitions to date and is on target for $1M in revenue in 2023.
Connect with Andrew Pierno
So, do you want to know how to start working your way up to owning great SaaS businesses that are cash cows or learn how to flip them? Hi, I'm Jaryd Krause, host of the Buying Online Businesses podcast, and today I'm speaking with Andrew Piano, who is a UC Berkeley grad. He has built three profitable companies, sold one, and currently acquires small SaaS companies at XO Capital. XO has made seven acquisitions to date and is on track to generate $1 million in revenue in 2023.
Now, in his podcast episode, Andrew and I talk about why startups are so hard, why there's pressure on them, why so many of them fail, and then why Andrew decided to start buying businesses, specifically SaaS businesses. So, we talk a little bit about his story. We also talk about what you should be looking out for when you're doing due diligence on a software business. Obviously, there are the common things. We lean in and talk about how to do software due diligence, where you actually need a partner, a developer, to partner with on the site, not just for due diligence but for owning the site as well, and how critical that is, especially for a SaaS business.
We always talk about the costs of owning a small SaaS business; we talk about the small product surface of a SaaS business, which can help with growth; we talk about a lot of other growth activities that can be put into customer service, making the product better; and, you know, retention for the growth of a business. So, product lead growth, and then we also talk about where Andrew finds his deals from and where he sells those deals as well. So, there's so much value in this podcast episode. If you're looking to buy a SaaS business, either now or in the future. This is mandatory listening. Enjoy. Andrew, welcome to the show. Thanks for coming on.
Andrew Pierno (1:43)
Thanks so much, Jaryd. I'm happy to be here.
Jaryd Krause (1:45)
I'm looking forward to this chat. So, we just connected on surfing while living in Santa Monica. So, I've got a lot around the globe, which is quite cool. It's always good to talk to people who are ocean lovers, and business lovers.
I think there's so much in common that I draw from surfing and life in business. Do you find that similar for yourself as well?
Andrew Pierno (2:07)
but I'm like, I'm a fair-weather surfer. And I'm probably a fair-weather business person too. So, like I can, I can definitely say, you know, you've got to roll with the punches, right? Like you got to be in the right place at the right time to catch the right wave, like, you know, leverage, right? You're not going to catch something if you're not going the same speed as all those kinds of things. And then, you know, in my daily life, I just blatantly ignore all the good advice.
Jaryd Krause (2:31)
I have no doubt that all of us have been ignored. So, you've been buying SaaS businesses. Now, when did you start buying SaaS businesses?
Andrew Pierno (2:39)
A half year ago, I put a ragtag team together, it was really like an open call to anybody that wanted to, like, start wiring money to each other on the internet and buying software businesses, right? That was kind of the start of it. And we started two and a half years ago and bought a really tiny first deal.
Jaryd Krause (2:56)
Why software businesses? Like, why did you want to start buying software from businesses? What about that business model excites you?
Andrew Pierno (3:02)
So I was the CTO of a small venture studio here in Santa Monica. And that was like all straight venture stuff, right? Like we had a portfolio of three companies we were trying to build, and then spin out and raise venture capital for four. And then the other part of the business was just pure venture. So, we were just, you know, like, writing checks. I wasn't, but the other part of the venture studio was, and over time, I became the CTO of one of our portfolio companies. We raised 8 million dollars and had, like, you know, 2530 people at our peak. And after five years of struggling through that business, it ended up going to zero. And I looked around and said, "Man, isn't starting a business hard?"
Might there be an easier or less risky way to do this? And I started following Andrew Wilkinson and seeing what tiny capitals were doing sure swiftly some of those guys and thought, "Why not? Let's just try it. Let me just put, I don't know 10 grand that I'm perfectly happy to lose learning for; call it my little mini-MBA and find some partners to de-risk it a little bit, and let's go buy a couple of these things and just feel it out. I'm a software engineer by training.
So, like, I don't know anything about e-commerce. All the content stuff that you guys talk about is way over my head too. I'm like, sheesh, man. We're, like, woefully underutilizing SEO and content to grow those things. But that was kind of the start.
Jaryd Krause (4:22)
I think a lot of SaaS businesses don't have the best content marketing strategy to be honest. When I've looked at some SaaS businesses, I love focusing on retention and I love memberships and SaaS businesses for that reason, and you know, a lot of the marketing budget can go into product and service. There's a lot left on the table with no content marketing strategy, especially for evergreen content. Yeah, it holds the business in a solid way if it's good, evergreen content.
Andrew Pierno (4:59)
Skills, yep, you know, I think it'll delight your users to know how long it took us to just get one blog post per week per company to an email list that like sends out and have that work that took forever. I wouldn't say it's the highest quality thing, It's cool to see that you've had that you had the same chain of thought of like, why don't like these startups are really, they're grueling.but that's the extent to which we are doing content marketing.
Jaryd Krause (5:17)
There are so many parallels between what you did and what I did, except I am not a technical guy. I was a plumber. And I started to try and make money online through a few startups, but I didn't really do anything. And that was like hanging on a lug; you should try and buy one. And so, you started around 10 grand, your first one; I started around a similar price range, 15 grand, and then worked my way up. And yeah, it's cool. They're just insane, aren't they? Like, what about the startups made it a no brainer for you to buy businesses?
Andrew Pierno (5:53)
You mean, why was the venture so hard relative to buying a business? Or what went wrong with the venture backed company? Yeah, I think the problem with venture capital in general is that, particularly a couple of years ago, in a zero-interest rate environment like that, that's like free money. And so, a lot of capital was flowing to companies that really had no business being venture scale businesses.
That wasn't the case for our big swing—let's call it a full-on enterprise SaaS—it was a machine learning company. And if it had worked, it would have been a large company; it was one of those "swing for the fences" bets. I think some of the challenges that we ran into are sales. So, underinvesting in sales before you run out of money is hard. And then some corollaries to what we're doing now, like, you know, this kind of influences what we try and buy today, when you have a product that is for an enterprise and you're selling six figure ticket sizes, that's really cool, right? You get one customer, they pay you $100 grand plus a year, and you only need a couple of those for it to start to get meaningful.
That's really, really cool. The downside is that it takes six to 12 months, sometimes 18 months, to close one of those guys, and they're going to demand everything you've got, and then some—so you are, you know, a slave, but whatever their request is, no matter how large, you're basically like, "You can't say no, especially as a startup. So. So managing those long cycles and those long sales cycles, while raising a bunch of money is just really challenging.
The other part, too, is when you go out to raise, and let's say you raise in a pre seed round, that's relatively straightforward to do, right? You don't have to have any revenue. And here's kind of like, here are the people; here's the idea. They're like, "Okay, great, here's half a million bucks." Like, "Come back." When you've got a product, every time that you go back for more money, the bar gets raised on you at the beginning, right? Everything has potential; there are no numbers for the VCs to pick apart. Everything's just like gravy. And like, oh, wouldn't this be cool? Imagine a world where right and you just fill in the blank.
It's like playing Mad Libs. But as the months and years go on, those VCs are comparing you against these companies that are like lottery ticket winners, right? All of them have hockey stick growth. And you know, are you going to be like in the top 10% of those portfolios? Probably not.
And so, what happens to those middle tier companies is that they die, right? That's why venture backed startups have a relatively low success rate. And my insight is that, actually, you don't have the capital to go and execute on this. But there's a whole world of distressed ventures. So, you know, we spent 8 million bucks and five years building this really cool thing. And it went to zero, like, just a straight zero. But, like, that's kind of crazy to think about; like, was there a zero-value created? Was there $0 worth of, like, IP created? and I think the answer is no.
So again, we don't have the capital to go and execute on this. Today, we're bootstrapping. It's just the three of us buying it with our own cash. But yeah, there's a whole world where I think that, kind of like those companies that fall off the venture track, they have a place to land, and we've actually bought two Y Combinator companies. Are you familiar with that? That accelerator, Y Combinator, is one of the most famous startup incubators in the world, if not the most famous, and they crank out hundreds of startups every year.
And, you know, many, many household names have gotten their start at YC. But even more, right, fall off and go to zero. But again, that's not to say that they haven't fallen off. Yeah, yeah, that's right. And but a lot of them, you know, they might have 50,000 a year in revenue 100,000 year in revenue, and it's like, they're not venture scale. But if I take all the engineers and fire them, right, or like, you know, they go away, and we hire some developers out of South America, or you know, at the beginning like yours truly would just jump in there and be like, Oh, I think I can handle this we can we can make it so that that 50,000 or $100,000 a year is kind of significant for us, right small fries, that's like, that's pretty decent money for depending, again, on how much effort we have to put into each of these little businesses.
Jaryd Krause (10:13)
I don't know much about raising funds and doing the whole startup and quick startup to try and get hockey stick growth, but one of the philosophies that I have is that the more pressure and stress that we put on ourselves, the less we typically perform because we're operating from a place of fear the less better we perform, because we have less sleep. And there are instances where, you know, sometimes when people are on the ropes, they will come out swinging and do really well. But I think more often than not, it's the opposite, where there's so much pressure and stress on the thing to work that with the little sleep and the stress on everything team time, it makes it hard.
And I think that's why even if like the startups that I've started very small, like without millions of dollars, like tiny, tiny, tiny, you know, penny pinching on a shoestring with one human being, it's tough. So this is why I think there's a big shift in the purchasing of things that have a proven track record. So, when you decide to move into things that, you know, SaaS businesses have a proven track record, you can literally utilize your skills as a CTO and add way more value than trying from the bottom. Brian, have you noticed training from scratch? Trying from scratch because you've got way more leverage there to work on?
Andrew Pierno (11:33)
So, a little bit of self-awareness. I am a terrible picker of things that other people will like, like this. And not in a cool way, right? There are people like tastemakers who know that thing is going to be really cool. in five years. That is not me. Okay? The things I think you're cool like no one else thinks are cool, meaning Highveld stupid ideas. And I know this about myself. And so, one like superpower, again, is like, even if I find something in the SaaS world, like 2550 customers, that to me is like, that's product market fit. You know, that's pretty good, right? Like, I've had plenty of ideas that never got me 25 customers, let alone one.. And so, for me, I'm like, "Okay, I actually, like, probably overindex on looking at the existing customer base and saying, "I trust that there are real dollars there.
And of course, you know, we can talk about diligence. But, like, you've got to look at the bank accounts and make sure people aren't doing weird stuff where they have their friends subscribe. And then, like, there are kickbacks on the back end, but, like, and then you buy it, and then all the revenue goes away. Like, all that stuff, you've got to verify, but, by and large, at face value, like the first thing we bought was like a total and complete commodity. And I don't even think I understand that business. Still today. It was a tool called the screenshot API. And it takes, as you might expect, screenshots, right.
It's a developer's tool. So, people need to take, like, 10s of 1000s of these things. It's got like the weirdest customer base ever. And, like, who needs all these screenshots? Like, that's not a use case I've ever encountered before. But when we bought it, it was, you know, we bought it for like, I don't know, $205,000, and it was making, I think, $500 a month at the time. And there were like, 3040 customers, and I thought to myself, "You know, there's a little foothold. Let's see what we can do."
Jaryd Krause (13:20)
here. a lot of it. So, when you look at something like that, with the due diligence, specifically around SaaS, the software due diligence, being a CTO, because there's a lot of people listening to this, their goal is to buy a SaaS business, because it's like, usually the glory business, it's like the legacy business, buy something. And it's just got, it just got really good profit margins. And you know, it's one of the most passive types of digital assets you can have.
Of course, it depends on what type of asset you buy, but typically, so many people are wanting to buy these SaaS businesses, What are some of the things they should be looking out for when they're doing due diligence on the software? Are you saying, you know, that somebody helped with the software? DD part of it because I, myself, would not know how to type "SaaS product" on a screenshot for this software.
Andrew Pierno (14:15)
There are two different answers. One is if you're not going to partner like you, yourself, as a solo operator, want to buy a SaaS business, but you're not technical. You need a partner of some kind, whether they're on you know, the cap table or buy the business with you, or it's the person from Upwork that helped the other founder build the startup like you need to have that person involved in some capacity.
The loveliest ones that we've bought have been ones where, as A and I think is really important for an initial acquisition, the surface area of the product should be quite small. So, screenshot API, how does the thing take screenshots? Does it do these 900 other things? No, it does not. It takes screenshots right. So, the surface area of the product is small. And what that is as close as I'll ever admit to being like passive income. And by passive, I mean, for us, we have two of these, which I'd consider relatively passive because, again, they have a small surface area on the product side, and we bought them nearly complete.
So, if there wasn't a lot of investment on our side, right, we were doing the due diligence to know that we wanted to buy something that was relatively passive, because we bought stuff before that we thought was going to be passive.
And it ended up being that, you know, all of these feature requests were sitting in, you know, intercom, or some kind of chat support system. And there were a ton of people who were willing to pay for the software if they had all these features. That's not the case, when you buy something that has just like a narrow, I call it just like a single promise to the customer. So again, does the thing, take screenshots, that's what I need, great, they sign up, they pay that smaller surface area, I think is really important. It's also making diligence easier, because frankly, there's just not that much code to go through, which helps a lot.
And I think the thing for us too—and this is where I start to kind of drift into just like putting my CTO hat on—is that I like that we have three full time developers now. But the buck always stops with me. So, I'm like the failsafe; I don't want to have to do this. But our worst-case scenario for a bad technical is me doing something like a diving save. Right. And that's nice to have; like, that's one of our kinds of, I guess, competitive advantages.
But for somebody that's non-technical, that's going to have to be that person on Upwork, or, you know, wherever they found that developer, they're going to have to get somebody that they can ping anytime, because stuff's going to go haywire, even just in the natural growth progression of a small startup, like things break, and you don't want to pay for bigger servers than you need. So, like, at some point, those small servers, if you're growing even at, like, 5% a month, over month, you're going to need to, like scale those things up. And unless somebody's watching, you're going to hit a limit, or wake up at 2am.
And get, like, you know, your customers yelling at you that the site's down or something like that. So again, the first step for us is to go through and, like, I just want to know where the bodies are buried. So, every single one of these is probably crappy, and they're probably built quite fast, right? Again, I'm talking sub, let's say anything that makes less than 100,000. A year. Yeah, this is not like pristine code that is going to like sunset you into, like, your lifelong cruise in the Caribbean. Like, that's not what this is going to be like.
For the first one to three months, you're going to have to invest probably the most you ever will, on the engineering side, to fix things. You know, listen to customer support, see if there are actual features that you really, really, really need to build. And if you're not able to go through the code yourself, then I think you definitely need somebody to at least look through the architecture and the code base to make sure that it does the things that it says it does. Right, so people can put, like, a bunch of features on the site, and you've got to use them.
And it's like, they just put a button there. But, you know, the button on the front page is just the tip of the iceberg. You got to have all the code that does the things accurately. And then just a quick note, like on IP, because I think a lot of people get stuck in this like, oh, well, like what's proprietary? The answer is probably nothing. Probably nothing is proprietary, there's probably no patentable, anything in your software, it's probably a total commodity. And it's probably copyable, right? So, I'm looking at somebody else's product.
For most of these, like micro acquisitions, I could buy, I could go build the thing in like two or three weeks just by myself, just like, I could just go copy that thing wholeheartedly. But that's not what you're buying, right, you're buying sort of like the brand; I don't want to call it brand, because brands are like a whole thing. But it's like the starting point of a brand, and the customer base, right, and this, and then, of course, all the content stuff that you already know about.
Jaryd Krause (18:56)
Yet, you're basically buying product market fit that needs some serious work added to it to get it to a point where the competitors aren't just going to squash it in one fell swoop because they've got gazillions of dollars. Say Zoom comes along and says, Hey, I usually take screenshots like all the time, or like another software that might be similar, like a tracking software that Upwork actually uses screenshots, you know, lots of screenshots to track up virtual systems work. I'm glad there are so many things to unpack there.
Andrew, I'm glad that you said that. It's not like not you’re that you're buying something sub 100k You're you've got a lot of work to do. Like a lot of people will come and say, Jaryd, I want to buy a software business, and I've got 15K or 10K, and you've done this, but you've done this as a CTO, and this is your whole career behind this, and you know what? And you've got investment to put into this smaller asset, whereas for most people it's 15K or everything they've got, and they want to try and make it work.
So, if you are in that camp, first and foremost, congratulate yourself on the 15 grand; it's good for everybody. We shouldn't compare ourselves to everybody else. Because we're all born in different places and have different circumstances, circumstances, maybe start with us a different asset, then getting into SaaS, because you're you need to, like you said, and or you need to force some capital into it.
And maybe even more than what you purchased that, for example, are you open to sharing how much you poured into the first one that you bought for 20? Grand Andrew? And what?
Andrew Pierno (20:26)
Yes, so that's that one; we bought it for 25 grand, there were three partners. So, 25 divided by three—that was intentional, I just wanted to do this. And then I wrangled other poor folks to, you know, come and partner with me on it. And we bought it. And during diligence, it was in a programming language that I just don't like and think is old and that I'm, you know, kind of snobby about, and we immediately rewrote the whole thing.
But I went, I walked into that deal, knowing that I'm going to spend an absurd amount of time having Andrew write code to rebuild this thing from scratch. And that's what we did. And I don't ever want to do that again. But for the first one, I was like, "Hey, you know, I'll do whatever it takes, right? Like, what is it going to take? Yeah. So for that one, again, we weren't paying for a developer, but I was doing it. So, it was like my hours. If it was, you know, an hourly rate, it would have been like, you know, I got paid $1 an hour so far, right? Like, we haven't taken any money out of the business, which is a whole other thing we can talk about to show that the reality is like, running these things, when stuff goes wrong.
And you have to pay for a developer to go in and fix things. That's a variable cost that's really hard to predict. And generally speaking, for our tiny ones, we run like, slightly negative, generally most months, because I think the other part too, and I know we're bouncing all over the place, but like, the income with SaaS can be super lumpy. So if they ran a promo deal in February, three years ago, there's a ton of annual payments that come through in February, right? But then you're starving by, like, June, July, right? Nothing's coming in.
And so I think actually, like, you look in a stripe dashboard, and it says, like, your MRR is $2,000. And you're like, sweet, I get $2,000 a month. But no, you do not. You might get like 4000 Some months and like zero some other months, two. And so, managing the cash flow. And that was also like, that was the one of the biggest surprises to getting into this space.
Jaryd Krause (22:23)
Check that out during due diligence, because Black Friday sales can alter the average monthly revenue.
It's funny if I find that people who are really good with their own personal finances can also be really good with business finances. And that's where a lot of the time I like to help people fix their leaky bucket syndrome, what I call it before they get before they even Chuck money into a deal. A lot of people come to the space and say, "Jaryd, I've got this amount of money, and I want to use finance to buy the deal." I normally ask them, "How have you gotten into any other debts? And what are they? Are they personal debt to credit card debts?
Because if you're not great with your own personal finances and you're going to buy a business and bring poor finances into it, the money can leak out just as fast as it's coming in, because you don't know how to handle it and you haven't worked on the smallest stuff first. And that's not to poke holes in anybody's armor. But it's just to get people aware that finance is cool. It's really good. but especially with online assets. It's there's the risk involved. Right? Absolutely. Have you seen much of that before? I mean, you have with like startups being financed.
Andrew Pierno (23:26)
To be honest, I don't know that I'm the best with personal finances. But yeah, I mean, being really frugal on spending, when you have just a certain amount in the bank, and you have to make something work. The real benefit is that we, the three of us who initially started this for the first year and a half—didn't take any money out of the business. And it was only in January of last year that one of the three partners went full time and started taking a salary. So, I'm still not a burden to the business.
And the other partner is still not a burden to the business. And we're still just like people who write checks occasionally to fill gaps, right? We have payroll now and some headcount and are continuing to try and be just as frugal as possible.
Jaryd Krause (24:15)
And what is your goal with these—to sell them eventually? Or to hold them as cash cows to reinvest some of that money into other assets?
Andrew Pierno (24:26)
You know, sometimes people I don't I don't know how you feel about this, but I was told by various people, like start with a thesis so like, what's your investment thesis? And for the first couple months, we were like, Okay, great.
We got something so specific, and did the nominee deals match that thesis criteria? Zero, there was zero; we didn't buy anything because nothing matched it. So we're like, "Okay, maybe thesis isn't the right word for this. And so we ended up buying like three little things pretty close to each other. And today, like I still don't think that we have enough cash to really have any kind of thesis, we have bought SaaS applications. Let's say there are two categories of SaaS applications to there's like b2b enterprise SaaS, right? So, you're selling high ticket deals to other enterprises.
These are like larger companies, right? These aren't somebody that is like a freemium model and comes and signs up and spends 10 2050. With you, these are like, you know, 1000s of dollars per month type of customers, we've bought a couple of those. And those are way different operationally than these self-serve freemiums, where you come in, there's a two-week free trial, a certain amount converts, and it's your tweak. And those are the kinds of knobs you tweak, right? Like, where's my top of the funnel? What's my conversion rate for signing up? What's my signup to paid rate? What's my retention? All that stuff, We have since started buying more of this "product lead growth, as it's also called, or freemium type products, right, those are much, much easier for us operationally.
And again, we're still trying to focus on things like those single promises to the customer. But in terms of finances, there's really not that much money coming in the door on a monthly basis, like our base payroll costs. For the smaller businesses, the money comes from their sales. So, if you're really looking to compound capital, I think you have to flip them. I think you have to do that. Because otherwise, you're going to wait for these things to start flowing. And that accumulation is just too damn slow. I think you have to flip them. So, we'd like to be more like permanent capital stuff. And there's some stuff I think we'll hold for a very long time.
But our biggest financial gains have come from selling the businesses after we've taken them over, you know, kind of cleaned them up, like given them a fresh coat of paint, and then, you know, selling them on to somebody else.
Jaryd Krause (26:52)
It's great to hear, because people listening may have the ideology, I'm going to buy a SaaS business and just sit there and let it churn out money.
And you can't do that, but it's going to need work, it's going to need development to maintain, and especially in SaaS, to keep away the competition. Like once, you know, the competition is like, "There's a lot of money in SaaS, and, you know, a big SaaS business can just come in and squash one of these businesses pretty fast. So, like the growth, I feel like the growth really needs to be injected quite quickly. You know, you don't want to have somebody else come out with a free tool for their SaaS business, that is your whole business model. And then you've just, like, been about to sell it in five or six months’ time.
Andrew Pierno (27:34)
That I mean, I mean, part of diligence, right, is figuring out like, what's the if something were to kill this, what would it be? So there's a name for this exercise that I forget; it's like a premortem; I think they call it that instead of like a postmortem. So absolutely, like for these, again, single purpose apps, which are quite close to commodities, you could be killed by a feature and a competitor, a larger competitor, or they could also just release a free tool that does the thing.
And they're like, "Yeah, we'll lose $20 grand a month, because, like, that means nothing to us, right, and they can just kill your business. So, you definitely have to, like, think about what could kill it. But I think I have a kind of weird stance on competition, I just don't care that much about it. It's just that I haven't seen it affect anything. Of course, if you are going into a competitive space, what are some of the things you need, your product has to have, like at least the same coverage of features that the competitor has? Like if you only do 1/10 of what the competitor does for twice the price? Yeah, like it's not going to work.
So long as you have feature parity, you guys do roughly the same thing. I think we have competitors for another one of our microtools, a developer tool that turns like a Google spreadsheet into an API, it's a developer thing. There are a ton of huge competitors in that space. But you know, some people are just like us; they like the way the product looks, right? Talk about non passive, one of the very first people we hired, the very first person we hired full time, was customer support. Because no matter what, even if you think it's passive, right, there's still going to be people with questions.
And, like, you can win so much business by just responding within an hour to somebody's question that they could well look it up; they might just be testing you. But it's so nice to be able to just open a chat box and talk to a real human and get a real answer. And yes, we try to win on simple things like that to beat out the competition. Because somebody might be paying about the same with us, but they're not going to switch because they're like, "Oh, well, I can just reach out to Andrew on the support chat." and they always treat me well. That can be enough for a customer to stay.
Jaryd Krause (29:44)
That's what you're talking about with product lead growth and also marketing budgets; you know, it's easier and usually cheaper to keep someone than to find new customers. So where do you where do you find these businesses? Where are you buying them, and then where are you selling them? Are you selling them through a network? Are you buying through a network? Are you selling him? Are you selling him through your network? Are you buying through a network? Are you on different platforms?
Andrew Pierno (30:05)
So the first two times I hustled on Twitter, I just reached out to a bunch of people I looked up on indiehackers.com. They have some people that self-report revenue numbers. And so, I just like was looking for something really tiny. And this is still my direct outreach today, which we still do all the time. Still, this works great. And because it's true and it's honest, I say something along the lines of, I know, it's probably not the right time."
But if you're ever thinking of selling, I'd love to chat. And a ton of people respond like I was thinking, but I don't want to, like, go through this listing process, or maybe they just have questions about how acquisitions work in general that I answer, like, I've built a lot of goodwill through that. So the first two are from Twitter and micro.acquired.com. That's kind of like the big player in the SaaS space. I think they just rebranded to acquire.com.
We have bought and sold several businesses there. There are no broker fees or anything like that. They're awesome. And we've recently been working with a broker to sell our first business. We've sold the other two ourselves. So, we're just trying out the broker thing and seeing how that goes.
Jaryd Krause (31:19)
Cool. Congratulations, Andrew! Where can people go and find out more about what you're doing at XO Capital?
Andrew Pierno (31:25)
I am @andrewpierno on Twitter, pierno.
Jaryd Krause (31:31)
cool, guys, be careful. He might be he might be hunting some deals. So that's good. It's probably a good thing. Because that is a strategy that a lot of people who want to buy sites, even content sites, and other types of businesses will be able to use as well. So, I'm so grateful that you shared that. It's really good, guys. Check it out.
Andrew Pierno (31:48)
Thank you so much for having me.
Jaryd Krause (31:50)
Thanks for coming on guys. Check out these links in the show notes. There will be links there. Everybody's listening. Thank you so much for listening. If you're thinking of buying any business, listen to this again. There are so many little secrets and hidden clues about growth and due diligence throughout this, and if you know somebody who is looking to buy a business, share this podcast episode with them. Selfishly, it helps myself and Andrew help more people, but by growing the podcast, it helps us get in front of more people.
Want to have more financial and time freedom?
Jaryd Krause is a serial entrepreneur who helps people buy online businesses so they can spend more time doing what they love with who they love. He’s helped people buy and scale sites all the way up to 8 figures – from eCommerce to content websites. He spends his time surfing and traveling, and his biggest goals are around making a real tangible impact on people’s lives.
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