Ep 371: Micro SaaS Exits & Acquisitions From 20 Successful Deals with Stuart Faught

I try to just keep things super simple, man. For both me and the buyer, and I've found that I'm able to be more productive and sell more, and the buyer is able to wrap their head around the opportunity quicker and easier if we just do things.

Hey, I'm Jaryd Krause, host of the Buying Online Businesses podcast. And today I'm talking with Stuart Fort. He is a serial SaaS entrepreneur who has built and sold over 20 micro SaaS businesses across verticals, including dental, orthodontics, HVAC, med spas, and home care. And he's known for his rapid exit strategy. Stuart closes most deals in 30 to 45 days, typically also sometimes up to 90 days by creating clean documentation and targeting niche markets.

He's found multiple companies, including praise, patient snap, caddy and Covington AI and Stuart specializes in vertical SaaS solutions and teaches founders how to build for exits and not endless scaling. And in his podcast, we talk about why he got started in SaaS businesses and start SaaS businesses and how much he sells them for what sort of ARR he targets to get to how he got to exiting 20 software businesses.

Also talk about how to do due diligence. Like if he was gonna buy a software business, what is the due diligence he would do? What are the exit strategies and structure that he uses when selling his SaaS businesses and his advice to people who are acquiring businesses as well?

Now there's so much value in this podcast episode for some of these sold over 20 software businesses. He may even have a business that you're looking to buy. So such a valuable pod, I'm sure you're gonna love it.

Do it. Welcome to the podcast. Thanks for your time.

Thanks for having me, man. Happy to be here.

Yeah, likewise, really looking forward to this conversation. Now, you just mentioned you acquired your 20th SaaS business.

Congratulations.

Yeah.

Thank you. Actually just sold. So I just had my 20th acquisition. So I just sold my 20th SaaS business. I've never actually acquired a SaaS business. Yeah, I'm an early stage guy. like to build from scratch.

So 20 exits, wow. And so what's the consistent pattern you've used, I guess, to get to the point where the business is, yeah, I see this is ready for an exit. What are some of the things that you wanna get the business, get right in the business before you go, okay, it's time to hand this on and then start your new journey in another startup?

Yeah, so I, man, like I said, I'm an early stage SaaS dude. I love the early part of the SaaS. I love coming up with the branding and picking a vertical and kind of niching down into a vertical and then getting it off the ground. So to answer your question, I usually shoot for like anywhere between 50K ARR to 100K ARR.

Once I'm at that spot, that's kind my sweet spot. And then I'll take it to the market, find a good buyer and then hand the business off to him or her and kind of go about my way to the next deal.

Awesome. When did you, I guess, when did you start your first SaaS business? How many, how long has this been going on for now? Cause somebody go, yeah, 20 like, wow. Is that like, how many, how many, long have you been going and doing this for? What was before even starting your first SaaS business?

Sure, sure. So I've always been entrepreneurial, kind of back in the day, graduated college during 2008. Economically, it was kind of a weird time to go and get a job. Kind of a weird time finding a job, finally got a job and found myself in this really corporate kind of cubicle environment.

And that's never really been my forte. And so I knew that I wasn't going to be there for long, but what I was doing was selling know, software to dental practices. And I'm to this day, not technical, but I saw an opportunity to kind of innovate within the dental space. And so I thought, this is cool. But again, job market sucks. I need to get out of the cubicle. I should just start my own little thing in order to just lead this job that I really didn't like.

And so started hearing about SEO, search engine optimization back when I was a new thing. And this was around like 2010 or so. And basically just, you know, went out and started my first little SEO business from there. That led me into starting one of the first online reputation SaaS companies and then bootstrapped that business, signed up a couple of thousand local businesses to work with. And so it was a great bootstrap business that I had for a handful of years. 18 rolled along, I had an opportunity to sell that business. And at the time I was pretty burnt out on what I was doing. And so was like, okay, great. And then…

Took a little time off around COVID period, started hearing about Acquire. And I thought, you know, I started following Andrew, who's the founder of Acquire. And I was just super intrigued because I just a couple of years found your first, you sold your first deal and then you found acquire.com after you've sold your first deal, is that right? When you were building the second one?

Right. So yeah, sold the business in 2018 and then took a couple of years off. And then around COVID discovered Acquire, which at the time was called MicroAcquire and started following Andrew Gazdecki, who's the founder of Acquire on LinkedIn. And I was like, totally resonating with his content because I had just gone through that prior acquisition deal and it's not easy.

And Andrew was talking about his platform and I thought, that's what I've learned how to do the last 10 years is build a software company. wonder if I can, you know, do another one and sell it on the platform. So kind of as an initial experiment, I went out and created a new brand, built a new platform, got it to about a hundred K and ARR and took it to the platform within like 30 or 45 days sold, sold that business. And I thought that was awesome. That was a fun transaction and, and, it was a great platform. And, and I thought.

I wonder if I could do it again. so I created another business, different vertical, and got that one to, I think I got that one to 50K in ARR and sold, again, sold the business. then just the last few years have just been kind of repeating that process and to answer multiple questions.

So I always like to shoot for a 5X of top line revenue. So if I get the SaaS biz to 100K ARR, I'll try to sell it for 500K. I've got a little bit of flexibility there, but that's kind of what the market has, from my experience, kind of been. What about you? What are you seeing currently with SaaS Multi…

It depends on the software, the recurring revenue churn rate. It really depends for multiples, but I was previously seeing six and seven, sometimes more, eight multiple on net revenue. I think it's come down slightly in the last year or two. What have you noticed in terms of multiples? Have you noticed much change or have you…

Yeah, I have. I agree. think the last couple of years, it's gone down a little bit. It was like, kind of white hot for a minute and then it went down a bit and I'm noticing that it's starting to pick up again. so, yeah, I agree. think opportunity to get the higher multiples is out there. For me, for my purposes, since I'm kind of doing a bunch of these, I just try to get a quick 5X and move on to my next deal.

Awesome. so like you said, you've been doing this for a long time now and you've exited 20. Congrats. It's really cool. And is there a point in time where you're like, want to, like, have you thought about growing to bigger than a hundred K hour at all?

Or is you just with your personality and what you enjoy or don't enjoy, do you just get to a point where you're like, it's time to move on from this one? Like, cause some people are purely to start up.

I've spelt out personally and love that, love that race and then want to hand the baton off. that, is that similar for you or different or?

Yeah.

Yeah. Yeah. mean, for me, so my first, my first SaaS business was quite a bit bigger. And so I'd gone out and I had signed up like a couple of thousand local businesses we working with and got to like a solid ARR and, had like a nice exit. know, kind of like I mentioned was just a little bit burnt out at the time. so the idea of, you know, just kind of kind of doing these smaller deals was a little bit refreshing to me.

And then I kind of learned about myself that, you know, I really liked the beginning stage of creating the brand, picking the niche, all that good stuff. then I love the excitement and the fun of finding a buyer and doing a quick exit. know, so the beginning and the ending stage is what I love the most.

But for this, for my next venture, I'm looking to build it, you know, try to do a bigger one. The goal is to get to like 10 million ARR and have like a of like a glorious final exit or something like that. I don't know. We'll see how goes.

But that's that's kind of what I'm working on right now and still continuing to build and sell the small loans and also just learned about myself. I love working with first time founders.

Yeah.

That's cool. It seems like it's a different audience size when you want to go for a 10 million ARR and get the big 550 to 70 mil exit or whatever it is that say something that's, you and maybe there's some of the niches that you or the businesses you bought could possibly get to that, but there's certain businesses that get to a point where the audience or the market cap is like, you're sort of tapped out. Really? Have you felt that or seen that?

Yeah, I mean, I've never really experienced that myself. I mean, my thought is, you know, if you have a product that you're selling into a vertical and it's a small niche vertical, you know, usually that niche vertical has kind of, you know, close cousins that you can also expand to.

Like, for example, if you're working in med spa space and you've taken two or three years and exhausted, you know, kind of all your growth within that vertical, you can move over to plastic surgeons and so on and so forth. You know, so…

So yeah, to kind of get totally tapped out, I don't know. I think that might be difficult. I certainly have never done that.

That's cool. And it's really good for when you're selling on to somebody how much room for growth there is. What is the typical structure you like to go for for an exit just like, you know, kind of deal structure, purchase versus yeah. So I usually just keep it simple. I'll do a hundred percent.

I'll sell a hundred percent of the business. We'll structure it as like a simple asset purchase. You know, typically depending on kind of what, you know, what we're doing, there might be an earn out there might not be. I always shoot for all cash or at least like 50 % cash. And then I try to collect the additional 50 % over like a 90 day period.

So that's kind of for my smaller, relatively smaller deals, that's what I found kind of works well for me. And I try to just keep things super simple, for both me and the buyer. I've found that I'm able to be more productive and sell more and the buyer is able to wrap their head around the opportunity quicker and easier if we just do things that way.

Yeah, I love that. It's the only way deal gets done is if you meet in the middle and you're both excited to proceed and move forwards. Otherwise, and the relationship's good. Otherwise it's just what are you even doing? Do you have an example that you can share with us of somebody that came in as a buyer with just an unrealistic expectation or terms or an offer you just like, is not great for me.

And the reason I ask is from the viewpoint of the listener, a lot of people looking at acquiring businesses and have an expectation that they should just be able to nickel and dime and buy something for like hardly any money or like a unicorn structure because they hear it on some podcast or YouTube video.

That's in theory, not reality of where the market's at. So do you have anything where you've seen a buyer come in and like, this is what I want. And you're like, all right, mate, no thanks. See you later.

Yeah, yeah, I've seen a lot, know, as far as that goes. The first thing comes to my mind is, and I'm sure there's podcasts and courses teaching this structure, but maybe it works with like the boomer sellers, but like for me, it's not interesting at all. But I'll have guys approach me and say, hey, you know, what if I put nothing down?

And then what if I, you know, we spread it out over five years and with the revenue I pay you. And it's like, you know, it's just maybe if I owned a dry cleaner and I was a boomer, that would work. And I'm sure maybe it does for that. But certainly with these small SaaS businesses on building and selling, super not interested in those types of structures.

So, yeah, always just try to get at least 50 % upfront and then don't like to push the deal longer than like 90 days after that. And I just kind of really stick with those terms and have found that there's usually enough buyers that are willing to pay it. So, you usually just pretty firm with that.

Yeah, no, that's great. It's I've never seen a deal or been a part of a deal happen where there's no money down. I like to tell people that if you're going for something, if you want to buy something for no money down or very little skin in the game, you're typically buying something where the seller's desperate, which means it's a business that isn't doing very well. And a buyer, for example, you Stuart, you didn't.

You've got other offers out there. You've got other buyers that are going to be able to buy for mostly cash or at least 50 minimum 50 % cash. And then the rest within a short 90 day window, it's just not, you're just not going to entertain that offer because your business is solid enough to attract a buyer that's willing to meet in the middle with where the markets are. It's just not, yeah, it's a shame.

It's a shame though that there are people that look, I've had somebody that come in and done my courses and program and was speaking to a bunch of brokers and just basically got pushed on and none of the brokers wanted to work with this person because they just had this idea of that all businesses were too expensive and the deal structures weren't good enough.

And they just got basically kicked out of the online business acquisition space and never bought something because nobody wanted to work with them. And they just created such a bad reputation.

Yeah, I've seen people come in like that and I always tell buyers, it's like, guys, just, you know, it's really pretty simple. Like just be, you know, courteous and, you know, be upfront and honest. And, you know, I don't know if they've been watching too many eighties movies where it's like the negotiations are hardcore or what, but, you know, it's just always.

Better just to be upfront and honest with people, keep your appointments, have the appearance of being easy to work with, and you're more likely to get a deal done if you're just respectful and you come in with your best. And if it's not your best, just meet in the middle. And if it's a good seller, then you should be able to put something together pretty quickly and easily.

Yeah, absolutely. I have some trainings on how to become an attractive buyer. it's basically just starting with being a good person, building a relationship and showing that trust gets built throughout and compounds throughout the transaction to a point where you're both like, yeah, okay, like we can both let our guards down a little bit more as a transaction goes through because the trust gets built. And when you do that, then magic happens, right?

Yeah, 100%. Absolutely. Yeah, no seller wants to do a deal with like a, you know, a rude or sketchy buyer. So yeah, stuff like that. It's really simple. You'd be surprised at how many buyers like don't come to the table with that mentality or with that attitude. that's...

That's true. So Stuart, like let's just like have a very, I've got a very random question for you because it's probably not something you would do. And I don't think you should because you're very good at starting software businesses, but say you were to go and buy a SaaS business around the mill range or a little bit less, maybe more. What would you be looking for through due diligence?

What are some of the things a buyer should be curious of and making sure that checking is accurate or good enough for them to acquire. Knowing with your hat on of a SaaS exit guy and SaaS businesses, what would be too much risk and what would be worth taking on or not.

Yeah, it's a good question. I would, you know, like I think I mentioned, you know, before we click record, but I'm super not technical. so, um, you know, whatever my strength wasn't, whether that was the technical piece or the sales piece or whatever, I'd, I'd bring in an advisor, trusted advisors to help me look under the hood.

Um, I do a solid code review you know, check out the code, make sure it's, you know, looking good and it's scalable and all those different things. would look, I would look at the customer base and if I was buying a business, you know, with a certain amount of revenue, I would make sure that that was sticky revenue. I would ask the seller like, okay, like is the revenue sticky?

Yeah, it is. Okay, great. What makes it sticky? know, how do you think I can make it stickier? So I'd go down that, you know, that, that tunnel with, with the seller. I would look at what they've done with growth, like, Hey, what have you done that's worth? And if you were me, how would you grow it?

And I would listen to them and, and, you know, and then I would probably, I would probably talk to three or three to five customers and I would just have good conversations with them, make sure everything's checking out with a relationship in the business and with the product and all that good stuff. And, if I wasn't super, you know, familiar with like the space, the product, the history.

I would probably talk with a handful of people and ask them their opinion. Like, Hey, is this something you think is going to be around for a while? Or is this kind of a, you know, outdated product or what do you think? You know, and that's, that's probably what I would do.

I'd probably just focus on those things and, and then, move forward. I'd make sure that I had some sort of like support after the clothes. So I would work out some sort of deal with the seller like, can you be available for you know, at least 90 days, I'd probably shoot for some sort of relationship, you know, where I can reach out to him or her for like a six month period. But yeah, off the top of my head, those those would be the main things that go for it.

I love that. There's so much in there. Review the code. Make sure it's like you said, you can build on top of it. How would you do a code review and how do you know that you can build on top of that?

Yeah. So what I do with each one of my deals is, you know, basically my developers will give access to the buyer's developers, you know, kind of view only access. And that part's a big mystery to me, you know, I'm not a technical guy. It kind of sounds ridiculous, but it's a big mystery to me. I always just hear them come back and say, Hey, you know, my guy gave it a, gave it two thumbs up and everything looks good. that hasn't always been the case. I've worked with different.

Your dev teams where, you know, I go to sell the business and there's a problem with the code and it killed the deal. And so if you're a seller or a buyer, just make sure you're, you know, you have someone competent on your side to either get the code right, what you're selling, or if you're buying, make sure that it's solid code that you can scale and features and all that fun stuff on top of it.

It's so good to talk about this in a non-technical way, because it's not so much like the technicalities of the code and you need to understand all of it and how the code works. But it's more about like what you said is like, how much is it going to cost to maintain this in the current environment?

Is there better code out there that could replicate this and we could build on top of for cheaper? How much would it cost to invest into that? It's more about like resource allocation and risk versus how does a code work or where does it not work?

Totally. Yeah. mean, my big message to your listeners that might be buyers or have thought about, because I think the misconception is like, hey, if I want to own a tech company, I have to be technical. That's a logical thought process, but I'm here to tell you it's not necessary. But what I would lean on is your skills on selling. So I think the best…

The best people that are equipped to buy and grow a software company are those guys that are able to sell. And they have a vision for sales and are able to create partnerships and all that good stuff. That's really the important stuff. You can find technical people to build the code, but to really grow the business, it's more of a sales thing.

Yeah. Any business under the mill ranges is marketing and sales and, and then team and culture and stuff comes in after that. And yeah, I agree with you. need to be able to know how to sell or at least learn how to sell. And with a, you know, a software company, you can just literally ask people what they need to be able to stay on the platform or, provide those features within like obviously realistic way. Like don't give everybody everything.

Cause then you'll build a Frankenstein software product, but yeah, it's just understanding how sales and marketing works. And then, and you can pick up that theory pretty well as you, as you move forward as a business owner. It's like same with you saying like, you don't need to be technical to have a SaaS product or build a SaaS business sell one.

A lot of people have this perception that to buy an online business, you need to know how to, you know, run one and grow one. And the reality is like, don't because I was a plumber and I had no idea how to run an online business or grow one. Fast forward years, there's multiple businesses acquired and how many people we've helped do it. 70 % of 70 % of people we work with, they don't, they've never bought an online business. They know how to use their email and Facebook and then they work it out.

Yeah, absolutely. Absolutely, man. It's all about sales and marketing and just figuring it out as you go. But yeah, you definitely don't have to be technical. And there's lots and lots of resources out there on how to train people on how to grow and sell. And that's kind of been like a bit of my secret sauce, I think.

Because like I mentioned, I love working with first time founders because the value that I'm able to deliver to them is so much more than if I was just selling to a PE guy that already has their playbooks and how to grow and manage and all that stuff. Whereas if I can help someone that's looking to go from full-time employee that maybe isn't super passionate about their job to owning a lifestyle SaaS that they can build a 500K ARR and be super comfortable and happy, that's kind of my sweet spot. That's what I'm always looking for, those types of buyers.

Yeah. And you, I was going to ask, do you have a couple of those that you sort of reach out to before you go to acquire.com or list and like, is it a portion that you've just done off market exits versus through acquire?

Yeah. Any other brokers as well?

Yeah, so I've kind of messed around with some brokers, but haven't gone down that tunnel too far. I've mainly done all my deals on Acquire and I've done a couple of deals on Flippa as well. And then just randomly we'll have, you know, some people reach out whether they've heard me on a podcast or something to do a deal. And that's, yeah, that's kind of kept me busy.

Yeah, hopefully this a good podcast. I'm sure it will probably keep you busy. There's a lot of…

That'd be awesome, man. Yeah, there's a lot of buyers out there that sell it. A lot of good stuff going on.

Yeah, absolutely. Yes, you're congrats on what you've done. I would love to see where you're at in any in a couple of years and it'd be good to get you back on again and see how it's tracking and hopefully we can get you to that. You know, that larger exit 1 million AR, 10 million AR exit that'd be so cool.

Yeah, man. Yeah, I appreciate you having me and yeah, keep keep me posted, man.

For sure. Where can people reach out if they do want to reach out?

Yeah, best place to connect really is just on LinkedIn. So if you're growing a SaaS and curious, different ways to put it in a box and sell it, I'm a good resource. If you're looking to grow a SaaS early stage, I'm a good resource. Or if you're looking to buy a SaaS, I'm a good resource. So yeah, feel free to reach.

Yeah, congrats. Keep doing what you're doing and we'll speak to you soon. Appreciate it. See ya.

Thanks man. Later.