Ep 391: How To Win Micro SaaS Acquisitions With Seller Financing (Even Against Higher Offers) with Justin Butlion

Important for anyone who's gonna do acquisitions of SAS to have a game plan and an overarching strategy. I wanted to kind of move my cash into a better vehicle. I kind of took this first from a business mindset, almost like an investor mindset. Studied Andrew Wilkinson. I'm a fan of Warren Buffett, you know, and the whole conglomerate, you know, whole company long-term mindset. That's the first thing.

Hey, I'm Jaryd Krause, host of the Buying Online Business Podcast. And today I'm speaking with Justin Butlion, and he's the founder of Hawkeye Ventures, which is a holding company that he's set up where he's acquired over 10 micro SaaS apps that are generating him close to 100K a year. Now, after seven years working inside B2B SaaS companies as a marketer, product manager, and analyst, Justin turned to acquisitions instead of reinvesting his agency's marketing budget.

Into ads. And he writes SAS Decoded. I'll share a link to that as well, where he shares deal breakdowns, due diligence lessons, and acquisition strategy for operators and buyers.

And in this club, we talk about some of the transactions he's done, why he did the transactions, what they were, and what type of apps and businesses they were. And we talk about why he looked for this specific type of deal and how he built out his acquisition criteria per se with minimal risk, but also happy to not.

Make too much gain in each deal. Just doesn't want to take too much risk. We also talk about how he structured the acquisitions of these and how he built out the hold co, basically, how he set up the legal entity of the hold co, some of the lessons he learned, and some of the money he lost by doing that.

We also talk about how he structured some seller financing and the acquisitions, and how he's been able to get some pretty good seller financing deals. He's also, through doing all this, learned how to become a very attractive buyer.

And he breaks down some of the things he's done to showcase that he's an attractive buyer, to win deals over maybe people submitting offers that are more than his or similar to his, but where he's able to win because he is the attractive buyer in that race to the acquisition.

We talk about what his plans are for the whole company and what he wants to do to build his wealth significantly. And we talk about the equation of spending too much time building that up versus not too much time, and the opportunity cost of all of it. So this is such a valuable podcast episode. Now I'm sure if you listen to this, you're looking at buying a business. And if you want to dramatically decrease your risk of buying a lemon, make sure you go away and get my Judil's framework.

What I've used is what my clients use, and it's not only made people millions of dollars, but it's saved people millions of dollars, and it's very good for buying micro SaaS businesses. Let's dive into the pod.

Justin, welcome to the pod.

Yeah, so keen to learn more about your journey.

Were chatting just before about how you moved to Israel after school, and you've been a digital nomad for eight years.

What led you to buying micro SaaS agencies?

Yeah. How did you get into that? Thanks. Thanks for having me, Jaryd.

So since around COVID, I was running an analytics agency. I've been kind of in the analytics space most of my career, and I ended up with quite a good problem. I was sitting on a bunch of cash and wasn't really sure what to do with it. I didn't really want to invest back into the agency just because I wanted to keep it boutique, and I didn't see a clear path of actually investing that money to grow the agency.

So I was kind of wondering what my options, you know, putting the money into stocks was one of them. But I was kind of doing that myself personally a lot. And then I kinda got lucky.

I came across the story of Andrew Wilkinson, who's a wealthy Canadian guy who went into acquisitions, and I kind of studied his story, and that birthed the idea of me setting up a holding company and taking the profits from the agency to do acquisitions. So I started that in twenty twenty two.

I set up some entities in the US, you know, both for my agency and for the holding company. And that was also a learning curve. You know, I'm originally from South Africa, but you know, been living in Israel since I was nineteen and kind of realized I would have to deal with Stripe, which is a very popular payment processor, and Stripe doesn't operate in Israel, so I kind of got ahead of that problem by deciding to set up everything in the US, but you know had to kind of understand and learn a lot to do that properly.

Some mistakes were made, and happy to get into that a bit if you want. I think also around twenty twenty two, acquire.com started to get a bit more attention and popped up on my social feeds. So there was also something that kind of sparked my interest in going down that path. And since I think it was August of twenty twenty two, I did my first one in August and September.

I've done five deals in total. For your listeners, just to be clear, we're talking about MicrosaS. So my biggest deal was ninety-eight thousand, and there was fifty percent in cash up front, fifty percent seller financing.

I've done seller financing, I think, in three out of my five deals. So I'm a fan of that approach. And I think my smallest one was twelve thousand, if I remember correctly. So pretty low, you know, acquisition price, and the idea was to kind of buy mature, simple, cash-flowing, low-risk B2B SaaS, micro-SaaS, or B2B SAS apps.

And in every case except the first acquisition, these are apps that are sitting in a marketplace. So they get organic exposure to potential users. And that kind of takes care of the distribution, which is often the biggest challenge.

In the SaaS world. You know, building products is easy now, especially with AI, but getting those products in front of the right people is expensive and difficult. So this way I've been able to build, you know, this year I'm hoping we'll pass six figures in cash flow across the portfolio.

And to be clear, because people will wonder this, I spend, on average, probably three hours a week of re real focus time on that portfolio, mostly answering support tickets, which I still do myself. So I've got ten apps in the portfolio.

So some of the acquisitions were for multiple apps. Like, you know, sometimes the developer will build two, three, four apps and want to sell the whole bunch of them. So I've done two deals for multiple apps.

Yeah, great. Cool man. Congrats so much to unpack there. And thank you for sharing.

I just want to back up what you said, just to be clear that it's people thinking about micro SAS or just larger SaaS deals, even in the six- and seven-figure range, where I help people mostly in the seven-figure range. And we also have, you know, I've been helping people for over a decade now buy businesses under the 100K range without education courses.

But buying SaaS doesn't mean you're just buying software, because yes, you can buy it for almost free, cheap, very cheap these days, but you are buying distribution; you are buying an audience that's a sticky audience that is paying recurring revenue, and you're buying that branding and that distribution channel.

Which, as you said, is harder to build, and I was gonna ask you, you know, instead of growing the agency with, like, throwing that money into marketing, which is probably quite costly, it seems like the agency is separate from the whole code, though- is that right?

Yes. Yes, it was completely. I saw them as different business entities, you know; they're technically different business entities, but that's why I kind of mentioned I had to set up things the right way to move, you know, the the cash between the entities in a tax efficient way so that I wouldn't be penalized and some mistakes were made there in the types of entities I used, except but there were two different things completely and up until really the beginning of this year the agency was eighty, ninety percent of my focus.

I kind of decided to make a big pivot at the beginning of the year away from providing services and focusing more on my SaaS portfolio, also building new SAS. I'm, you know, I'm focusing now on Project Echo, which is my new project where I'm actually building it myself here through vibe coding, and I've also shifted more towards education through newsletters and stuff like that. I just did the agency thing for a while and got really burnt out from it. I needed a bit of a change.

There's also the concept of leverage, right? SaaS is very, very high leverage. Writing newsletters is also very high leverage. Unfortunately, the agency model has a lot of benefits.

You know, it cash flows nicely. You don't need capital to get it started. There are a lot of benefits, but there's also a lot of challenges. You're dealing with so many challenges.

You know, labor is low leverage; marketing is a changing landscape. There are so many challenges. And I'm proud that I generated over a million dollars over six, seven years selling analytics services to SaaS and e-commerce businesses, but it's a heavy price for that million, and with the lower margins, it's not as impressive as it sounds.

So luckily I'd built up, you know, the portfolio; it was cash-flowing. I could kind of take a bit of a risk by moving out of the business that was where I generated most of my income over a good few years and kind of roll the dice and start kind of from scratch, building, and, you know, new projects, working on new projects with higher scalability, higher margin, higher leverage, more suited maybe to my personality as well. So that's kind of what I've been doing this year.

Yeah.

That's so cool. It's exciting because agencies typically take a lot of time. They're heavy and time-intensive. And like you said, you've got the benefits, but you've got the downsides. And it's cool to see, and I'm happy for you to move into something better for your personality.

You probably like it a lot more, and you can work far less. Like you said, you know, three hours a week or so on, you know, five different micro SaaS businesses you bought, which is just so cool.

That's, you know, it's funny, you know, would you take a million dollars over, you know, five years working really, really hard, or would you take a million dollars over ten years working three hours a week?

Like, it depends on what your goal is. If you want money really fast and are prepared to burn yourself out for it versus slower money but lifestyle and enjoying your human experience while we're here, right? So it's cool that you've come to that for yourself. I don't think a lot of people think about it consciously.

With the SAS businesses you've bought, what due diligence questions did you always ask before, you know, going to an LOI or, you know, preliminary due diligence and stuff? Because yeah, I'm fascinated by your due diligence process.

Yeah, I find it a very interesting topic. You know, your listeners should know I had a background in SaaS before starting the acquisitions. And I think that's important. If you're gonna go down the road of doing acquisitions, either bring in someone who knows the space that can kind of guide you and/or mentor you, or probably don't do it 'cause the risks are gonna be too high. You need to know the space and know what to look for and so on.

You know, I've got over ten years of experience working for SaaS companies, you know, serving them through pr as I said, through the agency, etcetera. I've also tried building my own SaaS, you know, since my college days. So I kinda know the space well. So that's the first thing, right?

I wanted to ask a question about that, and, you know, 'cause you've got so much experience over a decade, how did it change your lens on what sort of deals you're looking for? Like, how did it form your buying criteria of what you don't want to accept versus what you do want?

I think even before I answer that, it's important for anyone that's gonna do acquisitions of SAS to have a game plan, have an overarching strategy. For myself, as I mentioned, I wanted to kind of move my cash into a better vehicle. So I kind of took this first from a business mindset, almost like an investor mindset.

You know, I studied Andrew Wilkinson; I'm a fan of Warren Buffett, you know, and the whole conglomerate, you know, whole long-term mindset. So that's the first thing. Second of all, I didn't want to I wanted to kind of find the sweet spot between the different variables.

And what I mean by that is you've got growth rate, you've got return on investment, you've got time, you know, how much time you're gonna have to invest to maintain the asset. There are all these different variables, and I kind of wanted to maximize my upside without, you know, lowering my downside.

So it was kind of a combination of extreme passive approach with as low risk as possible and kind of giving up on growth. So I was kind of saying, you know, if I can get five to twenty percent a year in growth organically by spending thirty minutes to an hour a week at most to maintain this asset, that would be great. A lot of people wouldn't want to take that approach because they would they want the higher growth.

So they can get their money back quicker. I was kind of taking a very slow, passive approach. Yeah, conservatives, I could focus on the agency and just keep on building up the snowball of the SAS on the side until maybe it got to a critical mass, and then I could kind of change strategy. So that was my thinking. So now that I've got my overarching strategy, I know now what kind of deals fit into that. I can kind of go through a checklist, but for the most part it was B2B over B2C.

I don't really have much experience in B2C SaaS, and it's also a lot higher risk and much more difficult.

It's just a completely different model, almost. You need to be much better at marketing and distribution. You need a very healthy top of funnel because your churn is gonna be very high. I wanted simple B2B, very low churn. As you said, when you're buying a SAS, you're buying, you know, an existing subscriber base.

What's almost the most valuable is that you've got a hundred to three hundred businesses that are paying every year, with a very low churn rate. And as I said, I was willing to give up on the growth.

So any new business I get, I'm excited, even if it's fifty bucks a year in in ARR, as long as what I'm buy what I've bought doesn't disappear. And that way, you know, often if you're buying at the right price, you're getting your money back in three to four years, which is not bad from a return standpoint.

There are also a lot of industries I just wouldn't touch, things like medical, things like the elderly, pets. I don't wanna deal with anything where there's high, you know, legal risk. Well, that too, you know, looking at this like a businessman. But it's more about not dealing with anything that can create any harm if something goes wrong.

So if the if the if the app goes down, people aren't gonna, you know, be risking their lives or anything like that, as you would have in the medical space. You know, childcare, pets. I don't want to deal with anything where there could be litigation risk down the road.

And then it's also just to keep things as simple as possible. I don't want a very complicated tech stack. I don't want to have to deal with a lot of APIs or AI; none of my apps have any AI functionality. That'll probably be forced; I'll have to go down that route eventually just 'cause it's so prolific now.

But if your readers, if your listeners, are interested, I've written quite a bit about my approach through my Substack, Coffee Plus Revelation is what it's called; they can find that or look me up on LinkedIn, and I often post, you know, about it there. So I've got one or two posts there where I go into a bit more detail on, you know, what it takes to acquire MicrosaS and the kind of questions you should be asking. I should also say, because I've got a background in analytics and data, I've got a bit of an edge.

I think in being able to, you know, request, for example, data dumps and then kind of actually open those data sets up and analyze them. So I'm looking at things like retention rates and churn and activation rates top of funnel.

I have this kind of framework I call the core funnel, which is just really mapping the main funnel of the SAS. And I want to understand how healthy that funnel is before I'm obviously finalizing any deal.

How many people are getting exposed to the app, how many are signing up, how many get to the aha moment or the wow moment, seeing the value, what's the conversion to paid, etc. So my second acquisition, for example, Meet Slack, which is just a very popular Slack app, I could see that it had a very, very low conversion to paid.

But because it's popular, it's getting a lot of installs, like 100, 200, 300 installs a month on autopilot. And it's all types of businesses, including mega enterprise are, installing it. But then I noticed it's got like a one point seven percent churn rate. Which means like almost no one almost no one's cancelling.

So I'm like, like I said, going back to the variables, I was very happy with that. Like, top of funnel is very healthy. I don't have to do anything with marketing. And if one-tenth of one percent become paid over time, it should grow because the churn rate's so low. So I was able to see all of that.

How much did you acquire that one?

That one was my largest for ninety-eight thousand. Today it's doing around fifty K a year. Took thirty-seven months to get my money back, which just happened. I also use seller financing.

Fifty percent seller financing on that one, yeah.

Yes. And yeah, so that's a very powerful weapon: seller financing 'cause, you know, it allows you to do more, you know, acquisitions, more acquisitions over time. But then you've got to also be smart with how you model out the data, model out the cash flow, because yeah, if you look at the trend and I actually, you know, recorded all three years of history in a Google Sheet, you see for the first like two and a half years, like I got almost no money.

From it. It was just that everything was going into the seller financing. So yeah, that's another lesson I've learned.

It yeah, it's so good. It gives you a faster run rate. And what did you how did you structure the seller financing? Over how long? Was there any interest?

So typically this is also maybe a funny thing to say publicly, but I'm acquiring these apps from developers. So it's also important, you know, and I'm sure you probably talk about this, to get into the head of the seller to understand the motivations.

And in my case, you're dealing with engineers that have built something; they've usually spent two to three years building it up, and now they're kind of tired of it. They want to get back to building.

'Cause that's what gets them excited is the actual building, not the growing. So they wanna kind of usually want a quick deal; they want some cash up front. They're not so savvy on the negotiation side, and they're not so interested in interest in these types of things.

So that gives me maybe a bit more of a sophisticated buyer. As I said, I'm approaching this very much like an investor to ask for terms which suit me. Right. So, for example, a very low interest rate.

So most of the deals are done with seller financing, this being under two percent interest, you know, annualized. So they don't really care about that. So I take advantage, and I kind of, you know, in my l letter of intent, I put a very low interest rate. Usually the seller financing is pretty far out.

So, if I remember correctly, I did two and a half years of seller financing for that second deal. So about forty-eight thousand. I paid according to the terms; it was around two thousand a month, but I actually paid two and a half thousand on purpose. I wanted to kind of pay it off quicker.

But as I said, I've learned through experience to actually be a bit more careful with that because you can get into trouble when the seller financing is too much of a total percentage of your, you know, cash flow. And then if you don't have a lot of growth, that can hold you back. And like I said, yeah. Yeah, so for about two years, like I had no extra cash really from that acquisition, which can be painful if you're not careful.

And you gotta take it out of your pocket. The business has to pay it down.

Yeah, I mean, this is what I tell people to not spend all of their money. You know, say you've got a hundred grand, don't go buy something for a hundred thousand dollars. Buy something for close to eighty, and you've got some backup cash for anything that happens within the business as well.

Seller financing allows you to you know, it gives you some well that's what it's leverage. And I honestly think, to be honest, I don't hear people get many great terms of like two and a half years of fifty grand or forty-eight grand. It's pretty- I would say well done to you, Justin. It's a pretty good seller financing structure, yourself.

Yeah, I think also what I do when I see something I like, you know, I jump at it. I'm very kind of pretty aggressive because I understand they're talking with other buyers. I want to move quickly and show my intent.

I think also because I've done I've now done a few deals, you know, I mention that to the seller so that he also feels okay; this guy knows what he's doing. Yeah. Because I'm so public with everything I do in business, like I can share my newsletters and show them he's been through transactions before.

That I'm building a portfolio, that, like, I've done all these deals before. I'll give you another example. I've done two deals now to acquire apps on a specific platform called Monday, Monday.com.

It's like a productivity ecosystem, you know, right. So that platform's a bit different to, say, Stripe, Slack, and other marketplaces. They're actually quite a lot more manual, where you need to get in touch with, like, the head of partnerships, and they do a bunch of stuff behind the scenes.

Now, since I've already done that and I know the people at Monday that deal with all of this, I can drop their names when I'm talking with someone selling a Monday app, right? And that immediately sends the signal to him that this isn't a regular; he's probably spoken to ten buyers. I stand out, and then he's like, Okay, cool, this guy wants to move quickly.

He knows what he's doing, he's done it before, he knows the people; it's much lower risk now for that for the seller. And I think that also helps me close the deals that I've gone after.

Yeah, definitely. This is what I call it: being an attractive buyer is learning how to be an attractive buyer, understanding the industry, understanding who's in there, and you're even going down into the specific things where the sellers realize that it's the least risky; you're the least risky person to sell the business to, and it makes the most sense.

So it is that you can come in even with a lower offer or a similarly priced offer and win the deal because of your experience and becoming an attractive buyer. With that, you said you learned a lot of lessons setting up different structures in the States.

What was for somebody- I mean, it sounds like it was through tax, you know, this there was you were taxed on not well, you were taxed in a way that you didn't know you were gonna be taxed and you and that was some of the lessons. But for somebody thinking about being, you know, international like yourself.

You're a digital nomad thinking about setting up an LLC or a for a hold go in the States. How have you done it, and how would you suggest people do it? Just based on your experience.

Yeah, so I used Stripe as a service, kind of a standalone service called Stripe Atlas, where you can use them to set up business entities in the US, typically in Delaware, which is a very business-friendly state, on your behalf.

So I use Stripe Atlas twice to set up my two d entities, one for my agency and one for my hold co. My mistake actually wasn't on the tax side; it was because I wanted to move cash from the agency into the hold co. That gets a bit more complicated when you have multiple entities.

And most people don't even go that route. And I probably honestly overcomplicated things looking back. But what I did, just for your listeners to understand, was I set up two C Corps instead of setting up one C Corp and one LLC, not understanding that.

If I want to move money between them, you can have two C Corps, and one C Corp can be the parent and one C Corp can be the child. But since the C Corp isn't a pass-through entity, if you want to move profits from a C Corp to a C Corp, there's actually triple taxation. So I didn't want any taxation on moving the profits through. So the correct way to actually do it was an LLC owned by a C Corp as a subsidiary. And it took me about a year after setting everything up to correct that. I had to go through lawyers, get things, you know, the entity changed, and then that wasn't done correctly.

So there were some expenses involved and a lot of admin work. And then, of course, it's learning the US tax code. It's understanding that you need to have a bookkeeper. So I work with a company called Bench, Bench dot co.

They're a decent service for a good price for the bookkeeping across both my entities. And then I kind of realized I can't really w wing the tax side myself. So I actually hunted down a tax specialist firm in the US that has been consulting with me,e and they file my taxes every year and kind of give me a lot of good advice, and they've been great.

But it should have cost me a lot more money than it should have and caused a lot more stress. There were potential penalties from the IRS because of how things were set up incorrectly initially. So anyone who wants to kind of follow my path, take that into account. There's a bit of a learning curve; take the tax side very, very seriously.

Do it correctly on day one, write everything down because you know, even though I've been doing this for a few years, when it comes time to pay my quarterly taxes, I have to kind of go through a checklist; I have to log into all these systems to do it. So there's definitely stress, there's definitely challenges around it, but you know, you learn, and it's part of my long-term strategy to kind of build up my wealth through kinda needing to go through it.

Yeah, it's a long it's a build up short term pain.

Yeah, congrats. And so you would have the LLC in the S Corp and send the money to the LLC. Cool. So sorry, that's cool.

C Corp. Yeah. So Stripe Atlas allows you to set up either an LLC or a C Corp. I don't think they do S Corp. But honestly, it's not that challenging today. There are all kinds of companies that will help you set these up; it's not too expensive to set them up. What ends up costing a bit is that the bookkeeping can add up if you're not making a lot of money. All of a sudden, you're spending three to five thousand a year in bookkeeping, and then the taxes, right? So I spend fifteen hundred a year just to file the taxes. Yeah. But once again, I see that as kind of an insurance because I'm working with a proper company, not kind of a, you know, this guy who could get you into trouble down the road.

Absolutely. Absolutely. How is the health of the Holdco? So you've got five you've had five acquisitions, but it's ten apps in total in that Holdco, right? And so do you have any outstanding seller financing that you're paying off at the moment? And where do you go from here?

Like, are you putting more money into the Holdco personally to acquire still, or are you, and then when do you get to a point where you want the Holdco to do its own acquisitions without your personal input?

Yeah. Those are all great questions. So, the state of the hold co so that I still have seller financing on two of the deals. One will be paid off by the end of the year; one will be paid off by June of next year. So basically, about a year left of payments.

And then that will obviously help a bit with cash flow 'cause there'll be less debt; there won't be any debt left. I've kind of decided to at least for now put things on hold while I build up new assets that I'm building myself, not through acquisition. So I mentioned the newsletters, you know, I've got two; I write every week trying to build up that audience.

And then there's also the last three months I've been working on my on a new SaaS from scratch. So I'm building it myself. I'm marketing it. That's Project Echo. And the motivation now is to do a combination of- well, let me say the goal really is to build up the total MRR across the whole code at 20,000 a month.

That's kind of my long-term goal. It's what I set back in 2022, and I'm about I'm sitting at around 8,000 MRR. That's obviously before the seller finance payments, which eat into that every month. But I've also kind of realized the approach I've taken up until now, even though it is semi-scalable.

I don't think it's the most efficient way to do it. These micro deals. If I'm gonna double down on the acquisitions, which there's a high likelihood I will, I need to kind of transition from these micro deals into bigger deals.

And especially deals where there's more growth potential. Because the real magic is when you can acquire something at a good price, say two and a half to three X, but grow it at fifty to a hundred percent a year. That's where the outside gains really come in this game of acquisitions, and I'm sure you would agree with me on that.

But it doesn't really work in my current model where I'm going for this passive approach. So there's I've two op I've three options, really. I can take a super slow approach, build up the cash, you know, what I call the war chest slowly, you know, by keeping my personal costs down, and let the existing portfolio build up. But we're talking about two to three years before I can make another acquisition. You know, if we're looking at multiple six figures, because, as I said, the current portfolio is doing.

You know, it will probably cross a hundred K this year in cash flow with decent margins. It's still not fast enough to really build up that wall chair. So that's option one. Option two is I take some of my personal savings, invest, you know, put that cash into the business, and then maybe do a deal in a year to two years from now. The third option would be to raise some outside money. And I've been kind of debating that approach, slowly starting to talk with people.

Also understanding the tax side and how to structure that, you know, special purpose vehicles, and there are all kinds of legal side of it. I guess another model entirely would be setting up some kind of fund, but that's also a lot more complicated and a lot more expensive.

So I'm kind of what I call, you know, being in a research phase at this point. I'm not in a rush. Luckily, the portfolio is bringing in enough cash that I feel comfortable. I also still have one consulting client from the agency days left that more or less covers my salary.

So I've purposely kept that client to kinda lower my risk and give me more bandwidth. But as I said, I transitioned from many years of, like, burnout and consulting through an agency to a very different model. And I've been much happier this year.

Like I said, transitioning to be more, you know, working on things closer to my personality, my lifestyle. You know, when you've got to jump on video calls two, three times a day and you're a digital nomad.

Facing challenges. Client-facing work is challenging. It's not for everybody. Yeah. So different type of work when you are a business owner and operator, and you're not doing client-facing. It can if if you don't like client facing it's far more enjoyable and you're using your skills and your personality like you said.

Yes.

Right. So what I'm really hoping is, call it, you know, in the next six to twelve months, build up some additional MRR through the newsletters, the new SAS, slowly start moving towards a twenty K MR, and then I'll be in a nice position where there's enough coming in that I'm really comfortable.

And then potentially, as I said, in a year or two from now, raise some outside money, go potentially all in on the acquisitions. But once again, it's also giving up freedom. It's a big change, probably in lifestyle I'll need to make, and I'm not sure if I want to do that versus just being, you know, optimized for happiness and freedom and kind of build slowly.

You know, I'm in no rush. And I'd rather do things the right way for myself than force it and then end up in a position where I feel very stuck, you know. Also, if you're taking outside money, you now have people; you have investors; you don't have happiness. There are all these other, you know, taxes that come with that kind of approach. So we'll see, you know. We'll see how I feel down the road.

You're just learning so much, and it's so cool that you've learnt so much from your acquisitions, and for somebody not to turn this into, like, just giving you unsolicited advice.

Happy to get unsolicited advice.

Well, somebody's been doing it for a while. It is what I get paid for, but it's just an equation of, like, you thinking about, like, you already are. How do you make more money with less effort and less stress? Personally, I think- and I wouldn't say it's just personally- but, like, using and spending other people's money can be more stressful, depending on how you think about that and handle it.

But when you move to larger acquisitions, for example, it's just taking your portfolio and thinking about opportunity cost, and not just opportunity cost in your money, but it's also opportunity cost in your time. And I was gonna ask you a question, like, how do you manage to split up your time between multiple apps?

And this is what I've done in my life, and my portfolio is: I went and bought three small businesses in three years, slightly larger than some of yours. And then I just thought I was I'm good. I got three businesses in my portfolio and kept going. But one started to do better than the other.

Well, I started this one, right? And it started to do really well. This business I'm in now. And I neglected all the other ones and thought, I need to keep this portfolio going, and I just wasted too much time and held onto those other ones for too long.

Whereas it just it it would have been better for me to have one singular focus. And that one singular focus isn't for everyone. But I do feel that most people do perform better when they have one singular focus. And it can look like, do we, you know, take this money from these apps and just slowly start to buy something larger and and s and sell off the smaller ones.

And that's what I'm doing in my property portfolio is like bought a bunch of residential properties, or real estate, you call it, in America, and starting this starting to, like build up to larger ones and then eventually the smaller ones will drop off and having like one to two like solid bigger assets that are not high performers, but they just earn a lot of money with a little less risk.

And as you said before, you can have the maybe you do go something where you can get, you know, fifty to a hundred percent growth in a year or two or three years. You can do that with assets that have minimal risk as well. They don't have to be high risk, high return; you can have a low risk and get a high return.

Like the one that I think about, the U is that meets Slack, or is it Slack meets? It's where it's on the slow or small percentage of conversion to paid, but the low churn is beautiful because then you've got low risk but high potential upside. It's yeah. What are your thoughts on the portfolio strategy? I think you're already leaning more towards larger acquisitions, but you don't want to go too big too soon.

Slowly over time, I guess. What do you think?

Yeah, you know, I think it's important to put things into perspective. So I did my first acquisition in twenty twenty two. So it's been now four years, five deals, and the portfolio will do, as I mentioned, around a hundred thousand US in cash. Now you've got seller financing, you know, call that two to two and a half K a month that eats into it. You've got admin costs; you've got, you know, software costs.

The margins are still great, much better than the agency. But all in all, you're looking at, you know, fifty to forty percent, you know, net of everything in cash. So even before I pay myself a cent, maybe I've got forty to fifty K, if I want to be conservative.

Now, if my goal is to build this multi-seven-figure net worth or ideally even higher than that in my lifetime, this approach won't get me there. It's just common sense; it's math, right?

What it might give me is skills and knowledge, and that's important 'cause, you know, you always want to be learning. And in theory, it's still an approach that could scale big enough if I give it enough time.

But I think all entrepreneurs were getting a bit impatient. So that's one big part of this. The second part of it is also that with every new acquisition, there are, you know, costs that come with that in terms of time.

So I'm now dealing with a lot more support tickets because I haven't delegated that yet, 'cause once again, there's not enough, you know, profit there to potentially hand it off to a full-time head of support. And it's not enough work also for a full-time hire, but it's, you know, I've noticed over the last year in particular there's more and more I'm spending more and more time answering emails, and that's kind of crap work.

Which drains me rather than gives me energy, right? And that's also something you want to try and do is to work on stuff that gives you energy, not takes energy. So I love that. You know, even if I doubled the portfolio tomorrow and I'm bringing in now, call it a hundred K net, I'll probably be a lot less happy, and it still doesn't solve my underlying problem because it's not enough.

For me to scale. So I've kind of modeled out if I went and raised, say, five million dollars, did two multi-six-figure deals, and used the rest to kind of build a core team. I can delegate things like marketing support and admin, and I'm kind of head of strategy, plus looking for new potential deals. Now it's much more of a scalable model with interesting economics.

Right. My model, people get fascinated because it's kind of, I think, a pretty unique approach to building wealth, what I'm doing. And who doesn't like money, right? And the whole discussion around it. But economically, it's not that impressive.

You know, you talked about opportunity cost. I could probably go and join Google or one of these tech giants tomorrow and earn a lot more money. Will I grow and be happy? Probably not at the pace I am now. So that's once again opportunity cost. But the reason I stopped this year and kind of reposition stuff and decided to build my own SaaS is because we're living now in the age of AI with the high, super high leverage activities, there's more and more stories of these solo, you know, indie developers that spent three, four, five years on their product and now all of a sudden their graph is taking off and they're doing a hundred K a month from a single app, right?

These are now becoming a lot more common. So I see that also as a way to solve this, right? Is to spend my time building something a lot more scalable than the existing portfolio.

A, I'll learn a ton, and I think I need to if I want to consider myself a SaaS expert. I need to ultimately build something from scratch and build it, you know, ideally to multiple six figures in annual recurring revenue. Go through that entire journey myself versus working with companies that are doing it.

And you know, if it takes me three, four, five years, but I'm ultimately at a point where I've got a seven-figure asset that I could also sell at a good multiple, that's another way to solve the challenge of building, you know, extreme wealth. So I'm very honest with myself. I'm doing this 'cause I wanna reach financial independence and freedom and build up enough, you know, wealth to kind of live the life I really want to live. I enjoy the journey, and that's also important. But I'm trying to be as strategic and honest with myself as possible.

Yeah, no, it's cool. I'm not the start-up person. That's not what I share and advise 'cause I've tried to start businesses and stuff like that. But you're so right. Like, if somebody can see there's a market out there that needs this tool and it's not built, and you spent some time building it, definitely a way to go.


Maybe a bit more, three hundred and fifty K if you get three point five. You've got three point three and a half three hundred and fifty K there to go and buy something; that could be making a hundred K, and you've got one business.

Right. That's another idea.

Yeah, that's the way I look at it, and how I would do it, if it was that's for me, though. It's not everybody's way that they would do it, but if I had my time again, I would have sold my three businesses and reinvested into one larger one and had a singular focus, and then I would have yeah, I just I just would have had a smaller team, a better margin, and then I would have try to double that over a two to three year period to get that three fifty K to say seven hundred.

And then if I couldn't take that, you know, then go buy a seven hundred K asset, and if I couldn't double that one in two, three years and sell or whatnot, and I'll just take it one acquisition at a time and probably stick in a similar lane of the business model. And for you it might be SaaS, or for somebody else it might be e-commerce. But that's how I would have personally done it.

Because I mean, it's admirable for people to take on financing from others and stuff like that. That is definitely a faster way to do it for sure. So it just depends on, like, you said at the start, your risk appetite hasn't been that high. And I just think that's admirable, to be honest. Especially when you're starting small, and a lot of people like you need to take crazy risks. Some you do need to take risks, but I think it's admirable not to have a high risk appetite, but to understand that every asset has infinite growth potential.

Well. Yeah, you know, you touched on a good point: the risk profile. You know, mine's been very low. I have a very good friend who's kind of the opposite of me. He'll put all his chips on black, you know, every few years, and it's been interesting to follow his journey and see the contrast.

So yeah, you know, it's an interesting game, and there are different ways to play it. I don't know if you're familiar, there's a company in Canada called Constellation Software, which is also very, very interesting. It's probably the largest software holding company in the world, and they do like two or three hundred acquisitions, you know, every year. And they have a very simple model.

They buy vertical SAS, you know, for a few million a pop. And, you know, they hold forever, and they've been doing this for a long time. So that's also a company I've started to research a lot more because, you know, if I'm gonna go the route of raising funding, I'm probably gonna go all in, with the goal being to build, you know if the fifty to hundred-year conglomerate and really shoot for the stars. Because I either play the low-risk, slow, kind of very selfish type of approach, where it's like I just want to reach this threshold. I'm not looking for more than that. I just want to pay myself well, be very comfortable, delegate all the work I don't want to do, and really optimize for lifestyle. Or I'm like, okay, let's really go crazy here.

And you know, have to raise money every few years and scale very aggressively and almost like a VC-type approach, but through acquisitions and hold co and long term. And then it would be like every three to six months we do an acquisition. We have a core team that's responsible for growth, and our goal is to, you know, grow forty, fifty, sixty percent a year and just keep on doing that and then build the snowball because you're dealing with like eighty, ninety percent margins in many cases, you know, in these software companies.

So that's kind of another model I've been thinking a lot about. But once again, it's a mindset shift completely. It's giving up the lifestyle. It's sitting in an office for the next forty years, dealing with a lot of stress. And I'm not so sure I want to do that. So, but it's a way to play the game. That's also very exciting.

If you succeed, it's incredible, right? So if you live once, why not take those kinds of shots? But it's a bit of a, you know, it's a mind game. It's all a mind game. It's all thinking about what the right way is to play it, and I think the best way to play life is to have fun and make it fun, and if whatever that is, each of those strategies is to go for that. But Justin, it's been so good to chat and just hear about your story and what you've done.

You've done so well. Congrats. Just excited to see, like your with your headspace and your mindset, and where you're gonna go.

Thank you.

So yeah, maybe we chat in a year or two and see where you're at. But congrats. Where can I send people to for your Substack? What's the link for that one again?

So it's so I've got two Substack accounts. My personal one, where I kind of share my journey, would be Justin Butley dot substack dot com. You can also find the link on my LinkedIn. So just look up my name on LinkedIn, and you'll find it there.

And then the second one is dedicated to SaaS and kind of educating SaaS founders on growing a SAS. So that's SAS decoded dot com. And then the third one would be Project Echo. If you're in the SaaS space and interested in getting feedback from your users to help you build your product and taking, you know, that kind of approach to product development, check out Project Echoes, my new SAS. And, you know, I'm very open and share a lot on my Substack. So if you go there and just read through some of my posts, you'll find all the links to everything.

Awesome man. I'll put a link to your LinkedIn and Sasta coded, and people can check out Project Echo and your substance.

Yeah. I'm also an ex and spending a bit more time on X. I'm having a lot of fun now on Twitter slash X. I've been on there for a long time but could never kind of work out how to do it properly. But that's slowly changing, and I'm also happy to connect with people there.

Yeah, it seems like Twitter's definitely a space. I it's not my- it's, I don't like social media so much, and I don't like reading so much. But I know it's and SAS. So I know. But each to their own, Justin. Thanks.

Thanks, man.

My pleasure. It's been a pleasure. Thanks, Jaryd.

Absolutely. All the best. Thank you. Everybody is listening. Thank you for listening, and I'll see you on the next one.