S2E12 – How to bootstrap your SaaS to a 10M+ exit? With Andrew Gazdecki

Bootstrapping a SaaS Startup: Guide to a $10M+ Successful Exit

Bootstrapping a SaaS Startup: Guide to a $10M+ Successful Exit.

Bootstrapping your SaaS company to a 10M+ exit is a formidable challenge that requires a strategic and disciplined approach. First and foremost, focus on achieving profitability early on, as this not only sustains your business but also makes it an attractive acquisition target. As you grow, prioritize hiring talented individuals who complement your skills and can take over key roles, allowing you to work on scaling the business rather than getting bogged down in day-to-day operations. Building a strong brand presence and a loyal customer base is crucial, and consider sharing your journey through content marketing or building in public to attract attention and potential acquirers. Ultimately, perseverance, a clear vision, and adaptability are key to bootstrapping your way to a successful 10M+ exit in the competitive SaaS landscape.

In episode four of season two we were privileged to host Thomas Smale as we discussed How to sell your B2B SaaS, In this episode however, show host Joran Hofman is joined by Andrew Gazdecki, the CEO and founder of acquire.com. When it comes to bootstrapping and exits there is arguably no better industry expert in the B2B SaaS than Andrew. Andrew has built a strong reputation on LinkedIn through his insightful content and deep understanding of the B2B SaaS landscape. During this episode, Andrew imparts valuable advice to founders who are bootstrapping their SaaS businesses and have aspirations of selling them in the future. If you are in this space then this is your episode!

What is Bootstrapping? 

Andrew shares his perspective on bootstrapping, emphasizing control and flexibility in business growth.

Understanding Bootstrapping a SaaS

• Andrew highlights two key techniques for bootstrap success: unfair distribution models and customer payback periods.
• Unfair distribution models involve finding cost-effective ways to reach customers, such as partnerships and white-labeling.
• The customer payback period focuses on achieving a quick return on investment, crucial for bootstrap startups.

Unfair Distribution Strategies

• Andrew shares examples of unfair distribution strategies, including social, storytelling, positioning, and partnerships.
• He discusses how white-labeling and partnerships helped his business achieve an unfair distribution advantage.

Listening to Customers 

• Andrew emphasizes the importance of listening to customers, which led to transformative changes in his business strategy.
• He underscores the significance of customer feedback in making critical decisions.

Common Mistakes in SaaS Growth 

• Andrew identifies common mistakes made in SaaS growth, including over-engineering products, lacking clear positioning in marketing, and shying away from sales efforts.
• He advises founders to actively engage in sales and understand the sales process.

Success Stories of Bootstrapped SaaS Companies

• Andrew shares success stories of startups that achieved significant acquisitions, ranging from seven to eight figures.
• He highlights these acquisitions’ emotional and life-changing impact on founders and their families.

Positioning for a Profitable Exit

• Andrew provides insights into preparing for a successful acquisition, including organizing financial documentation, creating a data room, and establishing a professional image.
• He emphasizes the importance of building trust and goodwill with potential buyers throughout acquisition.

Valuation and Pricing Your Business 

• Andrew discusses the factors that influence business valuation, such as revenue, profitability, and growth rate.
• He stresses the significance of realistic valuation and proper preparation to attract serious buyers.
• They highlight the importance of financial transparency and ease of access for potential buyers.

Challenges of Bootstrapping

• Andrew humorously describes bootstrapping as playing startup on the hardest mode possible due to limited resources.
• Andrew highlights the importance of being efficient with every dollar and the need to operate like every dollar counts.
• The concept of “only hiring when it hurts” is discussed, emphasizing the need for lean teams in bootstrapped startups.

The Grit and Determination of Bootstrapping

1. Andrew elaborates on the necessity of doing everything in a bootstrapped company, from sales to marketing to product strategy.
2. The discussion touches on the importance of finding creative solutions when resources are limited.
3. Andrew emphasizes the value of building a company properly without wasting capital as a result of bootstrapping constraints.
4. Joran shares his experiences with creative marketing and cost-effective strategies in events.

Passion and Founder Market Fit

• Andrew encourages founders to find a market they understand and are passionate about.
• The discussion touches on the determination required in the face of startup challenges.
• Andrew highlights the significance of defining success on one’s terms and having realistic expectations.
• The idea that not every startup needs to aim for a billion-dollar valuation is discussed.

Future of Valuations in SaaS

• Andrew shares insights on the current state of SaaS valuations, mentioning typical revenue and profit multipliers.
• He emphasizes the growing importance of profitability in valuing SaaS companies.
• The discussion revolves around the practicality of building a financially secure business without the pressure of raising massive capital.

Bootstrapping vs. Fundraising

• Andrew discusses the treadmill effect of continuous fundraising rounds and the need to focus on building a sustainable business.
• He suggests raising a small seed round to initiate product development and growth.
• The importance of building a product, talking to customers, and achieving revenue before seeking investment is emphasized.

Advice for SaaS Founders

•  Andrew advises SaaS founders aiming for 10K MRR to start building in public to find customers and build their brand.
• For founders aiming for 10 million ARR, he recommends hiring people smarter than oneself as soon as affordability allows.
• Andrew encourages founders to embrace the challenges and hard times of building a startup and to keep pushing forward.
• The importance of seeking support and community in the startup journey is mentioned.

In this insightful interview, Andrew provides valuable guidance for both budding and experienced SaaS entrepreneurs. He underscores the significance of efficient resource utilization, grit, and passion in the face of challenges while highlighting the potential for success in building financially secure businesses.

Key Timecodes

• (0:28) Show and guest intro
• (1:23) Why you should listen to Andrew
• (1:44) What is bootstrapping?
• (2:35) The key processes or strategies of bootstrap companies that are key to success
• (5:02) Andrew’s Success Story
• (8:33) Common mistakes founders make while trying, to grow and sell their Startup
• (10:24)  The big exits success stories
• (13:40) Key factors for pricing and valuing your business
• (17:03) The Must-Haves for SaaS founders to guarantee a good acquisition
• (22:27) The unique challenges bootstrap companies will have and how they can navigate those.
• (29:27) The future of valuations
• (33:40) SaaS growth advice: How to grow to 10k monthly recurring revenue and 10M ARR

Transcription

[00:00:00.000] – Intro

Welcome to Growing a B2B SaaS. On this show, you’ll get actionable and usable advice. You’ll hear about all aspects of growing a business to a business software company. Customer success, sales, funding, bootstrapping, exits, scaling, everything you need to know about growing a startup, and you’ll get it from someone who’s going through the same journey. Now your host, Joran Hofman.

[00:00:27.840] – Joran

Welcome back to the Grow Your B2B SaaS podcast where we discuss all topics on how to grow your B2b SaaS no matter in which stage you’re in. We already discussed how to sell your B2B SaaS with Thomas Small in Season 2, but getting to that point, it will take time and it can be done in many different ways. Today for me it’s going to be a great episode where I probably learn a lot myself because we’re going to discuss how to bootstrap your SaaS towards your 10 million plus exit. We’re going to chat with Andrew Gazdecki, the founder and CEO of Acquire. Com. So far, his company helped over hundreds of startups getting acquired and facilitated over 500 million in closed deals. Actually running Acquire, Andrew is an advisor to multiple startups and a great inspiration to his EDK fun hours where I’m one of them on LinkedIn, as he shares a lot of content for bootstrap founders. I guess without further ado, welcome to the show, Andrew.

[00:01:21.800] – Andrew

Yeah, thanks for having me.

[00:01:23.670] – Joran

I like to always start with this question. It’s really touch and blunt. Why should people listen to you today?

[00:01:29.220] – Andrew

That’s an interesting question. I would say, if anything, maybe I have to teach someone something, but more importantly, inspire someone.

[00:01:38.620] – Joran

That’s a good point of view. Let’s dive right in. We’re going to talk about bootstrapping. Let’s start with the real basics. What does bootstrapping mean in your words?

[00:01:47.670] – Andrew

Yeah, I think the straight answer to that would just be not raising a bunch of capital to build your business and building your business a little bit more intentionally at your own pace where you control how fast you grow. Booktrapping, to me, means controlling your own destiny in terms of what you really want out of a startup. Do you want flexibility and free time? Do you want to just have nice lifestyle business? But also it’s still possible to build a larger business. I think bootstrapping is a company that’s not funded with a lot of outside capital, but you can build great businesses, but it gives you so much more optionality than if you do take on capital.

[00:02:26.500] – Joran

There’s a big difference if I ride by them with raising capital or not. I think bootstrap companies will have a bit more challenges, I guess, especially in early days. What do you think are some key techniques or key processes or strategies or things bootstrap companies do which are pivotal for success?

[00:02:44.380] – Andrew

Yeah, I got two right at the top of my head. First, you need to figure out what I call an unfair distribution model. One, because you can’t build a big outbound sales team. You can’t spend a bunch on ads or something like that. You need to find a really cost effective way to get your product in the hands of customers. I can give you examples of how I’ve done it if that’s helpful. And then the second one would be customer payback period. So what that means is it’s a metric that you want to track where what is the cost to acquire the customer and then how much time does it take you to see an ROI on that. So typically in a venture-backed business, you have the luxury. You have a bunch of money in the bank. So you can sign up a customer at $100 a month and then wait two years until you’re finally profitable because let’s assume it costs 2,000 to acquire that customer. After two years, you’re finally profitable with that customer if they don’t churn. At a bootstrap startup, you need that time to be ideally less than 60 days.

[00:03:47.820] – Andrew

I would recommend 30 days. That’s a metric that I would always track when I was bootstrapping my first company, to give some more examples. So unfair distribution strategies, what could those be? They could be social, they could be storytelling, they could be positioning, they could be niching down into a specific market. For me, it was actually white labeling and partnerships. So we didn’t have a huge sales team, but what we did was we partnered with other companies that had huge sales teams. And so we would basically brand the product to their company so they can have their sales team sell it. And that created an unfair distribution channel. And then also the UniEconomics on that allowed us to have a customer payback period of about 28 days. When someone would subscribe, typical pricing was around, let’s call it $300 to $500 a month or $300 to 1,000. This might be too much detail, but those two are just critically important. It’s understanding you need to find a cost effective way to acquire customers. Then two, customer payback period really will determine how fast you can scale the business by reinvesting revenue back into growth.

[00:04:52.390] – Joran

Yeah, with the first advice, you already said use somebody who has access to the ideal customer profile, basically, who has access to it, and then leverage their network and have them actually sell it for you.

[00:05:02.560] – Andrew

Yeah. Do you want to hear a story about that?

[00:05:04.460] – Joran

Go ahead. Yeah.

[00:05:05.570] – Andrew

Yeah. For context, now I run a marketplace, Acquire. Com, and really the genesis behind that is I bootstrap to SaaS startup, 10 million revenue when it was acquired by a private equity firm. And that’s the outcomes that we’re trying to help founders achieve, just that same outcome. Now, when it comes to the distribution model, how do we get to 10 million revenue without any capital raised? I should say we did raise 100K, so two small angel investors. What we did was we started cold calling small businesses to sell mobile apps. This is in 2010. And so we would cold call restaurants. I remember even being on calls and saying I didn’t have a lot of sales experience. I’m asking, hey, what’s your mobile app strategy? And they’d be like, what? Appetizer? Do you want our appetizer? What are you talking about? Selling to small businesses direct over cold calling just didn’t work. And a huge inflection point for us and the company was maybe this is another piece of advice too, is just listen to your customers because they can change everything. So there was a customer that we had in Switzerland that started making apps for these large hotels.

[00:06:14.190] – Andrew

And Itried to assume that he owned the hotels, and so I reached out just to say thank you and maybe see if he had any advice. But what he told me was he actually owned a marketing agency and he managed their social, their website, pretty much all the marketing for these hotels. Then I asked them how many customers he had and he said 200. And then my next question was, How the hell do I get you to sell apps to all those customers? And so he was actually the person that said, if you white-label this mobile app platform, because what I’m doing now is I’m selling the app, but I’ll charge $500 to set it up, and then $50 a month to maintain it, and then I pay you $30 a month. But on your website, my customers can see that price, Delta. If I could just have my own branding, I can have $1,000 at a fee and $100 monthly management fee. I remember asking him, We could build that. Will you presubscribe to 50 apps upfront? And he was like, Yep. And so that’s when we changed from selling one app at a time to sometimes 10, 20, 30, 100 at a time.

[00:07:26.950] – Joran

Yeah. And in the end, to come back to what you said at the beginning, talk to your customers, listen to your customers. So you had one customer, you went in the conversation, and that’s where the magic started. Yeah.

[00:07:36.620] – Andrew

I literally had a Wikipedia white label. I didn’t know what it meant or anything, and that ended up being our business model because it was so cost effective, because it allowed us to, again, work with other people with pre-existing relationships with small businesses. And that’s crucial when you sell to SMBs because there’s a saying that small businesses lack time, aptitude, and money, which is a perfect storm. They don’t have the time to learn anything new. They don’t want to learn anything new, and then they don’t have a big marketing budget. And so they rely heavily on whoever it is they’re currently working with. So we were able to tap into that and get directly to the owner of the business without having to build out a massive sales team and hunt down the owner of the business and sell it to the end. So we had, I guess, warm referrals into hundreds of thousands of small businesses.

[00:08:29.860] – Joran

Nice. And this is a real good success story. When we go to the other side, especially now with Acquire, what do you see other founders make as mistakes while trying to grow and sell their company? What are the most common mistakes you see them making?

[00:08:45.830] – Andrew

Yeah, there’s a few, I think, but it depends on what category, like product, marketing, sales. In terms of product, I think a lot of entrepreneurs over-engineer their products. And so what you’ll typically see with a lot of businesses is 20 % of the features are mainly being used. Then you have all these other nice to have 80 % features. So that’s one common mistake. And then another one would be in terms of marketing, not being really specific in terms of how you position your business. Who is it for? What problem do you solve? And why should I care? Just have lots of buzzwords that doesn’t make sense. Just speak in clear language. So Simple That, like The Mom Test is a good book. And then in terms of sales, shying away from sales, I think is a big one. I see a lot of founders trying to hire someone to figure out sales, but it’s your job as a founder to figure out the initial sales process because that does two things. It gets you really close to the customer. Then it helps you understand the sales process. So when you do go to hire someone to eventually take over sales or an additional sales rep, you’re able to understand what type of person you need in that role.

[00:09:59.070] – Joran

Yeah. I guess for the listeners, this has been the advice of Season 1 for I think like almost everybody talk to your customers, do sales yourself, get your first clients in, and then you can figure out how to move things forward. I think this is one of the most common mistakes where not doing sales yourself is a really big one. You help startups to sell their company, right? You had some big exits or big exits you helped startups to get a big exit. Can you share some of the success stories? You don’t have to name names if you don’t want to, but more as in what are some success stories? How did they get there? And in the end, how did they actually get that 10 million plus exit?

[00:10:36.290] – Andrew

Yeah. So for context, our sweet spot is generally seven-figure acquisitions. We’ve only done a few eight-figure acquisitions. So our ideal customer profile would be a SaaS company doing anywhere from, let’s call it, three to five million in revenue, ideally profitable and a SaaS company. But if you do have a bigger company, we can definitely help you sell it. But a couple of stories. Recently, we had an acquisition that it was a SaaS business based in Canada, and it helped other companies with their sales process. That business, what was cool about it was when Melt2 million dollar acquisitions happened, you truly changed people’s lives. I know that sounds cheesy, but I went to lunch with him and he told me he had went to two other brokers or three other brokers and they valued his business at half of what we sold his business for, and at a third of the price that other brokers would normally charge. That was rewarding to hear. And then just like a big hug because it’s emotional and stressful. And when we actually have those success stories, we also feel it too, and get to celebrate with them. Another story I like to share is we do acquisitions globally as well.

[00:11:57.490] – Andrew

We’re not just US-based. I love also the smaller acquisitions too. The one I just described was on the upper end of High Seven Figures. But we’ll see a lot of situations like I love telling this story. There was a 20-something-year-old in India who built a platform to help you pass coding exams for large software companies. He sold it for half a million bucks or something like that. He wrote me the most heartfelt email. He bought his mom a house, he paid off his school, and half a million dollars in other regions of the world goes a long ways. Another story that I really love is someone who was living in Bali sold a business for about a couple of hundred thousand dollars. And he told me that was 10 years of just living expenses in Bali. In Bali, living in paradise. So we hear a lot of the stories like that about how whether you have a large startup or small startup, we have buyers for all of those. I could keep going with the story, but the general theme is when those acquisitions close, it’s not just a business and okay, whatever. There’s someone behind it with a story, with a life, with a family, and then we get to actually really have a meaningful impact on them that they’re never going to forget in their entire lives and really help them achieve something that they could never do without us.

[00:13:19.230] – Joran

Yeah, I can definitely imagine it’s a stressful period for them and for yourself. You want to make it as smooth as possible.

[00:13:25.230] – Andrew

Exactly, yeah. When you go to sell a business, you have no idea what to expect, what the process is like, how to properly price your business, how to prepare for the acquisition, how to speak with buyers. That’s really what we’re addressing at Accor. Com.

[00:13:40.150] – Joran

I’m curious because at the meeting you said the one example you mentioned you valued to different 10 other firms because I mentioned they’re M&A firms. And you now mentioned as well pricing your business is something difficult. How do you look at that? Is it purely ARR? Do you look at other metrics? Of course, profitability you already mentioned Yeah.

[00:14:00.440] – Andrew

Good question. It depends on the business, but typically we’ll put evaluation, like we have a suggested valuation. But the key to getting a higher valuation is you want to speak to multiple buyers. They’re just saying if you have one buyer, you have no buyers. And so what we do the best at Acquire. Com, or what I think we do the best is we drive a tremendous amount of buyer interest. And it’s not just regular P, it’s private equity firms, it’s public companies, it’s family offices, it’s high net worth, real serious buyers, like something I wish I had because it took me three years to find a buyer once we start searching. So what we’re able to do is take a company, and this is what drives the price up, is the more interested parties we get into acquisition process, you’ll get multiple offers. And then from there, you can essentially ideally start a bidding war where people are… And also it’s important to note the highest price always isn’t the best option because once you sign it a letter of intent, which is a formal offer to sell your business, that’s not guaranteed to close.

[00:15:10.520] – Andrew

We do see sometimes where someone signs an LY, the buyer changes their mind that last minute it happened. So we also help founders review letter of intents or do due diligence on buyers. So when they do sign an LY, we increase the likelihood of that LY closing. But short answer to your question, just the amount of liquidity within the marketplace and the attention we drive to these businesses is what really helps them sell. Because if you just show it to 10 buyers, eight aren’t going to be interested. And if you just have two, maybe one gives you an offer, and then they know they have all the leverage and they can take you through due diligence, change the price towards the end and all that fun stuff.

[00:15:52.370] – Joran

Yeah, because I guess there will be fun stuff in the process, like things you can’t predict or things you wouldn’t think would happen are going to happen.

[00:16:00.880] – Andrew

Yeah, I would say the most important part of an acquisition that successfully close is goodwill, because there’s really trust on both sides. You got to be in the middle where a buyer is going to be doing due diligence on your business and as the owner of the business, some of that can seem intrusive or some of it can seem exhausting because it’s essentially like telling your significant other everything you’ve ever done wrong in your life. You go through customer contracts, you go through code reviews, you show them how the operations of your business works because you have that knowledge and once you sell the business to them, they’re going to be operating the business unless you stay on through a transition period or earn out or something like that. So yeah, we help with each step of those stages in terms of just reducing stress and letting founders know you’re not on your own. We’ve seen a lot of acquisitions, both good and bad. So we know how to steer more towards a successful good acquisition.

[00:16:59.390] – Joran

I think then a question for the SaaS founders, what can they do to make it a good acquisition? I guess also, and then this is for a subjective, but with a good valuation. What should founders have in place to do so we can think about metrics, we can think about documentation, anything here.

[00:17:18.610] – Andrew

Yeah, it all helps. The short, easy, cop-out answer is just build a great business. If you build a great business, you can get away with a lot. And what I mean by that is you can get away with, I don’t recommend less preparation. If you have negative churn, your net retention rate is high, you’re growing like crazy, you’re also profitable, those businesses will generally get offers without any preparation. But if you do prepare, that’ll just accelerate offers. So in terms of how founders can really prepare for an acquisition is, start getting your books in order, start having a clean three-year P&L broken down by month. That’s extremely important. That’s usually the first question that financial buyer will ask. Also just when you work with our team, just taking our advice. How do you speak to buyers? What materials should you have available? How do you introduce yourself? How should you position your listing? Also aligning, how are we going to market? Who are you trying to sell to? Because we have a database of so many buyers with data on what they’re looking to acquire so we can properly connect buyers and sellers with the right people.

[00:18:25.420] – Andrew

So again, a deal actually happens and we’re not just sending a bunch of random people that are not interested in your type of business. But for me, what I did was kept the data room open. I would just record looms on how does marketing work. It can be really simple to start just to get buyer interest. But your goal, as you think about potentially selling your business, is make it really easy for the buyer to understand your business in every department. So a 360 degree view and also do an audit on yourself, too. Do I have documentation for sales or marketing or the product. If you don’t, even just a quick loom can help or record a video. But the sooner you do that, the better, because another easy strategy is giving buyers access to a light data room that just has high level information where it’s not super sensitive and you save the more sensitive questions for formal due diligence after you’ve signed a letter of intent. But just having that data room shows professionalism and shows you’re taking the process seriously. And that’s what buyers really want to see is they don’t want to debate on, Is your business worth 20 times revenue?

[00:19:34.430] – Andrew

No, they don’t. They don’t have time for that. Some do, and in some situations buyers will. So having a realistic valuation, being prepared in terms of understanding what buyers are going to ask upfront, and just be ready to really put effort into that acquisition because it does take time.

[00:19:51.830] – Joran

Yeah, and I think a lot of things come back to what you already said before, as in build a great business. Because if you have a great business, you probably have internal documentation already. You probably have the churn, you might already have some version of analytics yourself, so it’s easier to share with the buyers.

[00:20:09.210] – Andrew

Absolutely. Yeah, and other things you can do, and I don’t want to shameously plug acquire. Com, you can connect. If you don’t have a clean PNL, you can connect QuickBooks or whatever billing system you use, Stripe, Chargebee, Curly, whatever, BrainTree, whatever it may be. And we can build out a PNL for you. So giving buyers a true financial look into the health of your business. And that really just again creates trust and helps buyers understand. And you’re not sharing your customer list and bad sense of information. How much revenue have you generated in last year? What does profitability look like? What’s growth rate? What’s average revenue per account? Just really, instead of just stating it, we have tools that connect directly in your billing system so you can show them, like giving read access into Google Analytics as an example.

[00:20:56.770] – Joran

Yeah, I haven’t personally used you guys yet, but I know these tools work great because you can just connect the sources. And then from there, you also can really say, We connected our data source, so we can’t iterate it. And it’s just you do all the math for you basically. It saves you a lot of time to get things in order.

[00:21:15.050] – Andrew

Yeah, that was one thing we noticed was a lot of SaaS founders don’t have clean P&Ls. We actually built a P&L builder. So when you list with us, again, it’s one of the first questions that a buyer is going to ask because they want to understand, how are you generating revenue? We’re where are your expenses coming from? Is the business in decline? Is it growing? Is it profitable? Is it break even? What’s going on in the business? And you could tell so much from a financial snapshot. We created a tool that breaks that out into a 36-month P&O just by connecting metrics.

[00:21:47.150] – Commercial break

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[00:22:27.770] – Joran

When we go back to bootstrapping, what do you think are some unique challenges bootstrap companies will have and how can they navigate those?

[00:22:36.890] – Andrew

Everything. I always joke bootstrapping is playing startup on the hardest mode possible because you can’t really take too many risks. Like as a counter example, so I bootstrap business apps, Accor. Com is venture-backed. And what we’re able to do since we raise capital is we’re able to take some bets that may not work out. And we’ve had that happen. As a bootstrap company, you cannot. And so bootstrap companies are forced to be efficient with every single dollar that they have. And every business should really operate in that manner. And we do our best to operate with that same. Once you bootstrap a company, it’s hard to really ever think of building a company another way. But when I was bootstrapping my previous startup, there were so many situations where we had a saying we only hire when it hurts. And so there’s moments where you’re growing and you’re putting the team on. If you are successfully growing fast, but you can’t afford an additional hire for. As an example, we had at 1.678 people just manually uploading iOS apps all day, and we needed 10 or 12 people given the volume. We ended up automating that process, but you just can’t afford to just build out the team that you really need to go from 5 to 10 million within the first two years.

[00:23:55.060] – Andrew

So you have to do all the sales calls yourself. You have to figure out the marketing strategy. You got to figure out the product strategy. You don’t have the luxury of building a modern tech stack with HubSpot and Sales Loft and a ton of different nice dialer and stuff like that. You probably also can’t get an office. Not necessarily you need one, but there’s just so many things that you have to work to obtain. But what that does is it builds a culture of just pure grit and determination because you can’t buy your way out of problems. You have to find creative solutions. So I always say, I guess put it another way, the way I think about it is those challenges are also blessings in disguise because they force you to build a company properly without any waste because you don’t have the capital to waste.

[00:24:45.400] – Joran

Yeah, you’re fully related to this. I always have fun challenges with events, for example, high ticket prices. I always manage to go one way or another without paying the full ticket price or getting access to somebody’s network, for example, by doing this podcast where we are getting our brand out there one way or another but without spending a lot of money on it.

[00:25:05.860] – Andrew

Yeah, that’s creative marketing, creative business building strategies, and it’s required. You just don’t have the luxury of hiring a VP of Sales or VP of marketing to come figure it out. And then also, even if you do, that rarely works out. You need to really understand every aspect of your business. I call it years of just chewing glass where you got to do everything from customer support. Another example is in the first two years of the prior, we were entirely bootstrap. So I bootstrap this company to about a million. And the way we started was I was doing all customer support, all product management. We have a curated marketplace. So when listings come in, we review them, we do some due diligence on them before placing them on the market. We also clean up the listing page. So we do a lot. It’s not just sign up and, okay, whatever you said. Then writing a newsletter that we have daily that sends our top picks of new deals. There are so many things that I was doing. I don’t recommend it, but I was truly working 4:00 AM to 10:00 PM about two years. I have a little footnote out there too.

[00:26:14.900] – Andrew

It was during COVID, there’s nothing to do and I love business. I guess maybe another piece of advice for people thinking about business is during that period, you might be thinking, That’s absolutely insane. But it didn’t feel like work. It was just like I was playing my favorite video game all day long. And so that’s I think where you can win also as a bootstrapper is find a market that you deeply understand and that you’re deeply passionate about because it will get hard and you will want to quit. And then when that happens, just remember that’s when people do typically quit. So don’t do that. But you dramatically increase your odds of success by what I’d call founder market fit. Why are you specifically… Do you have any advantage or unique insight into the market? And then ideally, really serve a customer that you truly are passionate about or solve a problem that you’re truly passionate about solving. Otherwise, you’ll just quit. We see it all the time.

[00:27:08.010] – Joran

In the end, 9 out of 10 startups fail. So you have to have that determination to actually keep things going for yourself as well.

[00:27:14.860] – Andrew

Yeah, I say 90% of startups fail and then 10% of entrepreneurs just don’t quit. There’s always a way. I think sometimes, yes, there’s just no product-market fit or something like that. But from my experience, the startups that really make it. And also just defining success is important too. I think building a billion-dollar business is a silly goal. The odds are you have 0.1% chance, but give it your best and try as much as possible and realize that every problem has a solution. So whatever problem your startup is facing, someone before you has already solved that problem. And you should be grateful for that because back in 2010, that was the year I started business apps. For short, everyone called it biz apps. We ended up having to buy that domain because once my mom started calling it biz apps, I was like, Okay, all right. Okay, even my mom can’t get my company name right. Work on something that you’re truly passionate about, and you’ll have a competitive advantage over others in the market.

[00:28:17.190] – Joran

Yeah, and I think the two things you said set up realistic expectations. You’re not going to build a billion-dollar company, but also the examples you gave before, like with a couple of billions, with even a couple of hundred thousands, you can’t change your life already.

[00:28:30.920] – Andrew

One thing that I truly believe is success is really defined by you. It’s such a cheesy saying, but it’s true. When you think about building a SaaS company, and I was actually just talking to a friend last night about this, he was thinking about, Okay, how do I go from zero to 100 million? I don’t think I’m thinking. I just said, hey, slow down. Let’s talk about how you get from zero to 100K. Then let’s talk about how you get from 100K to a million. And don’t think about anything else until you hit those milestones. So also just thinking things like you’re always going to see a startup growing faster than you. You’re always going to see a startup that’s bigger or I don’t know, however you define that. But having a business where if your goal is to just make $250,000 a year, that is so obtainable with internet today. And that’s an awesome goal too. You don’t have to go big to be successful is the point I think I was trying to make.

[00:29:23.430] – Joran

Yeah, because in the end, you define your own success. Exactly. Will we go back to valuations. I’m not going to ask again about multipliers, things like that, but there’s a lot of things going on in the SaaS world now. How do you see the future of valuations based on everything, what is happening currently in the market?

[00:29:41.770] – Andrew

Valuations are constantly changing. Right now we’re typically trading, SaaS companies typically trade at three to four times revenue or four to seven times profit. And most SaaS companies that we help sell are typically valued on profitability. So the profitability, like on our marketplace has a specific example. Profitable startups receive, I believe, 10 times the amount of buyer requests and NDAs signed than non-profitable startups. And that’s where you’ll get a valuation on profitability where you’re running a business at the let’s say it’s at a million in revenue, but your profitability is at 600K. Having a multiple on that 600K is very significant because you have amazing margins. You have a very lean and efficient team. And that is a fantastic acquisition for both parties involved. There’s a large buyer pool for those types of businesses. So if you had a goal as a founder where your goal is to just become financially secure, that’s what you should be thinking about doing, in my opinion, because it’s such a more practical and realistic approach. Unless you want to change the world, again, going back to write down what you want out of a startup and if it’s just become financially secure, I say bootstrap to create wealth, raise venture capital to disrupt or change the market.

[00:30:56.570] – Andrew

Because when you bootstrap a company, if you get it to just one million in revenue, it’s profitable. You can be a huge success with an acquisition. If you raise venture capital and you get to one million in revenue and a couple hundred thousand profit, no one’s going to be too happy with that. So just understanding what do you really want out of a startup, I think if people were really honest with themselves, they’re just trying to make a better lives for their family. And that’s where I think not raising outside capital makes a lot of sense for a lot of different entrepreneurs.

[00:31:26.450] – Joran

Yeah, because in the end, you’re going to come into that treadmill and then everybody wants to have multiplier, of course. So you’re going to go from funding round to funding round, basically.

[00:31:36.380] – Andrew

Yeah, if you get on the fundraising treadmill too, but there’s ways to also build businesses. We saw a good example with some of those iconic companies, surprisingly, also never raised a lot of entry capital. Also something that you could do is raise, say, a small seed round to just get the product going, build a sustainable business. Trust me, most investors will be thrilled with a 5 or 10X return or even a one or two or 3X return because most investments go to zero. So if you can’t build a startup without some form of capital, which I always think you can find a way or find excuses in entrepreneurship, but if you’re truly in a situation where maybe a little bit of seed money will help you get at least an MVP out or something like that, or give you time to build it on the side, whatever may be, that could also be a good option too, where you’re not raising 100 million, trying to go public, or you’re just trying to build a sustainable business. But the beauty in that approach as well is you can decide to go big later. I think the biggest mistake that I see when founders look to finance their company is they think it’s make a pitch deck.

[00:32:46.250] – Andrew

This is the problem. We’re going to disrupt something huge. But you haven’t really done anything yet. And then the first step is talking to investors when it should be the complete opposite. You should be building the product. You should be talking to customers. You should be ideally getting revenue and really figuring out the business. And then if you get to a million revenue, you can take a little pit stop and say, Where do I want to take this thing? Do I want to try and go bigger? Or do I like how the business is now? Because your ambitions also may change as you grow the business over a period of time. And that’s the best approach as well, because it keeps your options open. And that’s something that I think every entrepreneur should do.

[00:33:29.260] – Joran

Yeah, that’s really good advice. We are coming to the end where I always like to ask these two questions. We’re going to chop it up into different sections, as you mentioned, to your friend. So when we talk about advice, what advice would you give SaaS founders growing to 10K monthly recurring revenue?

[00:33:46.750] – Andrew

To 10K monthly recurring revenue, I would say if you have no idea how to market your business, just start building in public. You’ll find customers, you’ll build your brand, you’ll have people cheering you on. It keeps you accountable. You’ll get instant feedback. There’s so many benefits to it. You’ll definitely get copied, though. But don’t worry about that. I always say if you’re not being copied, try harder because people don’t copy bad products. But that would be my best advice.

[00:34:13.310] – Joran

Nice. That’s also funny indeed. You get copied, but in the end, you’re hopefully doing better than the other. Well, we take it one step further. We’re past 10K Monday, we’re current revenue. What advice would you give somebody growing to? It’s a big step to 10 million AR.

[00:34:29.550] – Andrew

Start hiring people smarter than you as soon as you can afford them. That was probably my biggest mistake at business apps personally. And the first thing I did when we started getting to a point at Acquire where I can hire people that I had previously worked with that are far smarter than me to take over certain departments, that was the first thing I did. So get out of customer support. You always want to have a pulse on your customers forever, but you don’t need to be sitting on live chat forever. You need to work on the business, not in the business. And that’s a critical shift that I think a lot of founders don’t really understand in terms of how impactful, how much faster you can grow if you build a team. Startups, in my opinion, are team sport. And so to do that, you need to pull yourself out of departments and be a selector of leaders to take over customer support, to take over marketing, to take over sales, to take over product management. Because that way, you’re building a business rather than just a really highly demanding 100-hour-a-week job.

[00:35:32.560] – Joran

Makes a lot of sense. The final question, any last pieces of advice or encouragement to other SaaS founders who are currently bootstrapping?

[00:35:41.430] – Andrew

Yeah, I would say just in terms of building startups, just understand it’s hard. Learn to love it when it sucks because every founder goes through hard times. Every founder bumps into mistakes. Every founder has stories of things that they wish they did differently. It’s just part of the game. So just learn to love it when it sucks and keep building and keep going.

[00:36:02.800] – Joran

Nice. And there are communities, a lot of communities out there where you can meet other SaaS founders and you can vent sometimes as well and talk about your frustrations with no judgment. Cool. Thanks for coming on to the show, Andrew, and sharing your knowledge. Much appreciated.

[00:36:18.400] – Andrew

Yeah, thanks so much for having me.

[00:36:20.740] – Commercial break

You’ve been listening to growing a B2B SaaS. Yaron has been ahead of customer success before founding his own startup. He’s experiencing the same journey you are. We hope you’ve gotten some actionable advice from the show, and we hope you had fun along the way. We know we did. Make sure to like, rate, and review the podcast in the meantime. To find out more and to hook up with us on our social media sites, go to www. Getreditas. Com. See you next time on Growing a B2B SaaS.