I Bought a SaaS App
Jul 01, 2021
I've been thinking about buying a small SaaS application for a long time now. The idea is attractive because my time is valuable, and coding an application from scratch can often be a cost with no return. By purchasing an app, I can potentially save on the cost of development (my time) and avoid loss without the app ever making money (tax write-off).
So, for the last few months, I've been watching Twitter, reading IndieHackers, and generally just keeping an eye out for an app that makes sense. What was I looking for exactly? What were the criteria?
I really didn't know. At least, not until I found it.
I knew at my price range (the seller and I agreed not to disclose the price, but understand that I am not rich, and my ability to acquire apps or businesses is quite limited) would not allow me to purchase a revenue-positive application. So, what did that leave me with?
I could buy an app that had a mailing list. That's valuable. But it's not terribly exciting to me. And people now recognize the value of lists. So even if the app is shit, an app with a large list is going to command a large sum. I could buy an app with a decent, free user base. But even that was going to be pricey.
What I eventually landed on were the following criteria:
- Clean code
- Fast load times
- Potential for monetization
Now, I needed to figure out how I'd be able to determine if the first criterion was met. How could I know if the code was clean when most of the apps that might be willing to sell were closed-source? To me, the answer was simple. Look at who built it.
Since this was the first criterion, it drove my research. I would search side project flipping sites, small acquisition sites, and other places. If I found something interesting, I'd research the founder and developers as best I could. This led me to an app that seemed to meet all of the criteria.
Muell Post was a disposable email service. Need a quick email address, but nothing permanent, Muell Post could help you out. When I found Muell Post, I was impressed with how simple it was but how effective it was. The app was fast and it did exactly what it said it would do.
Better yet, the developer wrote about how he built it. The app had been around for a while, it was created by a guy who clearly knew what he was doing, and I had this technical background into how it was built. I could also immediately see potential in how the app could be monetized.
How The Purchase Happened
Once I felt comfortable with this app being the one I tried to purchase, I had to figure out how to go about it. The app surely could have been purchased on marketplace sites like Tiny Acquisition or Flippa, but I did not clearly understand the due diligence process when using those sites. I'm sure there is something built-in, but I didn't even explore the idea of buying the app on any marketplace site because I didn't know for sure.
Instead, I do what I normally do. I took to Twitter.
A quick note on this for any acquisition marketplace site: For buyers, it is crucial to understand what the process is. An offer is not the first thing a buyer wants to do when exploring a purchase. This is why I didn't use Tiny Acquisition.
While I waited for Lukas to respond, I researched him a little more and felt increasingly comfortable that the app was going to be solid. Lukas is the founder of Datacake, an IoT company. He knows what he's doing. He was quick to respond to my first message and provided some numbers.
Within a day, I made an offer, he accepted, and we planned out the acquisition process. All over Twitter dms. The internet is a magical place.
We agreed that he would take the weekend to get everything documented around the codebase and services the app used and I would put together a Software Acquisition Agreement. I didn't want to get too fancy with the agreement, and luckily I found a template from past acquisitions on the SEC's (Security Exchange Commiission) website. I modified the template, sent it to Lukas, and by Monday, Lukas had the agreement in-hand (or on-screen to be more accurate).
He signed the agreement, sent it back, and got the code to me. With that, I started the transfer process. We kept it simple. A wire transfer from my bank to his. The transfer was quicker than we both expected, and he had the funds in his account by the end of the day.
I wasn't sure what to expect with the transfer of the app. I had a suspicion that I would change the domain and the name of the app, but I wanted to own the original domain just in case. It turned out that wasn't a problem at all. Lukas transferred the domain without issue.
The next hurdle was figuring out how to transfer the existing services. That was not as easy. An easier solution was to stand up these services under my own account and transfer the data accordingly. This process took me a total of 30 minutes because Lukas had so thoroughly documented everything. Big props to him for that.
On the same day that the sale happened, I was able to get the app up and running. That's pretty impressive, and it's exactly why I was exploring a small SaaS app acquisition. Instant gratification.
I see a ton of potential in the app. I've already ported it over to a new domain and renamed it. The old domain also now forwards to the new domain. Right now, the app is nothing more than a free burner email address.
However, I think there are some paths to explore for turning this into a business:
- Paid API Access - Developers often need to create accounts for their apps during testing. API access would allow this process to be included in the testing scripts.
- OpenAI Integration - Not sure what this would look like, but I have access to OpenAI and I want to make use of it somewhere.
- Custom Domains - With very few tweaks, this can turn into an email forwarding and email client service that uses your own custom domains.
- Something else?
If you have an idea about how this can be monetized, I'd love to hear it. You can always drop me a note at justin [at] this site URL.
I very much enjoy writing software and building apps, but this was such a fun experience. I don't think you have to be the original author of the code to enjoy using and improving it—hell, that's what software engineers working for companies in their day jobs do all day, right? I think acquiring small projects, if done right, can be a nice hobby. And if lucky, it can make me some money.