Sean Markey asks Andrew about the sale of one of his businesses.
For my column this week, I thought it would be fun to interview Andrew about the sale — especially since I’ve previously been on both sides of buying and selling an online business.
Can you give a brief overview of the business you sold, including when, how, and why you started it?
My idea for PodcastGuests.com came from my Domain Name Wire Podcast, which I started in 2014. I tapped my Rolodex to find lots of guests the first year. About a year later, I was looking for new and interesting guests and hit a roadblock. I looked around to see if there were any easy and free ways to find guests, and there were none. So I decided to start a service to help podcasters connect with guests.
What can you share about acquiring the domain name?
As a domain name aficionado, my first instinct was to look for the right domain. I found that PodcastGuests.com was for sale at Sedo and acquired it there. While many companies now go with brandable domains, I believe this domain was very helpful by making it clear what the business did. It probably helped SEO, too.
What was your “unfair advantage” in acquiring this name and building this specific business?
I solved a problem I had, so I figured other people had it too. At first, I emailed some podcasters to see if they were interested, and they quickly joined up. It was just an email list at that time, but we started making connections between podcasters and guests in the very first email I sent. I knew I was on to something.
Can you give us some idea of the revenue it was doing? If not, maybe share some other metrics?
I can’t disclose financial details, but it’s public that the service now has over 40,000 users. It works on a freemium model, and a subset of those users pay a monthly or annual fee to be in the directory.
I originally launched the service thinking that it could be monetized with advertising because that is a revenue model I understood. A year or two later, some people suggested adding a paid directory component. In fact, one of those people is in the domain industry — Ammar Kubba. I met up with Ammar while I was in L.A. for a podcasting conference, and he suggested the idea. I validated the idea at the conference while I was there.
How much of your time did it take a week or a month to run the business?
It’s a good question. Lately — not much. But early on, I had to put a lot of elbow grease into it. This included attending a podcast conference and getting a booth to sign people up. It included dialing in advertising methods and refining the service.
It wasn’t worth it the first year. Nor the second. Maybe even the third. It started to really click into place after that, with word-of-mouth being a huge growth driver.
I outsourced some of the work, and then I spent only a handful of hours on the service each week.
What made you decide to sell? Why now?
I think most business owners consider selling when revenue hits a certain threshold. I also had a couple of inbound inquiries from people interested in buying the site. I looked at what I had built and wondered if I was the right person to take the service to the next level. I figured it was at least worth testing the market.
Why did you decide to go with FE International as the broker?
There are a handful of brokers that work with web businesses. FE is probably the most expensive — they charge 15% of the first million and 10% above that. So the question is, why pay that much money? Acquire.com doesn’t charge sellers a dime and other brokers charge less.
It’s a lot of money when you do the final deal, but you get a lot of stuff for it. Here are some of the benefits FE offered:
– Free upfront valuation
– Complete financials auditing and calculations (they downloaded every transaction and turned it into accrual accounting and figured out the MRR).
– Marketing deck
– Marketing to their existing buyer network. The person who bought the business from me previously worked with FE.
– They were the first line to answer questions from potential buyers. I’ve talked to people who have used other services who said they were inundated with tire kickers. FE only put people on the phone with me after they answered most of their questions and validated the buyer. So FE saves a lot of time.
– FE validates that the buyer has the funds to make their offer. This is important.
– No retrading deals. This is another important one. Buyers often try to retrade deals after signing an LOI. This rarely happens at FE because they’ve already audited everything. Unless there’s a change to the business, the price agreed at the LOI is the price paid.
– Basic legal documents, although I recommend hiring your own lawyer.
I was originally referred to FE by Michael Cyger, who sold a business through them.
That said, FE isn’t for everyone. They are selective about which assets they will market. They expect revenue to be growing (or at least steady). And again, it’s expensive. Some people will be better off using Acquire.com or another brokerage.
Is there anything you can share about the sale price?
I can say that businesses like this are usually valued on a multiple of earnings. There are lots of public documents out there from business brokers that explain typical multiples. Factors that played in my favor were consistent, growing revenues via subscriptions and a strong network effect in the business.
Any domain-related plans with the proceeds from the sale (building out your portfolio a bit?), or are you just going straight back to Vegas with it? 🙂
I’m not sure. Eventually, I will start another business in addition to my domain endeavors. Or maybe I’ll buy one and try to scale it.
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