Selling a startup can be an exciting but frustrating process for solopreneurs. The valuation, timing, acquisition process, and asset transfer require careful thought.
Marc Louvion learned this first-hand after selling two micro startups in 2023. He shares his lessons on how to successfully sell your side project or small SaaS business.
“I used to believe a $300 MRR startup was worth nothing. I was so wrong...
Your weekend project can change your life.”, saya Marc Louvion.
Marc Louvion
Valuing Your Micro Startup Realistically
Determining your startup's valuation is vital to setting an attractive yet fair asking price. However, arriving at the valuation can be complicated for solopreneurs. VCs use complex models accounting for cohorts, growth rates, margins, etc.
As an indie hacker, Louvion recommends a simple formula:
Valuation = Annualized Revenue x 3
For example:
- A habits tracker with $300 MRR could sell for $10,800 (300 x 12 months x 3)
- A logo maker with AI launched 3 months ago that made $4,000 so far could sell for $12,000
Note that MRR can be extrapolated to a year, but one-time payments cannot.
You can dive deeper into valuation methods like comparables. But for micro startups, over-analysis causes paralysis. Gaining a 5-10% higher valuation may not be worth the effort.
Louvion's formula gives you a ballpark number to begin negotiations. Imagine growing a weekend project to $1,000 MRR. At a 3x multiple, that's a $36,000 valuation. For bootstrapped solopreneurs, it's life-changing money and freedom.
Using Data-Driven Criteria to Decide when to Sell
With a valuation range, when do you pull the trigger and sell? Louvion considers three key criteria:
1. Can you 10x revenue in a year?
Think critically about growth potential before selling. Slow-growing industries or business models may not scale exponentially no matter how hard you try.
But some startups gain quick traction once product-market fit is nailed. If you foresee hockey stick growth, it may be better to hold off on selling.
2. Are you passionate about the market?
If your startup is in a niche you love, think twice before selling. The acquisition may bring short-term rewards but leave you unfulfilled long-term. However, many solopreneurs build side projects outside their core interests. Flipping these for a profit is a valid strategy.
3. Do you need cash now?
An acquisition provides a quick influx of capital. If you have pressing financial needs, it may make sense to sell even a promising asset. Life throws curveballs. Consider health emergencies, family requirements, or wanting to quit your job. Prioritize financial security as required.
The Acquisition Process
Once you decide to sell and find an interested buyer, the real work begins. Expect these next steps:
Legal agreements like a Letter of Intent (LOI) and Asset Purchase Agreement (APA) kick off the process. The APA summarizes what the buyer is acquiring.
Non-compete agreements are also common. Vet these carefully so you can still build what matters. Using a service like Acquire can help navigate the paperwork.
- Securing payment in escrow
The buyer will secure payment through a third-party escrow service. This keeps the money accessible but hands-off until milestones are met. Once payment is secured, you provide the assets to the buyer. This is everything from the website files to trademarks and more.
- Transferring assets and getting paid
Some assets like AWS S3 storage can't be directly transferred. In these cases, explain it to the buyer but don't hand over your login credentials. Have them set up their own accounts.
After inspecting that everything is in order, the buyer will approve the escrow payment to you. Congratulations, your micro SaaS is sold!
Transferring Assets Securely and Completely
For a smooth handover, ensure these assets are transferred:
- Domain name: Domain registrars make it easy to change ownership. Just follow their transfer process.
- Website files and hosting: Give the buyer access to download all webpages, images, CSS, etc. Transfer hosting logins or export the site.
- Database: Databases like MongoDB Atlas offer snapshot export tools. Use these to give the buyer a recent database copy.
- Passwords: Change passwords before sharing so you can revoke access later. Use a password manager to organize them.
- Code repository: Give the buyer read-only access to the repo during due diligence. After the sale, transfer ownership.
- Email accounts: Forward important emails to the buyer. Change passwords before sharing logins.
- Payment accounts: Stripe and similar services allow account transfers. Follow their procedures.
- Trademarks: Sign over trademark registrations and provide any brand assets like logos.
Double-check that no critical assets like API keys or licenses are missed. This ensures a smooth transition.
Tips to Speed Up the Sales Process
Selling a startup quickly maximizes your payout. Louvion shares proven tips to accelerate the process:
Don't waste time with buyers asking endless questions. Highly skeptical prospects likely won't purchase in the end. Politely explain that you have other buyers waiting, so they need to act fast if interested.
Building startups publicly helps buyers know and trust you already. This saved Louvion 4% in marketplace fees.
Your audience has context on your skills, vision, and integrity. This facilitates sales based on relationships rather than just numbers.
- Set a deadline for offers
Serious buyers will put down a deposit and make an offer if you give a firm deadline. Communicate that other buyers are interested, so the window to buy is limited. Give them just 1-2 weeks max to put down a deposit before moving on.
- Polish listings before publishing
Ensure your marketplace listing is 100% ready before hitting publish. For Acquire, this notification goes out to all buyers in 24 hours. Put your best foot forward from day one. You want buyers impressed at first glance.
- Adjust the price if no interest
On marketplaces like Acquire, edited listings get promoted again. If no buyers emerge in a month, try reducing the price. You can always negotiate up later. Get discussions started with an attractive price.
Key Takeaways on Selling Your Micro SaaS
Selling a side project or small startup may be your ticket to financial independence. But approach the process strategically:
- Value your business simply using a 3x revenue multiplier
- Sell based on growth potential, passion, and financial needs
- Transfer assets securely and completely
- Qualify buyers fast and set firm timelines
With the right approach, your micro startup could fund a new life chapter. The acquisition process doesn’t have to be complex if you stay focused on what matters most.
