In Episode #254 Nathan interviews Thomas Smale, co-founder of FE International, a company with seven-figure revenues that specializes in brokering the sale of online businesses. Listen as Nathan and Thomas talk about valuing SaaS companies, brokerage models, and the importance of focus.
- Favorite Book? – The Tipping Point
- What CEO do you follow? —Elon Musk
- What is your favorite online tool like Nathan’s invoicing tool, Freshbooks? — SEMrush
- Do you get 8 hours of sleep?— No
- If you could let your 20 year old self know one thing, what would it be? — Focus. I used to jump from idea to idea – it’s far better to focus on one thing.
Time Stamped Show Notes:
- 01:06 – Nathan’s introduction
- 01:50 – Welcoming Thomas to the show
- 02:00 – FE International started at university when Thomas was 22
- 02:30 – Completed just over 300 deals
- 02:50 – Last deal was a SaaS business
- 03:20 – Model: FE will value a business, put together a package, and look for buyers
- 04:10 – How do you value a SaaS business?
- The amount of time the owner spends on a business: more time = less valuable
- The growth prospects of a business
- A multiplier of 4-6 times on annual net revenue
- 06:10 – Why use net?
- 06:30 – When valuing smaller businesses, it makes more sense to use net revenue
- 07:05 – Business in last deal had around $200k net revenue
- 08:11 – Recent public deal was with PlanScope – around $100k
- 09:10 – The buyer was a developer looking for a safe investment project
- 11:00 – 7-12% churn rate is normal for businesses they deal with
- 11:30 – FE International charges 15% brokerage on each deal
- 12:00 – Currently have a team of 12 people
- 12:30 – Made $1.5 million in commissions in 2015
- 16:00 – Famous Five
3 Key Points:
- Focus on one thing. It’s tempting to jump from plan to plan – but focus leads to success.
- Small businesses need a different valuation model to large ones. Make sure you’re looking at the right numbers.
- Always be looking for opportunities – a start-up can expand incredibly fast with the right input
- Freshbooks – The site Nathan uses to manage his invoices and accounts.
- Host Gator – The site Nathan uses to buy his domain names and hosting for cheapest price possible.
- Leadpages – The drag and drop tool Nathan uses to quickly create his webinar landing pages which convert at 35%+
- Audible – Nathan uses Audible when he’s driving from Austin to San Antonio (1.5 hour drive) to listen to audio books.
- Show Notes provided by Mallard Creatives