SaaS Interviews with CEOs, Startups, Founders
Acquired! Why She Sold her Bootstrapped $800k ARR Company for $3m
05 Apr 2023
Chapter 1: What is the background of SweetCX360 and its revenue growth?
The easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Guys, SweetCX360.com launched 15 years ago. It's a consulting plus SaaS play. The pure SaaS revenue a year ago was about $708,000. On track to do 1.8 this year.
And one of our other podcast guests heard Valerie on the show, had mutual connections, actually bought Valerie's company. A call for a $3 million headline number. She's now happily working at QuestionPro, building that team.
Chapter 2: How did Valerie's company get acquired for $3 million?
Learned a ton. And again, hoping to grow this year. She did it all bootstrapped, which we love. Hey, folks. My guest today is a familiar face, Ms. Valerie Peck. She's the founder of SweetCX360.com. It's customer experience design and diagnostics. You may remember her. She came on the show a while ago, and she's got some news to share.
Chapter 3: What were the important considerations during the acquisition process?
Valerie, are you ready to take us to the top? Absolutely. All right. What happened since when we last spoke? Yeah, we've been acquired. So it's really interesting. We're one of the unicorns. that actually in this interesting time and age has gotten acquired. We'd been talking to a number of people. And one of the things that was really important to us was fit, right?
Chapter 4: How did networking influence the acquisition deal?
So there's different ways of growing your business. One of them is getting investment and more people and a little wind beneath your wings. And so in talking to Vivek, who was introduced to us by mutual friend, Mark Mandel, and he'll come to play in a moment as well. We started finding all sorts of common opportunities.
We plug a hole for question pro because they didn't have a tool to pull a lot of their different products and tools together. And they fill a lot of little holes for us because they have the tools that we normally use on the consulting side of the business. So the way the deal went down. Well, Valerie, hold on. Before, let's leave it as an open look so the audience can listen in. As you wish.
Chapter 5: What were the challenges faced during the negotiation phase?
For context, guys, on Valerie, again, she came on the show back in April of 2022 and shared that they were doing about $65,000 a month in MRR. So about $708,000 per year. They were serving 30 customers and their model was about a $10,000 setup fee. People were then paying a $26,000 ACV. Their largest customer was paying $100,000 per year. The smallest was $5,000 per year.
And in 2021, they had a nice blend of consulting services, professional services, and pure SaaS growing nicely. She's bootstrapped. They're growing 10% to 20% year over year. So she retained her optionality to do whatever she wanted.
Chapter 6: What is the significance of the QSBS tax structure in this deal?
She had no board. She had no crazy evaluation she had to sell for. So Valerie, on that note, first off, correct me if any of that was wrong. But on that note, what happened? Well, we did have a board, but they are very flexible and have been with me because three of them were my partners or the founders of Peppers and Rogers. So they all were all for what we were doing in the loop of all of this.
And in fact, Don Peppers is a good friend of Vivek's. So one of the interesting things when you do networking and acquisitions, a lot of times the who you know as well as the what you know becomes important. So when people try to triangulate around whether a deal is good or not, right, it often comes down to the people as well as the numbers you so quickly put it out.
So that was really interesting.
Chapter 7: How will the integration of SweetCX360 into QuestionPro unfold?
So after it was a good probably four months of up and back with a couple of little halts in the middle, we came to an agreement and we sold the intellectual property of the consulting firm to SuiteCX. And then the team at QuestionPro purchased SuiteCX. So that was back in October of 2022. And we've had a little ramp up since then.
So we've got a little bit of a grace period to start understanding how we're going to integrate our business as well as integrating the products and solutions. And in the meantime, we got a whale of a client, one that had been our client for a couple of years. doubled again what they had been doing from a functional perspective with us. And I think our contract was 550,000.
So that was a nice welcome present for Vivek and his team. And since then, we've been apace doing pretty much the same thing as we have been doing.
Chapter 8: What lessons did Valerie learn from her entrepreneurial journey?
And now we're just on kind of the precipice of really starting to take an integrated approach. So our editorial calendar, our webinars, all of our marketing tools and tactics and things like that. have all been percolating a little bit as we've been running as a fully separated subsidiary. But now we're starting to fold things in, right? So that's going to be really interesting.
So Valerie, what do you think inside of Question Pro, what do you think just the SWEX business line will do in revenue this year? We're expected to do between $1.8 and $2 million. Okay. And are you on track to do that? Yep. Rather than the 20% increases, we're looking for a 50% increase. That's great. And then take us into the details. And we are 75% there now.
Deals like this die a thousand deaths before they close. Take us into the war path. Tell me all the times this deal almost died. Why did it almost die? What were the terms? Well, there were two really critical pieces. Critical piece number one was really getting to an agreement on the fit. Again, that was really important to us. How would we be working with the different departments?
And, you know, kind of the bottom line was, gee, I can go to anyone and get surveys now. How am I going to deal with getting just a QuestionPro survey tool? Are we going to be able to be open for our existing clients because they all have different tools, including QuestionPro, or are we going to be closed, right? So it was important to me to stay open
But then, when appropriate, cross-sell the QuestionPro tools because that was really an important thing from an integration perspective. And then the second piece was a very interesting one that I think a lot of startups have.
We are a qualified SB 1202 company, which in short terms means that we incorporated under the terms that if we stayed in business for five years and then we sold under this particular incorporation phase, we had no capital gains for any of the shareholders. Now, that's really sweet for the person who is selling the company.
Unfortunately, buyers are set up so that they want to do an asset purchase. And an asset purchase then results in a 50% capital gains cost for the sellers. So interestingly enough, our tax code is not designed to be particularly conducive to M&A. So it ended up being kind of a decision whether or not ā
The buyer, Vivek, was going to gross up what we got so we would be made whole from a perspective of him being able to write off the assets or the alternate way of him buying stock, not being able to write off as much, but letting us end up in a better position from a capital gains perspective. So that went up and back.
And that probably was the most difficult for everyone to deal with because it was a lot of effort on either side to be able to mitigate.
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