SaaS Interviews with CEOs, Startups, Founders
Hacker Buys a SaaS Project for $7,500, Now Does $120,000 in Revenue
08 May 2022
Chapter 1: What is the main topic discussed in this episode?
And what is the monthly recurring revenue today on the app? It's just a little bit more than 10K USD. Per month or per year? Per month. Oh, wow. So you've really grown it a lot over the past 12 months. Yeah. You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, 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. Hey folks, my guest today is Norbert Huthmeyer.
He is a software developer and online entrepreneur looking to buy and scale offbeat internet businesses. Norbert, you ready to take us to the top? Yes, I am. All right. Why buy and sell instead of build from scratch? I find it interesting to pick something that already has traction because it's the hardest part, quite frankly. The product market fit is probably the most difficult part.
And if you can shortcut it, yeah, why not? So tell me about the last company you bought and how you found it. So I started in early 2021 and I wanted to buy something and see if I can scale it. And I did search through all the internet marketplaces, mostly Flippa.com back then, and just looked at as many listings that I could get my hands on and talk to the owners.
And then I found AutoForward SMS and yeah, just bought that one. Okay. And so which network did you find that website on, Flippa? That was Flippa, yes. Okay. And what was the listing price? It was pretty cheap. I think the original listing price was about 12 grand for, I think, 600 USD MRR back then. All right. 4,600 monthly? 600. Oh, 600. Yeah.
It was in Australian dollars, so I don't remind exactly, but yeah. Okay. So I was asking 12 grand and it was doing $600 per month or $7,200 per year. So about a two X multiple. And what'd you end up buying it for? I bought it for seven and a half grand, I think, because the owner had the deal lined up, but the guy who bought it before, like bought it,
Before me, never sent the money, never did the transfer. And so the owner reached out to me. He's like, hey, I have fell through. You can have it. And I was like, yeah, I like it, but I'm only paying this amount. And she was like, yeah, here, take it. And so I got it for a really good multiple. Very cheap by today's standards.
I mean, look, a lot of people think you go list on these marketplaces and some of the owners of the marketplaces are guilty of saying, oh, you build a $100 a month app.
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Chapter 2: How did Norbert Huthmeyer find the SaaS project he bought?
You can sell it for $10 million on our marketplace. And it's frankly just not true. I mean, most of the deals are the ones like what you did, right? They're for like 1x or sometimes 1.5x is usually what happens. But I guess why did the founder want to sell? Why was he a motivated seller? So in this case, it was an old Australian lady.
She had a bunch of businesses in the SMS space and she said she wants to work less and she was just selling off part of her assets. And this app and this Android app was one of the assets. And yeah, I mean, I had no reason to not believe her. She was very forthcoming, very open, which is always a good sign when you're dealing with owners. So that's why she sold it.
And I was quite lucky to get my hands on, to be honest. So you buy the company. Any surprises once you took it over in the code base or the finances or customers or anything? Not a surprise, but a little difficulty that I did not foresee. So her company was registered with Stripe in Australia. And I'm based in the US, so I had to transfer the account, which Stripe doesn't do for you.
So I needed to code the transfer of the accounts, the credit card information. And they kind of help you, but I was still worried that I might break something and that the subscriptions wouldn't renew. Everything turned out really well, but I was sweating. I was test migrating like five times. And what is the monthly recurring revenue today on the app? it's just a little bit more than 10K USD.
Per month or per year? Per month. Oh, wow. So you've really grown it a lot over the past 12 months. Yeah. Tell me about that. How'd you do it? So part of the reason why I found it interesting in the first place was that I saw something, like I would call it maybe an error pricing mistake. The previous owner had a very neat feature that was totally for free.
So in her mind, it was like, yeah, if you forward text messages to like an API, let's say, it doesn't cost me anything. So it shouldn't cost the user anything. And so the power users, I want to say, that use the app the most basically got it for free. Like they paid 99 cents. And when I took over the app, I restructured the pricing and I said, well, this is a feature that helps you.
So I should be earning. And I made it a paid feature essentially. And that was the best thing that I could do because it was free. And now what did you charge for it? How much? So it's in tiers. So if you want to forward like 500 messages a month, it's like, I think $1.30. If you have between 500 and 5,000, it's like $5 a month. And the top tier is like 100,000 forwards per month. And that's $22.
How many forwards across your entire user base are you doing per month? I have no way to track that because I advertise it as some, like as a... taking care of their privacy. So I have no way to see what they are forwarding or how much they... Well, how do you know what to bill them then? I'm tracking it, but the app tracks it. So the app, it's a counter inside the app. And I have no stat.
I know how much a certain user is forwarding. But I don't know how much all of them in total. What is your largest user forward per month? Like hundreds of thousands? No, like the limit would be 100,000. And I've never had anyone complain that he needs more. Typically, people text me when they reach like a tier limit and say, hey, I need more.
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Chapter 3: What motivated the seller to sell the SaaS business?
That's great. That's great advice. Now, what about churn in the business? Are you able to measure churn? I am. I can have a look at my dashboard right now. It's going down. So we had a little bug that made it really high. So churn is at 8% right now per month, which is quite high by SaaS standards, I think. but it has been growing like, I want to say 15% per month, um, over the past year.
So honestly, I've never been too concerned about it. Um, but yeah, you're the only person running it, right? Just one person. I run it. Uh, I have a dear friend of mine that is taking care of the tech. Um, what do you mean engineering? Yeah. I thought you said you do all the engineering work. I do. I do. So the app, when I bought it, was built on one tech stack.
And then we released a new version of it that is built on a new tech stack. It's Google Firebase and Flutter. And I do the old app where most of the revenue is coming from. That's Kotlin and PHP backend. And the new one is Firebase plus Flutter. So he takes care of the new app and I take care of the old app. And yeah. And what do you pay him per month? Do you just pay him four or five grand?
He has a share. So this is a fun story. So we typically travel once a year, like as friends. And we sat together. We traveled to Ecuador last year. We sat together and I was like, hey, don't you want to join me? I give you 20%. And he was a little bit hesitant. And then I just kept on talking, talking. And one day he was like, I'll help you.
Chapter 4: What challenges did Norbert face after acquiring the app?
And so I promised him 20%. And so he takes... 20% every month of the profit that we make. And he just charges. He sends me an invoice. That's great. So what were profits last month? I need to go back. So the MRR doesn't always align too well. Give me a second to log in. Take your time. This would be March 2022 profits. Yeah, the new Stripe layout still confuses me.
So last month we had a revenue of 9.3 grand and with very little costs. I don't know exactly, but it's way below 500 bucks a month. Really good profit margin. Could further cut it down. So what was profit? 885, 8600, something like that? Yeah, something like that. And so he took 20% of that. So about $1,600, $1,700. Yeah. Okay. Interesting. And you're able to keep the rest, right? Yeah.
Where do you personally invest that money? Do you pay it out as dividends and invest in real estate or what? I just keep it. So I pay myself a small salary. I don't really need much. I pay myself a small salary. The rest stays in the company. and I just use it to fund other ideas. Sometimes I want to try this, want to try that. For acquisition, you also need a bit of a cash
um, caution, um, just in case, you know, I want to go to a bank and say, Hey, I want to fund this. Let me pay, I don't know, down payment, whatever. And should I ever need it, you know, for myself, I can always just pay it out, but no stress there. And you're bootstrapped today though, right? No outside funding. No, nothing. That's awesome. We love that. Very cool.
On that note, let's wrap up with the famous five. Number one, favorite business book. Oh, favorite business book. I read a lot, but not anymore about business. What's the last book that you read? The last book that I read was from Sahil Lavinia. I forgot the name, but it was about bootstrapping. I could quickly find it. Okay. Number two, is there a CEO you're following or studying?
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Chapter 5: How did Norbert restructure the pricing to increase revenue?
Um, to be honest, uh, no, no, no particular person. I mean, I'm on Twitter. I follow a lot of folks, but mostly indie hackers. I find their stories very interesting. They're very open and forthcoming and yeah. Number three, what's your favorite online tool for building auto forward? My favorite online, well, not sure if it qualifies as a tool, but I really love Stripe.
As a techie, I'm just amazed by how well everything works and integrates documentation, customer support. Just love them. Number four, how many hours of sleep do you get every night? Oh, I sleep, I don't know, six, seven, sometimes eight. I don't know. I don't try to minimize that. I did that when I was younger, but I don't think it did me any good. So if I wake up, I get out of bed.
If I sleep longer, I sleep longer. It doesn't matter. And what's your situation? Married, single, kids? Married, no kids. No kids. And how old are you? I'm 34, almost 35. 34. Happy early birthday. Last question, Norbert. Something you wish you knew back when you were 20. Um, yeah, that persistence is key.
Um, you just gotta stick, you know, you have an idea, you gotta dedicate the time, uh, get rich quick worked or works sometimes, but it's better, better not to, to bet on it. It's better. You find something and you dedicate and you put in the hours. Of course, there is no guarantee. I tried, I have a list here next to me of 20 things that I tried and failed. And, um,
Yeah, you just got to keep digging, I think. And one day, hopefully you hit gold. That's all. Guys, there you have it. A great way to get into SaaS. He bought a software company doing $600 per month for $7,500. He then proceeded to grow the business to now $10,000 a month today. He found it on Flippa.com. He loved that there was a big user base.
There was good SEO traffic for the word text message forwarding on the Google Android App Exchange. And all he did when he launched and bought it was basically put up a paywall and a very popular feature that's driven most of the growth, which has been incredible. If you want to find a great company to buy, check it out at NathanLaka.com forward slash Flippa. A lot of great companies there.
You can follow in Norbert's footsteps. Norbert, thank you for taking us to the top. Thank you for having me. Have a good rest of the day.
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