SaaS Interviews with CEOs, Startups, Founders
SandHill Dev Sells $55k/mo Side Project for $1m+, Now Building 4 Other Products $3.6m Run Rate
04 Oct 2020
Chapter 1: What recent business decision did SandHill Dev make?
Just announced last week, we actually sold one of our products, which has caused our monthly revenue to fluctuate in the last couple of months. And so we're still trying to figure out exactly where we're gonna be since we no longer have the revenue from that product coming in. But last month we did 311,000. You are listening to Conversations with Nathan Latka.
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Chapter 2: How did selling a product impact SandHill's revenue?
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He's a nature-loving farm boy that somehow found his way into computers, internet, and business. He runs a company called Sandhills Development. They build e-commerce and membership software for websites. Pippin, you ready to take us to the top? Absolutely. All right. So I'm looking forward to this. I found you on IndieHackers where I think you stated the revenue.
I mean, you were doing somewhere between two and three million bucks, right? Yep. What do you think you'll do here in 2020 with COVID? Well, so I can tell you our plans have changed a little bit. We were originally estimating that we'd break $4 million.
However, just announced last week, we actually sold one of our products, which has caused our monthly revenue to fluctuate in the last couple of months. And so we're still trying to figure out exactly where we're going to be since we no longer have the revenue from that product coming in. But last month, we did $311,000. That's great. So tell us about that product. What product did you sell?
We sold actually our membership platform. So we'll have to adjust our tagline just a little bit. So it was called Restrict Content Pro, and it was a WordPress membership plugin that basically allowed site owners to sell memberships. So annual, monthly, daily, any kind of membership, any type of content that you wanted to lock away behind a membership. Interesting. So that's obviously a hot space.
A lot of people believe today that community is sort of the new moat for any piece of software. Membership sites are a key piece of community. How much of the 311 that you did last month, 311,000 in revenue was from the membership tool? Uh, for last month, zero, uh, because the sale actually went through before last month, but at the time that we sold it, it was doing about 50 to 55,000 a month.
Okay. Got it. So a good chunk, but not a majority of, of your monthly revenue. Yeah. Interesting. Okay. So why'd you decide to sell it? It's doing 55,000 bucks a month. I assume it's high margin. Why sell? It was doing very hard margins.
Frankly, it wasn't something that we originally planned to sell, but the opportunity arose and we've always tried to approach business with a mentality that everything has a possibility of being sold at some point.
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Chapter 3: What product did SandHill Dev sell and why?
Uh, you know, so I said earlier that we try to approach everything with the possibility that it may one day be sold. Um, at this point we have no plans to sell it. Uh, it is something that we're having a lot of fun with and it is our biggest moneymaker for sure. Now that also means that, you know, it could negotiate the highest price.
Um, and so, you know, we can, I can't say what the future holds for us at this point. We are building for the longterm and we are aiming for longevity, which is one of the reasons why we sold our other product. Well, yes. So you get, again, you can't say the exact number, but two to three X, $55,000 a month in terms of AR.
It sounds like something, you know, it'd be something between one and 2 million bucks coming into the company. How do you decide where to invest in that for the longterm? Like, what does that actually mean? Sure. So the first thing that we're wanting to do after the sale is make sure that we still have profitability.
So we operate on a model that we will always aim for profitability because that's the only thing that we can ensure that keeps the business alive. We are 100% bootstrapped, self-funded business. We have no outside investment and we're all privately owned. And so at that, we typically aim for about the 20% profit margin.
And when we sold off Restricted Content Pro, that was basically the loss of that revenue was majority of our profit margin. So what we want to do at that point is operate for the next couple of months carefully. but also very strategically to make sure that we can still maintain a monthly profit margin. With enough cash in the bank, obviously we can take on losses for a few months, no problem.
We can actually take it off for quite a few months, but we still want to reattain our month to month profit margin. So the first strategy is just just pay attention, see where we are. We we don't have our numbers from August yet, but we think we've already achieved that profitability margin again.
And so then basically we get to decide if we want to make some strategic investments for long term growth, whether that is hiring or acquisition. uh we can choose to just sit on it and you know not really do anything just have a nice cash cushion in the bank uh or a combination of both so on the 311 000 you did last month what was profit margin on that was it totally wiped out so you break even
Last month, we incurred a loss, but that's because we made some significant investments that are abnormal expenses, if you will. This month, I'm expecting we'll show a profit. Got it. The month of August. Got it. And you think we'll go back up to 20%? I mean, obviously, you're going to show a loss if you spent a bunch of the $1 to $2 million in investments last month.
But when the business normalizes, you think you'll be back at cranking $10, $20, $40 grand at the bottom line? I think we'll see 10% to 20% profit margin by the end of the year. Yeah. Yeah. Interesting. Okay. Very cool. And so let's keep going down the list because you said you had four products. Your big one is affiliate tool doing $115,000 a month. What's under that?
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Chapter 4: What are the challenges of finding a buyer for a SaaS product?
Yeah. Yes. Divide that by 12 and that gets you your monthly. Yeah, yeah, yeah, yeah. Oh, that's an annual value you just gave me. Yeah. So everything, we don't do any monthly values. We do everything in annual. Got it. So, but still even multiplying that, I guess the better question is of the 10 to 30, because you've done so many pricing experiments, which is fine.
Of the 10 to 13,000 customers you have, how many of them are still paying? Well, I guess you said you don't have any monthly.
Chapter 5: How did SandHill determine the valuation of their sold product?
They're all annual. right? Correct. Yeah. Yeah. We don't do any monthly billing. Got it. Okay. Fair enough. Cool. And then, um, what about easy digital downloads? Uh, that one off the top of my head, I couldn't tell you. Um, I could pull it up if you would like real quick though. Um, is it a one time cost? Well, so easy digital downloads is a freemium product.
So we have a free base product and then we have a lot of premium upgrades. And so one customer might have five different, uh, premium upgrades. One customer might have one, one customer or one user might have zero, uh, to date affiliate, sorry, easy digital downloads is installed on somewhere between 50 and 75,000 websites. And then each one of those users may or may not be a customer.
I have 50 to 75,000 websites. It's great. And then what do we, what about WP simple pay? WP simple pay is in the range of three to five. Hold on. I'll just tell you this one. Numbers don't stick in my head super well. Yeah, no worries. So WP simple pay is one of, is our small, it's not the smallest, but it's the second smallest after restrict content pro, which we got rid of.
Um, and it currently has, uh, 4,300 active customers. Okay. So what they pay about 10 bucks a month on average. Um, so just like our other ones, it's all annual billing. Um, our lowest price point at this at right now is uh 49 no uh 99 Um, and just like our other products we've gone through a series of price changes.
It's also a product that we acquired um just about a year and a half ago and the previous owner had also done a lot of different price changes and experiments and so So like AffiliateWP, we have customers all over the board in terms of their calculated monthly value.
Yeah, well, it's doing $540,000 annually at a $45,000 a month target right now, which means on average customers paying $125 a year. Yeah, yeah. Tell me about that. You bought the company. How'd you find it? How'd you find it? And how'd you go through the process of, hey, we should buy this? Sure. So it was originally started and owned by a guy named Phil Dirksen.
And he's a guy that I've known for a long time. I've been in the WordPress world and building software products for the WordPress platform for about 10 to 12 years. And Phil Dirksen was a guy that I got to know pretty early on just by going to conferences and meeting each other there.
And about two years ago, it's funny, we actually had a podcast and we were doing a conversation about acquisitions and selling your product or buying other products. And literally right after that podcast episode was recorded, he sent me an email and said, hey, you want to work together? I'd be interested in merging WP SimplePay with Sandhills Development.
So we started the conversation, took about six months of back and forth. And eventually we basically came to an agreement where he bought into the company and basically his selling, the price for WP SimplePay was equity. So we gave him equity in the company and he gave us WP SimplePay. Interesting. And how much revenue is WP SimplePay doing when you do this deal? It was doing about 22 to 24,000.
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Chapter 6: What is the current revenue run rate for SandHill's remaining products?
Got it. So if you're paying someone 3k in terms of affiliate commissions a month, that means we can multiply by five, right? So they, they've helped you get 15,000 in MRR. Yep. Yep. That's interesting. Really interesting. Okay. So that's your main go to market is the, are the affiliates. How do you find new affiliates? Uh, that's something that we've really never done up until now.
Uh, we are right now we're actually working on, uh, on affiliate strategy specifically to do that. Uh, in the past we have simply relied on our position inside of the community. So in the WordPress world, uh, there's a pretty strong community of bloggers and other people that do a lot of just affiliate marketing as that's their standard business. Um, and we've always been, um, I guess,
Pretty well connected to all of them. I used to do a ton of speaking at conferences and meeting a lot of people. And so I know most of them face to face. And so when we were originally building out new products, that group of people were always interested in getting on and promoting our products. And so we still have that strong base of original affiliates.
And they're really the only ones that we really use. But we're looking at expanding into actually doing some more intentional outreach. All right, Pippin, good stuff. Let's wrap up with the famous five. Number one, favorite business book. Small Giants by Bo Burlingham. Number two, is there a CEO you're following or studying? Jason Freed, Basecamp.
Number three, what's your favorite online tool for building your company besides one of your own? I'd have to say Stripe. I can't run my business without Stripe. I was going to say, you're updating your, you're refreshing your Stripe as we chat, which is great. Number four, how many hours of sleep do you get every night? I strided for eight. Okay. And situation, married, single kids?
Married, three kids. Oh, wow. Busy guy. How old are you? I am 31. 31. Last question. What's something you wish you knew when you were 20? That it's okay to slow down and not work 18 hours a day. So tonight, today I sleep eight hours a day and I work eight hours a day or less sometimes. But I used to, you know, I would do the grind.
I would get up super early and I would work super late or I'd do all-nighters. And it led to a lot of burnout. And frankly, I think I could have avoided all of that and had an extra year of productivity if I had just accepted and realized early on that it's okay to work an eight-hour day. That's fine. What a story.
Sandhills, Deb, a couple months ago, they were doing $360,000, $370,000 a month in revenue. Then they sold off one of their products, Restrict Content Pro, which is doing $55,000 per month. They sold it at a 2x to 3x multiple.
They're now using that cash to reinvest in their other four critical brands, the biggest one being AffiliateWP.com with 10,000 to 13,000 paying customers all on annual plans. They're doing $130,000 a month on that product. Easy Digital Downloads, another $70K per month. Add it all up, they're doing about $311,000 a month in revenue right now with profitability targets in the 20% range.
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