Exactly How I Cold Emailed My Way to A Life-Changing Exit (And You Can Too)
At the end of 2021, I sold my bootstrapped SaaS business MeetEdgar.
I had made it to “ramen profitable” with my next company Paperbell (a tool for life coaches to run their online business) and proven the model. Now that Paperbell was a go, it was time to devote my full attention to it and move on from the company I had started seven years before.
This article is specifically about the process of selling your business, and more specifically selling it to a “micro PE” company like I did.
Here’s the exact process I went through, a process you can duplicate for your own business as well.
First, Learn All The Things
Aside from selling my interest to a business partner, this would be my first “real exit”. So I wanted to go in as knowledgeable as possible.
I started out by reading all the books I could get my hands on about selling your business. I discovered that preparing your business to be sell-able is a big topic, but there are actually surprisingly few books about the actual process of selling.
Luckily, one person wrote an excellent book and one excellent book is all you need!
The first and last book you need to read on this topic is The Art of Selling Your Business by John Warrillow. The book gives a detailed overview of the process that I personally found to be very accurate. Plus, I found myself using many of the negotiation tactics I had learned in the book.
If you sell a business without reading this book, you are dummy. There, I said it!
I would also recommend the book Before The Exit by Dan Andrews. This one isn’t as step-by-step, but is particularly good for understanding the “gotchas” of different types of sellers.
I also listened to many episodes of Built to Sell Radio (Adii Pienaar’s is probably the best SaaS episode).
After doing my research, I had a pretty solid idea of the type of buyer who would be the best match for my company and how to pitch them.
A Word On Brokers
Someone who helps you sell your business could be called a broker, an advisor, a banker, an M&A advisor, etc. All of these terms have blurry definitions and can take very different approaches to selling your business. I talked to many brokers (most would not call themselves that), some who were very helpful and knowledgeable and some who were borderline scam artists.
Let me just put one clear word of warning here: there are some brokers who charge very large up-front fees ($20,000 and upwards). From what I’ve been told from others who know the industry better than me, these brokers often make more money from the upfront fee than selling businesses, and have a reputation for doing very little. Buyer beware of a large upfront fee.
Strategic vs Financial
After thoroughly researching the lay of the land and talking to several brokers, I felt I could see two differing paths in front of me: a financial sale or a strategic sale. A strategic acquisition means the acquirer has an interest in more than just the cashflow of the business. It could be a product they want to add on, or a new market they want to get into. Strategic buys often have a higher multiple, but you are also dealing with large corporations and the process involves many hours with accountants and lawyers, and generally takes at least 6 months. (Strong caveat: no personal experience here! This is what I learned from general research and talking to others who had been down that road.)
At MeetEdgar we serve only small businesses so we had no big clients to talk to about a strategic acquisition (this seems to be the most common type of strategic acquirer) and there were no obvious strategic partners on a buying spree.
A financial acquisition, however, seemed like a bullseye match for my company. We were in the right revenue range, super profitable, and I saw a group of “micro PE” firms very active in acquiring software companies like mine.
So I decided to go the financial route, AND I decided to go without a broker. If I had been looking for a strategic buyer I would have absolutely needed help, but I felt confident in my abilities to approach and negotiate a financial buyer on my own.
Please note I certainly don’t feel that everyone should go at this alone and in many cases I think you will definitely end up with a better outcome going with a smart advisor. But this is my story, and that’s the road I took.
Contacting Micro PE (Private Equity) Firms
I had a very clear ideal acquirer: a firm that acquires profitable SaaS businesses with low-millions in annual revenue. These are often called “Micro PE” but they wouldn’t all call themselves that and that can really mean lots of things. (Yes, it’s confusing.)
Since my business was under $10m ARR we were a bit small for most “regular” private equity firms. (But again I can’t emphasize enough that none of these are hard and fast rules and exceptions happen all the time.)
So how did I find Micro PE firms that are looking to buy SaaS businesses? Google! Yup, I’m serious.
But you don’t even have to do that because I’ll give you the list right now. Here is the list I was able to find in late 2021 — please add more in the comments and note these have not been vetted in any kind of way:
- BigBand (I am a scout for them, please reach out to me if you’d like a warm intro)
- TinyCapital
- Scaleworks
- Saas.group
- Ramp Ventures
- HRX Capital
- Dura Software
- Bloom Equity
- LTV Fund
- Verne
- Timberwind
- Calm Capital
- Mudbrick Capital
- Horizen Capital
- Osceola
- Organic Equity
- Fullstack Capital
- Evermore Industries
- Constellation Software
- Enduring Ventures
- Southport Ventures
- Sureswift
I contacted them cold, just using the public information on their website.
Here’s the thing: if they buy profitable SaaS companies of a certain size, and you’re looking to sell a profitable SaaS company of a certain size, you’re going to get a pretty great response rate.
Here’s the initial email I sent:
Not that hard, right?
If they replied with interest, I sent over some very topline numbers like number of customers and annual recurring revenue, and from there we set up a phone call.
I was very transparent about all numbers right from the beginning — I didn’t want to end up in a situation where the buyer would find surprises during due diligence that would cause them to look at the deal in a different light.
In many acquisitions there are all sorts of “special” spreadsheets and financial reports created to slice and dice the numbers in different ways. I didn’t bother with any of that, in fact I never created any custom reports for this process! I just sent over our usual P&Ls, stats from profitwell, etc when they time was right.
During this phase I was also interviewing lawyers so that I would be ready to go when an LOI (Letter of Intent AKA the offer) was sent.
Levelling Up My Negotiation Skills
Before this process I would have considered myself an average negotiator. At MeetEdgar we’ve always been self-serve so I’ve never done a single sales call, much less in-depth negotiations. So I definitely wasn’t any kind of seasoned negotiator.
At the same time, it was a skill I was interested in leaning into and getting better at. In the past I had read a few of the sales/negotiation “classics” like Spin Selling and The Challenger Sale. But during this time I read ONE book that hugely helped me up my negotiation game.
It’s called Winning Through Intimidation! Yes, either the best or worst name ever depending on your perspective. It’s actually not about how to intimidate others, but how not to let others intimidate you.
The Art of Selling Your Business also has some excellent negotiation tips. One that I used directly from the book was to make sure to have a “no re-trading” conversion before due diligence kicked off. (“Re-trading” means changing the terms of the deal during the due diligence process.)
By far the most useful concept that I went to again and again in the process was the idea of BATNA. BATNA stands for Best Alternative To A Negotiated Agreement. Basically, your BATNA gives you the ability to walk away from any one deal. In my mind, my BATNA was actually holding on to my company. Edgar was profitable and we had a team running it that required very little of my time, so it was “easy money”. It only made sense for me to sell if the sale price clearly exceeded that reliable “easy money” reliable paycheck.
When you’re selling your business, you have to hype yourself up a bit. As entrepreneurs we generally spend our days looking at everything that’s wrong with our business so that we can work on making it better. But when you’re selling, you have to flip the script a bit and focus on this incredible asset that you’ve built.
The truth is there are a very finite number of companies worth buying. I reminded myself of this a lot — if they wanted a profitable, bootstrapped (the bootstrapping is attractive because there’s only ONE owner to negotiate with) SaaS company of a certain size ready to sell now, I was hands-down their best bet!
Honing In On a Buyer
I’m not going to detail the entire process I went through with potential acquirers, because Warrillow’s book does a very thorough job of that.
In my case, I had several parties interested right from day one but one stood out as the most serious: Sureswift. (Since I sold my company to SureSwift the leadership team that I worked with has left and are now with BigBand — reach out to me on twitter if you’d like me to make a warm intro for you.)
While others would wait a week between calls, Sureswift was always great about keeping the process moving and scheduling the next point of contact. When I spoke to them they had already acquired 40 SaaS companies which meant they had the process down cold (which made things a lot easier for me).
I ended up in a situation where Sureswift was ready to send me an LOI and two other companies were “maybes” — they were interested but not at the LOI stage yet. This might seem like bad news but I actually used it as a negotiation point — I told Sureswift that I would abandon my “maybes” but it had to be at a price that I LOVED, otherwise it wasn’t worth my while to lose the chance that my maybes would send an even better offer.
Sureswift was able to make moves in days which gave them a huge advantage over other slower companies. And after some back and forth they sent an LOI that was a “hell yes” for me. I would say negotiating the offer and receiving the LOI was the most exciting part of the process, for some reason it was even more exciting than the actual close!
Due Diligence And Close
Due diligence was REALLY easy and straightforward. We had a 30 day period which also gave my lawyer time to review the purchase agreement (there was very little that needed changing or discussing). All of our code was in Github, all of our transactions were in Stripe. We have no custom features for certain customers, no one with their own special price who mails us a check every quarter, no shenanigans of any kind! Self-serve SaaS is truly a beautiful model.
The Sale . . . What Was The Big Number?
Doing everything online meant the actual close was pretty anticlimactic! In my case it looked like constantly refreshing my screen waiting for the escrow company to release to my bank account.
The day the money hit was a weekday and my husband and I got his mom to watch the kids after dinner so we could walk to a local bar on the beach and have a few drinks. Yup, that was it! Everyone asks what we did to celebrate but with two young kids we’re not exactly dashing off for a glamorous week in Paris.
I agreed to a six-month transition period where Sureswift can ask me any questions needed to transition the business to their ownership. This has been an incredibly painless process and we’ve always been good about keeping processes and information clear and organized so there wasn’t a ton to ask about.
As for the price, I’m not able to disclose the price or multiple. On the podcast Startups for The Rest of Us (here’s a great acquisition episode) I’ve heard host Rob Walling ask founders if their exit was a “life changing” amount of money: my answer is yes.
How I’m Spending My Time After The Exit
The week after the acquisition closed I took the week off but didn’t go anywhere. I just lived my regular life without work for a week. I choose to do this to see what life without work would be like, and to remind myself that this is an option for me — I no longer need to work for money.
Of course after the week was up, I was right back at it! I love running a business and we’re at an exciting growth stage with Paperbell.
I did get a lot of clarity from the exit on the path that I desire as an entrepreneur. I absolutely plan to sell Paperbell, and I can now see clearly how much I love the launch and initial traction phase. I don’t have a desire to get to $100m ARR or build a massive team. If I can keep building, launching, and getting to product-market fit I think I’ll be a pretty happy camper.
