May 7, 2019
For our first entrepreneur acquisition update episode, we are speaking to Nathan Singh, a buyer who made a purchase through Quiet Light eighteen months back. Nathan is a great example of how a buyer can get a good deal and beat out other buyers just by being personable and investing in the seller.
It turns out that it’s not always the person who has an all-cash offer on the table that wins the deal. Having a Nathan was more appealing and likable to the seller, won out on a deal, and today we are hearing all about how the acquisition transition has gone for him.
Episode Highlights:
- Nathan tells us all about the two WordPress plugins he bought and what each does.
- Any regrets regarding the multiple and the use of an SBA loan for the transaction.
- The company growth rate and any challenges Nathan’s faced.
- Where the growth has come in and what he attributes that growth to.
- Staff retention and how the transition is going within the staff since the original transition period.
- Nathan’s tips for an easier transition.
- The importance of involving the customer in order to create a relevant product road map.
- The biggest challenges and successes of the businesses.
- Things Nathan has implemented to ignite that growth.
- Way’s Nathan keeps his relaxed disposition.
- Growth Goals for the next 12-24 months.
- Nathan’s 3P’s advice to entrepreneurs looking to strike out and acquire a business.
Transcription:
Mark: Joe, about a year ago you had Nathan Singh on the podcast. Nathan was a really good example of how a buyer can get a good deal, beat out buyers that maybe have a little bit of a stronger position with their offer or if they’re a cash buyer just by being kind and generous and investing more importantly in the person that’s selling the business. And I guess it’s time for an update from him.
Joe: Yeah, Nathan did a great job. His seller was Syed Balkhi. He owns Opt-In Monster. That’s not the one we sold but we sold two of his WordPress plugin sites which are essentially SaaS businesses and Nathan beat out a full priced all cash buyer with a full price SBA deal where Syed agreed to carry a 10% seller note which was pretty substantial based upon the size of the business. And it’s a story I’ve told often in the different events that we go to and here on the podcast so sorry for folks hearing it. I’m repeating it but yeah the first podcast we did with Nathan was all about that and the transition and training and things of that nature and we’re doing an update. I think this is probably our first entrepreneur acquisition update. And he talks about what it’s been like for the last 12 months; some of the wins, some of the losses, some of the challenges, the team and things of that nature. It’s a great episode to see what people have done. I think really probably more like 18 months later. I think we sold it to Nathan in the fall of ’17.
Mark: Yeah, I get asked all the time like do you guys follow up with people that have bought these sites and what does it look like a little bit after. And frankly, we don’t do enough update follow up with people who have bought so this is good. I’m glad that we are doing this with somebody we’re doing on the podcast live so that people can actually hear how the acquisition has gone a year and a half later. Let’s get right into it I want to hear from Nathan.
Joe: One more thing I want to just shout out a reminder this new intro that we have, we’ve got some movie quotes in there. If you can figure out what the movie quote is for the intro go back and rewind, listen to it, put it down in the show notes and we’ll give a call out to you in the next episode.
Joe: Hey, folks Joe Valley here from Quiet Light Brokerage and today we have our first ever Quiet Light update or acquisition update. We’ve got Nathan Singh on the podcast; Nathan, welcome.
Nathan: Hey Joe.
Joe: Good to be back, good to have you back man. I tell your story often. I share the story that it’s not always the person who has an all cash full price offer that wins the deal and that being likable is one of those intangible very, very important factors. And for those that didn’t listen to the podcast that we did with Nathan, he … I want to say won a deal where someone was bringing all cash to the table at a full price deal and Nathan came to the table just being more likable. He happened to go to the same school as the seller Syed Balkhi. I know it’s the Gators, is that … wait a second, hold on, I’m going to put on the hat because I have it. I have it. There it is.
Nathan: There you go. That’s the right one.
Joe: And I didn’t plan this I just happened to have the hat up in the cabin. It’s been there since fall of 2017. So it’s … I’m going to get it wrong and Syed he should … he sighed so loudly when I got it wrong. Is it Florida State?
Nathan: No, I would have sighed again, real loudly. Yes, University of Florida.
Joe: I’m sorry.
Nathan: [inaudible 00:04:41.8]
Joe: There it is. There was obviously a quick connection between you and Syed on the conference calls because you both went to Florida State.
Nathan: University of Florida, not Florida State.
Joe: Okay. Folks, obviously I don’t pay attention to schools in Florida. I’m from the Northeast originally and we don’t follow our college teams at all. Now for those watching the video, my hair looks great. Okay, I just took the hat off. You connected with him on the school but you also connected with him in terms of the way that you wanted to keep the staff in place and take care of them and that it becomes a family or an extended family. And that just really resonated with him and he didn’t want to call the end with you whereas the all cash buyer it was all about the fact that he was all cash he could do a quick close and these types of things but it was a little rough around the edges. Syed believed in you, trusted in you, and actually took an SBA deal where he had to not be all cash, he got 90% and so he carried a pretty substantial seller note that won’t be paid in full for … I don’t remember the exact terms of the deal but probably a balloon payment in year five along those lines. Does that sound about right?
Nathan: Yeah.
Joe: Alright. So you bought Soliloquy and Envira Gallery. Can you tell the audience a little bit about both of those businesses and what they’re all about and what they do?
Nathan: Yeah sure. So both of those businesses are pretty similar in the sense that they are WordPress plugins. Envira Gallery is basically a gallery plugin. That’s a really simplified way to put it but it’s really a photo management system. And if you Google best WordPress gallery plugins you’re probably going to see that in just about every result you see. Soliloquy same deal. It’s a slider plugin. Essentially if you’ve ever seen sliding pictures and things like that in PDFs and videos that’s what Soliloquy does. But essentially it just makes developers and designers lives a lot easier when they’re developing this sort of thing. That’s not something they really want to get into so it just streamlines the whole process. The whole gallery management system is there. And it can display multiple galleries in pictures and sliders in a very professional way. And especially for photographers, that’s a big deal. And that’s what Envira Gallery does.
Joe: Did you have a lot of experience, direct experience in WordPress and plugins and things of that nature before buying the business?
Nathan: Not at all. At least some people actually have worked in WordPress to some extent whether they’ve blogged or … I’ve had very minimal. I’ve looked at the backend years ago at one point I’m like no way. So WordPress has come a long way since then. A lot of people who have … who used WordPress and have been keeping abreast of that news, Gutenberg came out, what it did is essentially went straight for the head of Wix and Shopify and some of the really easy to use platforms for building websites. So Gutenberg is that which is a WordPress site builder. It’s built in. It’s made by WordPress. So that’s the main thing for all users, now you can get in the backend. It makes it a lot easier. But no previous to that I was pretty new to it. I didn’t really understand the dynamics and the market but the only thing that I had that was slightly close to that is I developed an app before in iOS. And so it was again it was being a part of this community and having some community standards when you have plugins that are uploaded to the depository.
Joe: Okay. So you were an entrepreneur. You did sell a business. I sold it for you prior to buying this one but no WordPress experience. You bought it … this business with an SBA loan and it paid a what I would say is a fair multiple. A lot of folks might say I think it’s strong. I won’t say it. You’re welcome to say if you want to. But do you have any regrets in terms of the multiple and the use of an SBA loan in the purchase of this business?
Nathan: No I don’t think so. Regarding the multiple, we did pay a strong multiple. I knew that going in but I also knew going in … I’ve gone through hundreds of business over the past few years, I talked to owner things like that. In order to get those businesses kind of like with Envira Gallery and Soliloquy where the churn was pretty good … it’s essentially a SaaS business. It’s been well maintained. It comes from a good pedigree by way of Syed Balkhi. So all those things played a huge part in me wanting to go ahead and stretch what I was looking to do in that multiple. But on the same end when you’re doing an SBA it made that decision a whole lot easier as well. So given the SBA process, I mean I’ve talked about that in the last podcast that we did as well it was … it’s come a long way. And so for me having gone through the trenches and years and years of trying to get SBA loans for businesses with no assets and getting to that point and seeing it streamlined with a guy like Stephen Speer and kind of what Bank United did, it’s just … I mean it was like a dream to go through that really quickly. But yeah I mean we’re here year later and I don’t regret it. The only thing I will say that I kind of … was a thing I didn’t sort of anticipate is how quickly the interest rate did change. And it does change year after year but it wasn’t so drastic that it affected the business in any way. But it did increase just a bit there so.
Joe: Your loan had a variable interest rate.
Nathan: I think it was more as a result to the Fed increasing.
Joe: Okay.
Nathan: It was something that I was aware of but it was just political things happened and it increased a little bit there.
Joe: Okay. Alright so why don’t you tell us how things are going? Are you seeing the business … what, we closed in the fall of 2017 so it’s been a little over 18 months, have you seen the business grow? Are you challenged by anything or is it growing year over year at this point?
Nathan: Yes, so it is growing. It’s a pretty healthy double digit growth.
Joe: Double digit growth, okay.
Nathan: So no complaints there. Challenges are really again coming and yeah I’ve been pretty much like industry agnostic every business I got into. Like I usually know nothing about it and I prefer it that way in some cases. And so coming in and learning it I’ve been attending the Word Camp. I went to Word Camp in US. I went to Word Camp Miami and really connecting with the people that are shaping where WordPress is going. And just some quick stats for people that like numbers, WordPress was around like 25% or so in all the websites in the world pretty much and now they’re around 33 or 35% and that’s continuing to grow. And just about every major web site that you probably visit is on WordPress. So the fact that that market share is growing there’s … that’s helped a lot with the organic growth as well.
Joe: Is that US growth or a combination of US and international?
Nathan: I think it’s a combination of both it’s like it’s used in the world but definitely United States I think that WordPress has a pretty solid share there.
Joe: You know it’s interesting that’s not something that we zeroed in on in the client interview with Syed in terms of WordPress growth. Is it something you thought about prior to and during due diligence prior to the LOI and due diligence or is it just worked out that way that you bought essentially a SaaS business on a platform that is growing?
Nathan: Yeah, I think it was a little bit of both. So I understood that WordPress was … at that time the numbers haven’t been released. The numbers are officially sold on Word Camp US or just before. So the actual numbers I didn’t really know at what rate it was growing but I did know that just the nature of the open source WordPress community, the fact that they’re building a bond and we talked about … a little about Gutenberg during the acquisition as well but just having seeing the route that they were going in relation to all these other paid sites, and what the paid platforms did to me it made sense that WordPress is going to continue to grow. It’s got a foundation to expand on and so it did play a little … not a significant amount in terms of the actual business acquisition.
Joe: Excellent. One of the big reasons why you and Syed are working together now was that you were going to bring the staff over, keep everybody involved and you worked remotely from a home office whereas everybody else I think does as well. How has that transition worked out in terms of the staff and you and are you still working together?
Nathan: Yeah, great. Yeah, it’s been great so we talked a little bit about this again in that previous interview but there was kind of a bumpy ride with the staff. Again full time they’ve been with the previous company for several years and they were part of a larger outfit. So there were some worry there that it’s just going to be us, essentially four folks transferring over to a completely new owner; my smaller company, how is that all going to work out? I think that just … it was a trust thing and I think after a couple of weeks that they saw that I was in the trenches with them and I was really working to make their lives easier, making sure they’re taken care of. You know we went on a retreat, we stayed in Austin, we stayed in a big house; an Airbnb together, really got a chance to bond and we’re doing it again this year as well. I think those things all sort of helped build that trust. I mean from where we were to point one just like in any transition when you’re taking people’s livelihoods and basically giving it to this owner that’s completely new and they’ve never met there’s always that kind of anxiety and stuff. But we’ve come a long way in that time and I’m happy to say that pretty much the entire team is still in place. One person did move on to another opportunity but outside of that, the core folks are still there.
Joe: Oh, that’s great to hear. Syed is probably happy with that as well. As far as the training and transition goes I know that normally it’s up to 40 hours over the first 90 days after closing is the standard in the asset purchase agreement, have you needed to reach out to Syed and other folks that are in the upper level management side or were of this business beyond that transition and training period so that you just reached out if you had a quick question that didn’t come up in the first 90 days?
Nathan: Yeah, I think it was that. It was the first maybe really the first month or two is the bulk of the questions and stuff. Syed was really good about it. We went through training together. Thomas the co-founder was there as well or actually the founder. And so we recorded those conversations, went through each one of the processes and so I had all that. That helped tremendously so if you are selling try doing that. Go through recorded conversations and go through the process of what you do day to day and that really helps for them to not have to ask any questions. They can just look at the video again.
Joe: Oh, it’s a great idea and we use a Chrome extension called Loom, L-O-O-M on a daily basis when a broker has a question for me or I have a question for someone else they often just record their screen and send that. What software do you use?
Nathan: We use Zoom.
Joe: Better. Okay. We’re on Zoom now and we’re recording. Fortunately, as you all will hear in an episode or two I just did a podcast this week. I jokingly said it’s the best one I’ve ever done but I forgot to hit record. So we’ll be doing it again next week but I’m sure the guest will bring that up in the podcast for sure. Alright, let’s talk about the biggest challenges that you have had since buying the business back in the fall of 2017.
Nathan: Yeah, I would say the biggest challenges for me just like with any other business is kind of getting on that horse and riding it. It was just that the day to day stuff, making sure there was no loose ends that I was missing. I think aside from that it was really that there was not a strong product roadmap going forward. So everything would have gone well until up until that point and I think the team was kind of like well we’re just fixing stuff how long do we want to just continue just fixing stuff day to day? And so that was just like kind of shaving a product roadmap, again I’m coming in super fresh so there’s not a whole lot I can bring to it in terms of this is exactly what we need to do to take us to the next level, right? But the great thing is since I run other businesses and you kind of get a process within yourself that you can apply to these other businesses and for me, it was like let’s ask the customers. And that’s exactly what we did. We went straight to the customers, put out a survey; short, less than 60 seconds to complete. What are the features you like most, what do you want to see, how are we doing, stuff like that and they let us have it in a good way mostly.
Joe: In a good way, okay.
Nathan: And so the great thing is that they were happy with this feature set and they provided some stuff that would make them much more happier. And so that is what we’re working towards right now.
Joe: So they gave you that product roadmap and then your team is working on that. You’re not working on it, you’re just visionary and they’re actually doing the actual work itself, right?
Nathan: Yeah, you’re right the developers … you know what I did is basically help create prioritize the roadmap. And so the things we have to do first which is we got to rebuild some of our functions and things like that. That’s the most important part; to keep … to build on that foundation. And then outside of that, it’s going to be basically hitting those priority items and then doing those in truncheons as we move along based on that.
Joe: What would you say are your biggest successes or triumphs? Things that maybe they were a challenge but you’ve overcome them and see that it’s maybe something that kept you up at night but it’s changed and it’s a big part of your business now. Anything like that?
Nathan: I think for me it’s been a little bit of the marketing, kind of the way to take the market. WordPress is a little bit different in the sense that we have three versions that are on this .org repository. They’ve got somewhere in the range of 150 to 180,000 active users or active installs, probably more than that with Soliloquy. And so there’s not a lot of data we can gather. And up until recently there wasn’t a lot of … there’s not a funnel that you can put them through to bring them over to the paid versions because again it’s actively monitored and it’s a lot different than if you have a trial version and you’re moving them on to a paid version of the funnel. So I think the challenge was trading out ways to get around that and still playing by the rules. So again opt-ins we’ve recently put in opt-ins in the free version that wasn’t something that we could do previously but things in WordPress community has changed. So that’s going to be a huge boom for us. Aside from that kind of marketing directly to the WordPress base, a lot of designer and phyto developers that are used to a certain thing. So one thing they weren’t used to was re-occurring payments, annual subscriptions and things like that but honestly, it’s become something of paramount importance to anyone that’s running plugins that they have to be running a SaaS type program in order to survive or else you won’t be able to make it.
Joe: Have you changed the payment system with these two products? Have you changed the way that the customers are paying for it?
Nathan: The payments have stayed the same. I think a lot of it was showing them the value of continuing that.
Joe: Okay.
Nathan: Because again WordPress is a little bit tricky because once you pay for it once you basically own it for life.
Joe: I got you.
Nathan: So here that is really … is bringing in those value added updates and the value added support; the source support is probably like number two on our most celebrated feature of Envira Gallery and Soliloquy. We get it all and we saw it in the survey as well. So making sure that we’re doing everything we can for that customer experience just from the support standpoint and not only at the stuff that we’re doing as far as updates and things like that.
Joe: So you really brought your marketing experience and expertise into the business and that’s how you’re triumphing in a sense. Is that what it is attributable to the growth that you’ve seen, the double digit growth or is it that it was going that way and you’re just on for the ride and making sure you don’t break it.
Nathan: Yeah, I think there’s a balance between those. So initially … mostly when I go into these types of acquisitions I’m looking for something that’s like the first year I’m learning. It’s not like I can insert myself and change things at day one like say if you got a content site when essentially you’re dealing with software. So it’s always very different, the base is different, and then the software base is different in terms of developers and things like that. So for me, it’s applying the past knowledge of just making a great intuitive software, changing up the interface to what I believe is just a more … a better user experience, and outside of that applying some of those basic marketing things that just need to be done. In this case a lot of that, the basics have been done, but it’s that out of the box stuffs that really needed to get taken care of.
Joe: I love that first year just learning approach. I see lots of these businesses that are listed and sold. There’s a certain amount of year over year growth and the goal is to at least sustain that. And I had a call this week with someone that blew up the SKU count dramatically and it was his kind of biggest failure but at the same time it turned out to be a little bit of a triumph as well because there are some SKUs that are now generating an awful lot of revenue. But there’s also a great deal of loss there as well. So I like that learn in the first year process. And what kind of things are you working on now that were never done before in the business?
Nathan: Yeah, so there’s a couple of things that have also attributed to the growth outside of just again being a SaaS business with not a terrible churn. And the churn for WordPress businesses I think is probably a little bit above average of what other people see in WordPress. Again you buy one so you can potentially keep it. So outside of that, it’s been growing. Our affiliate revenue, that’s been increasing pretty tremendously. But we had a lot of articles that had been written that were getting pretty decent on the traffic, didn’t have any ads on there, didn’t have really any affiliate links things like that. So that’s one of the things putting in those affiliate links, building more articles around those really high performing traffic. I think at the time this wasn’t taken to do that and sort of nurturing that so that’s … I’ve seen—
Joe: Are these affiliate links for other plugins or SaaS products or physical products or a combination of all three?
Nathan: So the shoe in for us really became the funnel editing tools. We did a lot of … there’s been a lot of [inaudible 00:22:24.1] done, tools such as Photoshop and things like that. And so lot of traffic to that kind of stuff. And it just made sense to start saying hey if you don’t have Photoshop and you want to do this stuff that you see in this tutorial here’s where you can go. And that’s pretty much it. And then building off of that and saying what are those Photoshop competitors are out there well there’s Skylum Luminar, there is Capture One, there’s all these different types of photo editing tools that are kind of riding on the coattails and maybe on the heels of Photoshop. So writing tutorials for those and the same type of strategy that was used and say hey if you don’t have it you can go get it over here.
Joe: That seems like such a logical thing to do, slow down and read the article, what are people looking for, what can we … Do you know what you’re doing? You’re helping the audience. They’re reading an article about editing and you’re then offering them the best photo editing tools right there within the article and you happen to be making money off of it as well.
Nathan: Absolutely. And it wasn’t the intention of just skyrocket the affiliate. It just made sense. I was like a rational person would mainly look at that and be like you know what this is already an article at Photoshop so you probably already have it. That’s not true. There’s a lot of people that wouldn’t make something black and white and something color in the black and white picture but they didn’t know they needed specifically Photoshop to do it. So they end up going … picking up the Creative Cloud plans 9.99 or 19.99 or whatever a month not three or $400 as it used to be. So it’s just a lot more easier and accessible.
Joe: How did you find the affiliate platform to use, those affiliate themselves?
Nathan: Yeah. So share sell has already been in use in the previous ownerships so that’s just one of those things. But in this case, it wasn’t really even bad. It’s just getting … just registering for the program and dropping them the wings and saying hey I should always focus on this some more too because it looks like to be growing.
Joe: Pretty easy stuff then.
Nathan: Yeah.
Joe: Now you mentioned an e-mail list as well; you’ve historically had lots of free users, a huge e-mail list. Have you ever done anything with that and if not are you planning to do anything?
Nathan: Yeah. So the free versions, there was really no list before because there’s no way to collect emails from before. So we’ve started an opt-in for that which again I think is only … it’s been a few couple of short weeks but already we’re seeing the results come through. The only … the list that we do have is just essentially people that have paid the pro. But the great thing is we’re able to cross sell with Soliloquy because generally if you need something like Envira Gallery you probably need something like Soliloquy.
Joe: Yeah.
Nathan: So that’s continuing churn along as well.
Joe: That’s fantastic. Nathan you look so happy and relaxed and just chill, are you always this way or is it you’re just in a good position in right now that you’re running this business and see the trends and whatnot? I mean what’s the deal? Let’s get simple.
Nathan: It’s a little bit of both so I would be in positions where things were going absolutely terrible and so the short answer is I meditate every day so that I just accept things as they are so that makes life a lot easier for anyone listening. The second part is I think it is that I paid a higher multiple but I’ve got the security of if all else fails and I can’t figure out what to do it will still follow some level of revenue that was expected. So outside of that, I was just building upon that success that’s already sort of continuing as well.
Joe: Excellent. What’s in the works of … goal eyes what are you looking at in the next 12 to 24 months? Anything that if we come back for the second update in another 12 to 24 months what are you hoping to achieve?
Nathan: At a minimum, I’d like to achieve that same double digit year over year growth. But I think again entrepreneurs try to go all triple digit all these different revenue channels. Again I opened up the affiliate revenue more and that’s beginning to be more of a significant one. But a couple more like that I think would be interesting and just continued growth man. I mean the main thing is … this is one of the things we discussed earlier. It’s just that focus on the customer; making sure they’re happy, making sure that we’re hitting all those needs and then the business kind of just takes off by itself if you’re hitting all those things.
Joe: That’s it. A clear and simple plan; not too complicated. Focus on the customer makes a lot of sense. Any words of advice from one entrepreneur to others in the audience; people that maybe they’re working in the corporate world and want to be the next Nathan Singh. Any advice that you can give in terms of running your own business and overcoming challenges and things of that nature?
Nathan: Yeah, I would put it safely into patience, persistence, and presence; those three things.
Joe: Alright. Patience I get that. Persistence I get it. Presence … meaning?
Nathan: Meaning I think as entrepreneurs what we get into is too much looking around to see what someone else is doing or where they wanted to be in a couple of years and getting super stressed if they don’t hit those goals. Remember that is just your perception of where you wanted to be, reality happens different things. And I think that if you’re approaching everything in a present moment, I’m not trying to sound like a spiritual guru here.
Joe: It’s just natural though. I like it. Keep going.
Nathan: If you’re approaching everything in a present manner you’re likely to focus on what you’re doing at this point and not be so stressed about all those other stuff. Because essentially that’s going to be what’s going to mess you up; it is worrying about the future, worrying about how things are not going, things like that. Focus on what the problems are at the current moment and do those things at that minute, at that second and just kind of block everything out. I just feel like everybody is uniquely designed to run their own race. So don’t look left and right just do your own thing and you’ll get to where you’re trying to get to.
Joe: I like it. I like it very much. Nathan Singh thank you very much for coming back on and giving us the first ever Quiet Light update. I look forward to doing this again. I wish you the best of success.
Nathan: Absolutely. Good talking to you Joe.
Joe: You too.
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