How to Sell Your App or SaaS Business: Exits, Acquisitions & App Marketing Secrets

All right. I'm here with Steve Young, the founder at AppMasters. How's it going, Steve? I'm glad to be here. So, we're going to have two Steves going on at the same time. We got the double of Steve. >> Double of Steve. So, we actually connected a little while back and we've been sort of chatting about when to do the episode and I'm excited that we can finally sit down and unpack your successes. But, before we get there, let's talk about your background. Like, how did you get started in business?

Dude, so it's been a long journey. I was always a lifelong side hustler, Steve. I was doing all these side hustles in college all the way into my 20s and then fast forward into my 30s, I started developing apps. I learned I went to a meet up and I took that meet up and I brought my brother-in-law and it was like, "Hey, you know, we'll teach you how to make iOS apps." And they were a cross-platform so I can build for iOS and Google Play. And so, I went through that and started making my own apps.

But, it wasn't until 2013 when I decided to start my own very my very own podcast about apps cuz at that time I knew podcasts were growing, but I had only listened to like business podcasts and I thought that was too saturated. So, I wanted to differentiate myself and I niche down to apps. I was like, "Apps are growing. They're probably going to be the future, right?" And so, I started my own podcast about apps to see if I can turn this little side business that I had of my mobile apps into a full-time business so I can be an entrepreneur and finally stop being a side hustler and through the podcast I started building up an audience. And because of my marketing background, people were starting to come to me for help with their app marketing. And at the time, I didn't really know that much, but because people kept coming and we kept sharing good insights and doing these interviews that 6 months after starting

the podcast, I left that full-time job to do AppMasters full-time in 2000 in the beginning of 2014. And fast forward now, we got a team of 30 plus all around the world, but that's how I really started with just starting a podcast, Steve. Nice. That's the way to go. Building an audience, building a connection with people, and growing, and then launching a business is definitely I'm a firm believer in it, for sure. So >> Oh, absolutely.

>> Let's unpack some of the things that, you know, you've you've sold over the years. I think it's important to kind of talk about also what what recently transpired and kind of getting there. Let's go chronologically with some of the uh before we get into the exit advice for like all the all the good stuff there. Absolutely. So I've sold a bunch of apps, right? Through Flippa, as well, and actually the very first few apps that I started back in 2010, we ended up selling that portfolio, and I can tell you exactly why, but I've also sold websites as well through Flippa, and I it's just been a really good like in terms of sales, like it it wasn't like life-changing, but it made sense at the time, right? And I know you and I when we're thinking about doing this episode earlier, I was like, "Hey, just wait on it. I'm working on a really big exit right now."

And let's let's finish that. Let me finish that, and then maybe it'll make a better story. And so when I reached back out to you, I'm like, "Steve, it's back it's time now." But that sale didn't go through, and you know, I can share with you the reasons why and all that stuff, but like all it's your show, so I'll I'll go with wherever you want, but for me, it ended up being the right decision, and the the apps I did sell and the websites I did sell, there were like reasons for everything, and then learning the the fact that I didn't sell this bigger business was like, "You know what?

The reasons were all wrong." And so you got to really almost figure out like, "What is your true reasoning for exiting? What are you hoping for? Cuz maybe you can keep it and mitigate those reasons or fix those concerns or problems, the reasons that you wanted to get out of the business, as well. Yeah, I think it's it's also very, very crucial for for people listening that sometimes you can get lost in the details of your own business when you're going through a transaction to the point where you forget about yourself and your and your personal finances and everything. It's like a it it it can be just completely confusing.

And flip you upside down and around. So, I'm eager to to unpack kind of what what happened. But let's talk about the the flips that you've done on on Flippa before. Yeah. Why why those apps and why was it the right time? Cuz you mentioned that. Like when it Why was it the right time for those? Really, there's a couple of reasons. One, the apps were kind of small and so, I just didn't want to update them. The iPhone screens were changing, Steve, and I was like, you know what? They've run their course. Now, looking back, I maybe should have kept them because the the company that that bought the apps on Flippa, they wanted the {quote} SEO juice because the apps have been around for so long and it's almost like real estate, right? Like in the world of apps, the longer the app has been around, the better the SEO the apps We call it ASO in the App Store world, but the SEO for the App Store better the

better it is for them. So, that's why they ended up buying it. It was in the kids space, like kids educational space. And so, for me, it was just like the right time. I wasn't really paying attention to them. The new iPhone was starting to come out and I'd have to update almost everything and I was just like too busy with what was happening with AppMasters to care about these apps. But then an another app that we sold, really the a buyer approached us to buy it directly.

And we just thought it was the right time to sell. Like it was going to we felt like it was sort of stabilizing, but we didn't see the scale that it would eventually take. And so for me it was just like, all right. And that's the way I think about business. It's like, okay, when's the right time to leave this? What are the reasons for it? And it should the reason should be more business oriented versus being like the reason I you don't want to sell the bigger business was I was just burnt out. Like I was just kind of like tired from it. And so if those are the reasons, you got to figure out like can I figure out how to fix those burnout reasons versus reasons of like purely business. Hey, is there a still potential in this? Can I grow it any more? If the answers are no, no, no, no, no and it would be suited for a better person, then let it go. And so the business I did sell through Flippa like

I'm completely happy that I sold those businesses cuz they made sense for me right at the time and it wasn't like personal reasons. It was all like financial reasons. Yeah. And the the overall business, the bigger business. Let's let's unpack this a little bit in terms of what you can share and and and what you can't share about how how it went down with the process and everything. Yeah, part of it Steve was like for me, you know, I knew why I was selling. I was like, look, this is not going to be the last business I start and this is not going to be the last business I exit. So I want to learn how to do bigger deals.

And so that's why I went with I went into it being like, look, I was willing to close at a rate that I felt like was fair and I probably could have asked for more. But through the entire process I got to see how the buyer was thinking about things. I got to see how he was going to finance the entire purchase. I got to see what everything looks like. I got to see how to structure a bigger deal. And so, with that knowledge, we we we were like literally at the the finish line, and for some odd reason, I was not ready to let go of something that we agreed upon early on. And so, I said, "No." I ended up backing out. I said, "Nope, forget it then. Look, I told you from day one, I did not want to sell this part of the business, but if you're if you really want that, then I'm out." And and so, in it the things I learned was, it takes so long. The bigger the deals become, Steve, the longer it's going to

take, but I've learned that that I've taken all that knowledge, and I'm actually working on a bigger acquisition right now, and I'm excited about it. And I'm using all the things I learned from the quote-unquote fail failed exit to then make a bigger purchase for my company. And Steve, you know, I heard Neil Patel say this a long time ago, and he said, "Look, the the goal of your business is not to just exit all the time. Now, when it's right, exit, right?" But, it's still acquire new businesses. And so, there are certain businesses that I've bought that I know I want to exit later on, right? But, if it's the main thing that I really love doing and I still enjoy doing it, then it's like, how do I keep growing this versus letting it go? And so, I've learned a lot. Now, I'm like, "Okay, I'm ready to make that." And we're working on we're we've got the LOI sent out and signed, and we're working on a bigger

acquisition deal that I, you know, 10 years ago, I know that's going to come up later, but I would have never imagined me doing a deal like this 10 years ago. >> Nice. Yeah, very cool. Very cool. It went like reverse, where now you're on the the >> [laughter] >> which is very cool. When it with prepared- Dude, I've always had this approach. I'm sorry. With with preparedness. Let's dig into that a little bit because you you mentioned you got to see how the buyer was digging in, how they were thinking about it, the financing, all of that. What did you learn about preparing a business and like what you're looking for?

Oh man, it's really preparing a business, especially when you're getting to like seven, eight figure level like you got to have your books clean. You got to completely, completely clean. And obviously, you know, like you want to show as much profit as possible. So, you got to keep your books clean, make sure that you separate everything cuz that was a whirlwind. And having sold my apps, like if you're selling an app, have everything, your screenshots, your code, your app icon, like all the UI/UX, all your Figma files, have them all in one location.

And now that's how we build apps, like okay, we're building apps to sell, so let's make sure we have all that aligned. And then just be patient, like that is really it, like you going to they're going to ask a lot if it's a bigger deal, banks are going to get involved and they want to see certain things. And so, have all your tax returns ready, like have them all systematized and filed somewhere that you can easily pull cuz they're going to require a lot of it.

Yeah. Yeah, I think that the the amount of questions, the bigger the deal gets, the more pressure, the more expensive emails get and when you loop a lot of people in >> Yep. I remember at one point my second exit, emails were like $1,500 an email because there's just so many people >> [laughter] >> looped in that you just don't think about all these built-in costs that that get baked into a transaction like that, but I love to circle back or double click on the timing because I really like how you thought about these individual apps, listing them, selling them, and the timing and why it was right. What could you share with somebody listening that's Let's say they're operating When is the right time for them to sell?

You know, I think it's it's always going to be personal, right? It's always going to be personal and unique to you, but really think through like why you're selling it. Like ask yourself why. You know, there's that five whys. Ask yourself five times why. Like to get to the root of the why, and is that why true Like do you If you still love it, but you want to get rid of it, then really look at why, why, why, why. If it's more like, "Hey, I've always wanted to sell it." Like for my apps, I was like, you know, it was an easy why. I was like, "Just don't want to change my screenshot." See, if that is an easy thing to do, it's not hard, right? I just didn't want to do it, and I was like, "They They've given me so much already. I'm willing to let it go." And so, really think through the whys because I think as much as people talk about maybe buyer regret regret where they acquire a business and like, "Oh my

god, it was sinking." There's a lot of seller regret that you don't hear sellers talking about. It's like, "Now what? Now what am I going to do? What am you know?" And so, the grass typically isn't always greener. So, really think through the whys, and if your whys align with your future self and where you want to be 5, 10 years down the road, then sell it. And so, that's what I would say. >> Nice. Now, my favorite topic, mistakes.

Which [laughter] Which mistakes did you find while you were doing the deals? I think you've done multiple here. What were some of the key mistakes that people could take away? Yeah, I think it's just really being up front with the seller and be like, "Hey, here's why." You know, like or yeah, the seller and just be like, "Hey." Or the buyer and just be like, "Hey, here's what I want to keep, here's what I don't want to keep." Especially if the the business has multiple lines revenue lines, where it's all income streams, like really figure out what it's going to which one do you want to keep and which ones you want to let go of, right? And those those would be it. The other thing that I've learned is, especially if you're looking to acquire, there's some creative deal structures that you can put together. And that's the biggest learning that I got from my failed exit was like, "Oh, I didn't

even think about it this way." And once you hear about it, you're like, "Oh, that's seems obvious, right?" Like one would be a seller's note, right? You're taking a loan from the seller, essentially. And so you say, "Hey, I'm going to do a million-dollar deal, but I want 200,000 to be a seller note to be paid out in 20 24 months." So now you're essentially borrowing that 200,000 from the seller. It's a win to the seller cuz they still have cash flow. It's a win to you cuz now you've lowered the upfront cost a bit, right? And so I can you can start to get creative, but the mistakes I would be like just making sure my books were clean. I mean, obviously we're a business owner.

We probably don't like to pay a lot of taxes. And so we're going to try to do certain things to offset that, but you got to keep your books clean. And I have a great, you know, bench a bookkeeper that I I use and I was able to really keep those books pretty clean. Nice. Yeah, I think that's where a lot of people fall short is the accounting piece because sometimes they're running too quickly, forgetting to reconcile and all that good stuff. It it It can catch up for sure when you're when you're planning ahead.

[snorts and clears throat] So when it comes to the team, did the did the team uh you know, how big was the team when you were going through the transaction? Did you tell everybody? Were there a couple people that knew? How'd you play that? Yeah. You know, there's a great advice. Pretend like until you've got the money in the bank, pretend like you still own it. So, I just that's all I did. I kept it growing. I kept everything as stable as possible.

I mean, we had a pretty good number of I would say above 15. How about that? We had a pretty good number of team members that were going to be associated with this sale. And so, for me, I kept it super private cuz you never know, right? You don't know if it's going to go through or not. And so, I kept it super private, but ultimately you got to treat it like it's yours still until you ultimately get the check in the mail.

And that was something that the buyer told me. The And I I followed that advice because he's even as I'm looking for acquisition, I'm like, "Why is this falling?" You know, like we don't want a falling asset. We want something that's rising and where we still see potential, but we don't want a falling asset. And so, you're going to have to really make sure that it continues to grow. And so, I wouldn't I'm not I'm not a big fan of it cuz there's so many things can go wrong at any moment. I wouldn't publicize anything until it's done done.

>> And then it's also like part of what makes it so hard is being lonely. Like you can't talk to anybody. >> Yes. And I've talked about this before on the on the pod of finding somebody who is not financially incentivized to give you advice to to talk to is like such a great underrated resource. Just somebody that's a even a friend or somebody in business that's not associated with your business that you know, that you can just chop it up with is super important to to be able to get through it cuz you like you were saying, Steve, you can't just talk to people on your team that you talk to about everything else. You can't really say like, "Hey, this is going on behind the scenes." It just doesn't work like that. And it's one of the rare instances where you you just have to be careful with who you're sharing uh that information with, right?

100% man. >> Well, I think when it comes to valuation, you brought up a cool deal structure that comes up a bit about seller notes and all all that earn-out uh juiciness that comes in deals. When it comes to the valuation, what are some things that you have experienced that drove the value? That really helped increase that value. You mentioned kind of squeaky-clean books of course as preparing, but what are some of the levers that people can pull to really increase that multiple?

Yeah, I think a team always helps and I think the technology helps more, you know, we run an agency so I'm more familiar with like more service-based stuff and the ones the other the company I sold on Flippa was a like a more of a sort of like design pickle or, you know, bench for bookkeep like the for copywriting. I'm glad I got out of that, but you know, we wanted to do unlimited copywriting cuz I saw this unlimited service-based companies on monthly retainers being a a great niche that I wanted to be a part of and that's how we've sort of changed at Mark at Masters, but because of those things because of the service-based our multiples are going to be a little bit lower. And Steve, I know you sold some software companies and just having that software, seeing the scale, you can get a whole lot bigger multiples for SaaS products than you can for any service-based type of company. And so I think the more that

you can embed technology into it, then I think that's going to really help your multiples a lot more. >> Yeah, agreed. So that takes us to the finale. Knowing what you know now, what would you tell Steve 10 years ago? >> I love this quote Steve that I have saved. It's like do the work, give up the timeline. You know, I I met and I was one of these 20-year-olds, but I met a a of 20-year-olds like I want to be a millionaire by, you know, 30." And then it's just like some arbitrary goal that we think it's cool. And a lot of people hit it and some people a lot of people don't, right? And so, for me, I think it's just patience and persistence. You hear it all time and time again as you talk to more and more entrepreneurs, but I think the quote exemplifies it, you know, do the work, give up the timeline, cuz what I've learned is the 10-year-old self I would tell Steve like, "Hey, you're going to get everything you ever wished

for. It just not might not be at the time you want it, but you will get it. It just won't be when you want it the most, right? And so, continue to be persistent and continue to build on top of content, the business. Like I've I can die tomorrow a happy man, Steve. Like I've accomplished everything I needed accomplish in life. And it took me a lot longer than my 30-year-old self would have believed it to be, but eventually it it happened. So, that's what I would say. Do the work, give up the timeline.

>> Nice. That's a great one. That's a great one. So, that brings us to what you're working on now. You kind of talked a little bit about you're doing acquisitions, stuff like that. Walk us through what you're working on and where people can learn more. Yeah, so, I mean, the new we we've always done app marketing for big brands and, you know, I like to think of us ourselves as the Yelp of the app marketing space. But Steve, I got tired of people coming to us and being like, "Hey, help me grow this." And now I'm like, "Well, I need to change your paywall. I need to change your onboarding. I need to fix your product."

And so, what we're excited about, some new thing that we're launching, is just helping people build the right product. So, I'm opening up my own portfolio team. We still build our own apps, right? That's what I wanted to do back in 2013 when I started the podcast was be an app creator and make my living on being an app creator. And so, we're going to open up our app portfolio team and help you build what I'm calling, Steve, the minimum viable revenue.

Forget the product, find the product, solve one good problem, get distribution and downloads for it first, make a little bit of money, and then start building on top of it. Too many people are trying to build Facebook of today instead of Facebook of 2000 I want to remember what the year is, but 2006 time frame, right? Like it was just for Harvard. And I'm like, you guys are trying to build Facebook of today rather than Facebook just for Harvard. Love it and get people to love it in Harvard first, and then start building on top of it. So that's what we're trying to help people do is build the app that they want, but build it in a way that is not going to overload costs on the on the phase one stage.

And then eventually start making revenues and distribution cuz you said in the very beginning, distribution matters. I started the podcast first. That helped me grow the business to where it's at today. If I didn't have any distribution, I would not have a business cuz literally Steve, the the audience told me what they wanted from me. I did not want to do an app marketing agency. I was against agencies. I wanted to build a tech product like you, right? But hey, that's where I ended up being and I can't, you know, be happier with where I've become. But yeah, so that's what that's what we're doing. Very cool. Very cool.

I like that. The uh the old saying like first time founders focus on product, second time founders focus on distribution is is very very accurate. Very accurate. So that's that's really cool. Where people Where can people learn more about it? Oh, appmasters.com. That's appmasters.com. And where can people connect with you? You can get connected with me anywhere. I'm on LinkedIn. I'm pretty easy to find if you put Steve P. Young or just app masters. I'm pretty easy to find, but I'm on all your social media. But YouTube would be the biggest one. So if you go to youtube.com/appmasters, we share a lot of app development marketing tips there. Only for the app space, Steve.

Still in that niche. >> Right on. Right on. Well, wherever you guys are listening on iTunes or Spotify, the links that Steve mentioned will be in the show notes. Thank you so much for coming on and sharing all the ups and downs and all your wisdom. Thanks, Steve. >> [music] [music]