A Guide to Buying & Selling a SaaS Business on Marketplaces – with Juan Ignacio García [397]

[00:00:00] Omer: Juan, welcome to the show.

[00:00:01] Juan: Thank you. Thank you for hosting me.

[00:00:03] Omer: My pleasure. So today we're gonna be talking about buying and selling a SaaS business on marketplaces. So you are the, the founder and CEO of Boopos. So why don't we start there? Why don't you tell us about I. You know, what does the, the business do? Who is it for, and what's the main problem you're helping to solve?

[00:00:21] Juan: Sure. So we run platform for buying and selling small businesses. The main difference with acquired.com or other platforms out there being is that we offer the financing. So if you if you go to our platform and start searching for businesses to buy, for example, you will find out that for every opportunity that is posted there, you will get a term sheet a financing term sheet for around half of the, of the ask price. So that is essentially a tool for completing the acquisition which from our understanding is, is a clear bottleneck if you want to buy a, a small business. Actually, if you look at the businesses that are listed there, many of them come from marketplaces and platforms that don't have this financing option.

[00:01:06] So we help them close deals as well. So in the end the, the problem or the main issue that we're solving here is helping people acquire businesses by providing financing, by leveraging their cash availability, their equity so that they complete a bigger acquisition or, or just the deal that they want to complete.

[00:01:24] Omer: Great. So the, the, the financing obviously makes the process. That, you know, much more easier because that's obviously one of the biggest hurdles to, to being able to, to buy a business. You, you the, the Boopos marketplaces for all types of recurring revenue businesses. But obviously we have a lot of people listening to the show who are, you know, B2B SaaS founders.

[00:01:50] So specifically, you know when it comes to SaaS what. Type of businesses, you know, do typically well on Boopos.

[00:02:00] Juan: So we are looking for businesses. We have obviously criteria that are related to the fact that we are financing the acquisitions. So that means that we are looking for profit that's very important, at least 24 months of track record good customer retention, and that's generally found on B2B SaaS businesses.

[00:02:18] That's not to say that B2C businesses are ineligible, but generally they. Are they have more issues passing the retention test. We seeking for generally niche products that serve a specific audience and that have a, a high switching cost for customers to, to change to other platforms.

[00:02:39] So high stickiness and, and the like. In general, we're seeking a revenue stream that will be sustained through the course of the years, and that's highly related to how the product is. And, how the customer base engages with that product.

[00:02:54] Omer: Okay. So I think the general format of what we're gonna do here is we'll talk about, first of all, the process of selling a SaaS business on marketplace and just the general, you know, do's and don'ts and mistakes to avoid and how to be successful With that, then we'll talk about how to go about buying a SaaS business on a marketplace, and then we'll talk about financing options that, you know are available to, to founders.

[00:03:20] Now, obviously, you know, you, you run Boopos and, and that's one marketplace. But as you and I were talking before we recorded, you know, the goal really here is for us to try and educate people you know, regardless of whether they use Boopos or any other marketplace, how can we educate them to really feel confident about the buying?

[00:03:38] You know, and or selling process and to feel like, you know, they understand what are the common mistakes they, they should avoid making and, and how they can get a successful outcome, whatever that, you know, is for them. So why don't we start with you know, the, the process of, of selling a business on the marketplace.

[00:03:58] What, what are the sort of essential steps for a founder? You know, who wants to, you know, get ready to sell their business? Like, how do they prepare for that?

[00:04:07] Juan: I think that the first initial steps that they need to take is first of all, making sure that the P and L is in place. They have all the data and info that a potential buyer will want to see. And that's generally the financial statements. In SaaS businesses monthly P and L's are very important, so people will want to see at least 24 month months of track record and, and they will want to see how that P and L has evolved over the course of those 24 months.

[00:04:36] And that's useful for spotting growth trends, for spotting seasonality perhaps and understanding more how that the whole business works. They will most likely want to see customer retention, customer cohorts how customers are behaving whether they are taking monthly subscriptions or quarterly annually subscriptions.

[00:04:58] That's the type of thing that a buyer will want to see. And other than that, making sure that all the legals are in place. I think that's also very important 'cause sometimes there are locations in which you can't transfer the business because all the, the documents are not there and there's no way to migrate to a new buyer.

[00:05:15] So, first of all, that's something that you have to get right and make sure that you are prepared for answering the questions. And and obviously getting everything right for, for the buyer to assess the business. That's one thing and then the other thing, I think it's obviously understanding what the value of the business is.

[00:05:32] Don't want to start a process if you are not sure that you're getting the value that you expect. So in the, in the sense you have to understand what's the market out there and and get into a good understanding of what the value of your business is, which is by the way, something that marketplaces brokers can help with.

[00:05:49] Omer: So, yeah, I mean, obviously valuation is a hugely important topic. If someone is thinking of selling their business, is there, you know, in terms of using a marketplace or, or going some, some other route to sell their business, is there any difference in the potential valuation or is it generally about the same?

[00:06:06] Juan: I think generally engaging with an advisor and that could be a marketplace, it could be a broker, will help you maximize the opportunities of selling. So sometimes when you're selling a business, you might think that there's a buyer. That you know well because you are familiar with him.

[00:06:22] Maybe he's a customer, maybe it's a, a supplier maybe he's a competitor. But if you just engage in one-on-one conversations with those people, you might end up not optimizing the value of your business. Whereas if you engage with a broker or post it on a marketplace in which you have access to a much broader buyer base you might have the chances of.

[00:06:43] Optimizing the value of your business and learning more about how the market is, is valuing that business. And even if you end up selling to that same guy or that same buyer that you thought was the most likely buyer for your business, perhaps you will get more by generating that competitive tension.

[00:06:59] So I think it's good to at least explore what's out there and and asking questions about what the valuation of your business is.

[00:07:05] Omer: And, and typically like just ballpark, like what kind of multiples are we talking about here for, for a SaaS business and also what are the factors that might, you know, you know, improve that or, or make, you know, kind of potentially hurt, hurt the business?

[00:07:22] Juan: That's a very good question, and it depends a lot on the business itself we've seen multiples as low as 3x and perhaps that's not super compelling, but it's, if it's a business that is down trending or has some specific issues of transferability, et cetera, it might be a good solution for the seller to sell.

[00:07:40] But generally the market is offering anywhere between four and six times profit, or if you want to price it as, as revenue, slightly lower multiples, 2, 3, 4 times revenue. That's what we are seeing right now, that that doesn't mean that perhaps a business that is growing quite fast, that has very good customer retention shouldn't deserve an eight times profit multiple.

[00:08:03] But but yeah, generally the market is offering between four and six times.

[00:08:07] Omer: Great. Okay. So if I'm a founder and I'm thinking, okay, great, I want to sell my business you know, obviously I wanna get the best valuation that, that I can. What are some of the the most important factors that you think make the difference between.

[00:08:21] A business that would be, you know, priced at like a four x versus, you know, a 7, 8x valuation.

[00:08:28] Juan: I think the, the first thing that you have to assess is, is the product. So is the product something that is solving a problem that no one else is, is solving do you have like a captive user base or customer base?

[00:08:42] That benefits from your product and has high switching costs, can't move to a, a similar solution. So that's, that's very important. Is it a product that can perhaps evolve over time or that you can easily work on and improve. That's also something that that is important. You might have to make sure that it's transferable to a new developer that will take over the code and, and that's something that's gonna work going forward more or less easily. That's one thing. And then I guess that as, as I said before, we provide the financing for these businesses as well. And what we look for is what most of the equity buyers look for as well, which is very strong customer retention.

[00:09:22] Very strong profitability, very steady revenue flow, not something that is declining. And and if that's if, if that's a reality and I, on top of that, you're in a very hot segment. That's getting a lot of attention from investors roll up companies and so on. You might end up securing a 6x multiple or even higher than that.

[00:09:45] Omer: Just to recap, in terms of preparing, we are, we are saying, you know, number one, you wanna make sure your financials are in good shape. And, and the main thing you, you said there was the most important thing was having a monthly P and L that goes back, you know, at least 24 months that, that people can look at.

[00:10:00] Obviously just in terms of, you know, the operational aspects of the business and, and somebody being able to understand how well it's doing and, and functioning and, and so on the legal stuff and then typically, you know, you understand, you go in and you understand your valuation. You chat with somebody you know, whether it's a broker or an advisor that, you know, pays like blue posts.

[00:10:22] And then I guess the next step is, you know, you, you go out there and you, you list it. So number one, I would say like. Beyond Boopos, you, you talked about the, you know, what you offer and the benefits of that in terms of, you know, specifically the financing. But if somebody's saying, okay, great, that's one option.

[00:10:42] I also wanna think about, you know, a couple of other places. How, how would they, what, what, what's, how do they go about like, deciding where to list? You know, their, their business.

[00:10:55] Juan: That's a good question as well. I think there should be a fit between your advisor, your marketplace and your business.

[00:11:02] So perhaps you might want to go to FE International who are very good at selling SaaS businesses, but if your business is too small for them, they won't take the mandate. And even if they would take it, they, they wouldn't do it as well as, as they would do with a five to 10 million business, which is where the focus now if you want like very very detailed advice from, from the broker and a really hands-on process, and that's something that you might want to consider.

[00:11:32] Versus having a more like less managed or more like marketplace style type of thing. So, for example, Flippa is generally very good at having a lot of deals and a lot of bias, but it's mostly self-service. Acquired.com has a, a hybrid model in which you can have like the managed deals, which is where the broker engages with the seller.

[00:11:53] And provides a, a hands-on experience, but at the same time, they have a, a broad marketplace. And then if you're seeking something slightly different, which is what we are offering what we have is a very curated selection of bias. And these bias have been pre-approved bias as well. So they have the funds, they have a good credit score, and they have a strong operational track record.

[00:12:14] So they have. Everything that's needed for succeeding in, in buying a business. Plus we offer the financing as well. So that means that generally that increases the chances of, of closing a deal. So I, I'm not saying there's a a unique solution for each customer, but I generally feel that you have to find which advisor or which platform is, is best suited to your specific business.

[00:12:36] Omer: Let, let's talk about listing the, the business. Depending on, you know, how, how busy the, the marketplace can be. It may be, you know, it may be easy or hard to, to get noticed or, or found by the, the right buyer. So when somebody's thinking about listing, what are some of the factors that they should be thinking about to increase their chances of getting found by the right buyer?

[00:13:09] Juan: That's, again, a, a good question. I think that if you are looking to be highlighted in the middle of a, a huge marketplace getting advice or getting a managed deal as, as acquire calls them or an advisor as we, as we provide is something that is very important because in the end. You or these advisors will send custom alerts to buyers that have a very good fit with your business.

[00:13:36] And that's the way to get noticed. If you have a business that is perhaps smaller or you don't want to spend so much in fees and it's okay to be just part of the marketplace. And then obviously there's a lot of dealership and, and audience looking at that. And at some point in time, someone.

[00:13:51] We'll end up making a match, but if you want to accelerate that match and, and make it happen, having an advisor involved is a very important a very important step. Again, we curate bias, so we make sure that we get all the info from the perspective of obviously making sure that they can acquire a business, but at the same time, we get all the info on what type of business they.

[00:14:12] Can and they want to acquire so that that makes the match easier.

[00:14:16] Omer: So I think that's a really important distinction that you just laid out there. So it sounds like, okay, you, you have to be, you have to understand the type of marketplace that you're gonna be listing your business in. And if it's more of a self-serve type business like Flippa, as you mentioned, then you're really on your own in terms of, you've gotta make sure that you are doing all the right things to, you know, to, to maximize the discoverability of that listing. And you know, the types of buyers that you might be getting contacted by, you know, maybe.

[00:14:51] You know I dunno how vetted they are on, on places like Flipper. On the other hand, if you're going to more of a, a, a curated experience, you know, you're working with an advisor I guess then it becomes less about, you know, kind of the optimization of the listing or discoverability because you know you're gonna be having that advisor, as you said, going out and reaching out to the right types of buyers have already been.

[00:15:17] You know, pre-vetted to try and make that, that connection. So ultimately, is that a good way to think about it? Like in terms of, you know, what a self-serve experience might be like, or what versus what more of a. You know, you know, an advisor type experience would.

[00:15:32] Juan: That's exactly, yeah, that's exactly how I see it.

[00:15:35] And actually it's an interesting development that we are seeing in the, in the world of small m and a in the past few years, which is generally marketplaces are getting into the advisory space. And on the other hand, you get advisors trying to build marketplace like experience. So in the end, it's just a matter of deciding which way you want to go, right?

[00:15:57] I think generally, and that's why we tend to provide advice is it's good to have someone who has understood what your business is and has a good idea of which buyers will be a good fit for your business so that they can push in the right directions. But that doesn't mean that a marketplace experience is, is, is a, is a bad thing in some cases.

[00:16:19] Omer: Okay? So we, we get listed, we get connected with buyers or ideally, you know, the, the perfect buyer. And then we have to start to think about how do we. How do we negotiate and, and close on this deal? And I guess that, you know, when you start thinking about negotiating on selling a business, it can sound pretty stressful.

[00:16:41] Again, it would be helpful if you maybe just tell us about, okay. What, what are some tips that you can offer founders to sort of navigate through this process and, and, and get the best possible deal in terms of selling their business. And then maybe how, you know that as you sort of described earlier with the marketplaces, how that experience may vary depending on, on where they're selling the business and how much they have to do versus how what, you know, an advisor can, can help them with.

[00:17:07] Juan: Yes, that's a that's a very good question because in the end, this is where the advisors starts providing a lot of value through the process. So I think in general, the, the first advice I would give to someone who's talking to customers, sorry, to talking to potential bias is securing a first offer, LOI or even email proposal as, as early as possible. 'cause that will generate additional traction that will attract more biased 'cause they will find, like they will have a sense of urgency.

[00:17:42] They will want to perhaps improve the offer that someone has has made. And obviously, you know, when you are when you're buying a home, if someone else is interested, that probably means that the home is, is good. Well, same thing with the business. If someone else is interested in, in that business, it's because there's something good behind it, or, or at least that's the psychology that the buyers have.

[00:18:02] So that first offer is very important. It doesn't have to be the best offer, generally the first proposals that you're gonna get are not the ones that fulfill your, your expectations in terms of price, but that gives you an upper hand in terms of attracting additional bias in terms of negotiating with with additional bias.

[00:18:21] So, so yeah, getting that one is, is super important.

[00:18:25] Omer: So, so just to clarify there, so even if you, you know, the first offer you get is something that you know, is not a great offer. You wouldn't seriously consider it, but are you saying it's still, there's still value in, in not shutting down negotiations right away and, and asking for that?

[00:18:43] That letter of intent or that email proposal because at least it keeps the door open to maybe future negotiation. And it gives you more leverage with, with other potential buyers.

[00:18:53] Juan: Exactly. If you just dismiss it straight away you won't get that leverage for engaging with other buyers. So if you go to another buyer, you can tell him, look, I have an offer and if you are quick enough in putting together a proposal, perhaps I can go with you.

[00:19:08] For whatever reason. Whereas if you just have dismissed the previous offer, you can't say that because in the end I would be outright lying, obviously.

[00:19:16] Omer: Right, right. Yeah. Okay. So let's, let's talk about you, you know, let, let's, let's assume you, you've got, you know, you did well, you've got multiple offers.

[00:19:27] There's, you, you find a great buyer and it looks like, you know, a good deal for both sides. What happens next? What's the general process in terms of getting to a point where you close the sale, transition the business over and, and typically, you know, how long you know, does something like that take.

[00:19:47] Juan: So once you've signed a letter of intent, then it's a matter of the buyer putting together the due diligence process. So you will be in the hands of a buyer. Obviously you can control the scope you can let them know that you don't want to run through a very lengthy due diligence process. And that's something that you perhaps have discussed prior to signing the, the, the letter of intent. But yeah, you generally will have to be responsive so that the buyer doesn't see. Eh, red flags in the way you behave, not, not only in the info that you provide, but also in the way you behave, because that's a, a, a very important signal of how the transition of the migration of the business is going to look like.

[00:20:27] They will provide an asset purchase, or either you can draft an asset purchase agreement with account with council, or the buyer will produce that first draft of asset purchase agreement. In my experience, generally it's the buyer who produced the first, draft. So you will have to be patient, you'll have to be responsive, you will have to make sure that you're helping the buyer understand the good things of the business.

[00:20:51] And once that's done once, once that's done, it's just a matter of signing and migrating and transferring all, all the assets.

[00:20:58] Omer: How long does that process typically take?

[00:21:00] Juan: It generally, you, you want to select buyers that are experienced or have been through that before. So maybe not experience buying a business, but at least they know what they want to find.

[00:21:12] So perhaps they run another business and their due diligence will be more targeted towards finding the, the, you know, the first or the key things that they need to understand in, in the business. So, first of all, if you work with an experienced buyer, the due diligence will be much shorter and much quicker, but I would say ballpark, anywhere between 30 and 60 days.

[00:21:34] Omer: If I'm founder and I, I've got that offer and I'm going through this period for let's say the next 60 days or so, like, is that gonna be like a huge part of my time? Am I just gonna be like spending most of the day like answering questions from this, you know, this buyer or do you, do you've kind of, you know, do you think it's, it's a fairly streamlined process if there you know, using a marketplace like Boopos?

[00:21:56] Juan: I think the answer is, it depends, right? If you have prepared everything, well, if you're working with an advisor that has give you, given you some guidance or what the buyer will typically want to see it shouldn't be an overkill. If you haven't prepared, if you don't have all the documents handy, if you don't have, I dunno, IP titles or domain registrations and all those things that a buyer will want to see handy, then obviously it will be more challenging and that might end up giving a poor impression to the buyer. Generally brokers, advisors try to engage with you early on and they try to warn you about what you need to do, et cetera.

[00:22:37] So if you have done that preparation before ahead of time it shouldn't be, again, an overkill. It, it, it should be something that's variable and you can manage the business at the same time.

[00:22:48] Omer: Let's let's kind of switch gears and talk about the, the other side of the marketplace and actually being a buyer.

[00:22:55] So, you know, many people I talk to who want to get into, you know, running a SaaS business. Decide, you know, I don't wanna build this thing from scratch. I'd prefer to find a business that, you know already, you know, is up and running, has some customers, maybe you know, maybe, maybe it's not really realizing its potential today.

[00:23:18] And, you know, I could buy that business. And, and with the right. You know, the, the, the, the right strategy, the right execution, you know, I could turn that into, you know, something, you know, far more successful. So if we, if we're gonna kind of go through that, that process and, and I'm, I'm thinking about using a, a marketplace.

[00:23:39] Let, let's kind of, you know, where do I start again? Is it just a, a, a matter of, you know, I'm gonna do some research, like, what does that look like?

[00:23:45] Juan: Obviously I'm biased because not only 'cause I started s and, and I ran Boopos but because before starting Boopos tried to acquire three businesses I, I was unable to secure financing and that's why, that's why Boopos is here.

[00:23:58] Omer: Is that right? Wow. So it was from your own personal experience then.

[00:24:01] Juan: I'm a firm believer that buying a business sometimes is much more valuable than starting one because you skip the initial stages of finding product market fit especially business that has been running for a couple of years already and has customers that are generating revenue.

[00:24:15] So yeah, I'm a, I'm a very strong believer of, of the value of, of m and a, but obviously that has a price that comes with a price. So that means that you have to pay, you have to find financing for acquiring a business. So I think that it all depends on whether you have like a, a very clear I would say entrepreneurial spirit.

[00:24:33] Some people have that and they like to start things from scratch and and have, and go through all that discovery process. It's like very personal rather than a financial decision. I think it's a very personal decision of whether you want to go. Through those initial stages, whether you enjoy finding a business model and generating your first revenue et cetera.

[00:24:52] Because financially, honestly, I think it doesn't really make sense to go through that. You know, I, I started a business I was a co-founder with on a previous business as well. I was really lucky that both scaled well, but there's a lot of risk in, in that process.

[00:25:07] Omer: We, you know, you, you talked earlier about when we were talking about selling a business, what buyers look for, so we've kind of already covered that in terms of what are the sort of things that you should be looking for in terms of finding a a great business with great potential.

[00:25:24] Can you share maybe some of the mistakes that you've seen? Buyers make when they're, they're trying to look for a business.

[00:25:33] Juan: I think you have to buy a business that you can relate to. In the end, if you're buying something that's way out of your comfort zone chances are you're gonna make a lot of mistakes.

[00:25:43] So, for example, I've seen very smart people with a finance background in investment banking, consulting, et cetera, buying SaaS businesses, and they have never worked with development teams with developers, they're not developers themselves, so they will have to take care over the code and, and, and all that.

[00:26:02] You have to solve that piece. If you want to get into SaaS you have to be familiar with what's under the hood or at least work with people that are familiar and, and can help you take over it. So in the end. A, again, at least some degree of connection with the business that you want to buy a little understanding of, of what's going on with that business is something that you need to do.

[00:26:26] That's probably the, the first mistake that people do is when finding a business.

[00:26:31] Omer: Okay, great. So let's say we've, we've, you know, we've identified a business and now you know, the foot's on the other shoe. You know, we are the, we are the person who's, who's writing a letter of intent or, you know, sending up, you know, a proposal or whatever that is.

[00:26:47] Again, we talked about, you know, some of the due diligence that you would want to make sure that you're handling when you know, you're selling a business. But from the buyer's perspective, you know, if someone's listening to this and they're so far, they're, they're kind of following along and they're saying, okay, I like the sound of this.

[00:27:06] I like the idea of, of, buying a SaaS business, what are some, you know, some red flags that they wanna make sure that they're looking out for? Like, what are some of the signs of a business that, you know, may not be as as interesting or, or have as much potential as they, you know, as it appears to have?

[00:27:30] Juan: I think the first red flag that you have to, I mean, you have to get along with the seller very well 'cause you will work on a transition with him or her over the course of a few months. It's not just migrating and and that's it. So you will have to make sure that you're partnering with someone.

[00:27:47] With whom you can work and with whom you can, you can engage. The reason I'm saying this is because sometimes you will see that the business is just not transferable because the seller, won't cooperate or won't cooperate to the, to the scale that that they should, I guess that again, and I'm talking about Boopos again, but the fact that we've are curating sellers and underwriting sellers reduces that risk a lot.

[00:28:12] But still that's something that the buyer needs to clear out because it's also somehow personal. So if you see. I don't know a seller that is hiding info or not engaging properly. That's definitely a, a red flag that you need to raise.

[00:28:27] Omer: Would you say that's the main one? Like, you know, obviously we, we talked about the making sure that the, you know, what aspects of the financials and, and general health of the business.

[00:28:38] To look at, but beyond that, would you say that's the main red flag in terms of, you know, if you feel like, you know, if, if it's this hard to complete. Basically a transaction, like how hard is it gonna be to work with this person for, for months?

[00:28:54] Juan: I think that's a very important red flag. Other than that, obviously you have to audit.

[00:28:59] We, that's something that we do as well for our financing. You have to audit all the, the revenues and make, make sure, 'cause sometimes these small businesses have, I would say a lower quality of information. And again, if you work with a reputable marketplace, a broker you will reduce the risk a lot, but still you have to run your own audit and, and review.

[00:29:21] That's something that we also tell buyers. We obviously run our own due diligence for approving financing, and that's on and for onboarding people to the marketplace. But you also have to verify that the revenues are there, that everything is there and that all the legals and the ownership titles and, and everything are, are there.

[00:29:41] And that's if you find something that just doesn't click, you should perhaps rethink whether you want to buy a business or, or not. Again, working with a reputable broker will mean that those risks will be much lower.

[00:29:56] Omer: Okay, great. So I think in, in terms of the. You know, negotiation and closing. I kind of feel like we, we covered that when we were talking about selling the business.

[00:30:08] Is there, is there anything else that you'd add to that from, from a buyer's perspective, or do you think we, we already covered that?

[00:30:14] Juan: Well, I think we, we covered a lot of a lot of topics. Obviously the devils in the details. I mean, once you, once you get into it you will find out that there's a lot of things that you have in contemplated.

[00:30:24] Every acquisition is a learning reacquisition is a learning process. Even if you have acquired like 30 businesses, the 31st one will be a learning process again. 'cause you will find new things. So that, that's what exciting about it. But at the same time, that's what makes it challenging.

[00:30:38] Omer: Okay. I wanna talk about financing.

[00:30:40] Obviously that's a big part of what you do with Boopos, whether they're using Boopos or, or they're going, you know, somewhere else to get financing. You know, obviously I. You know, founders familiar with, you know, angels VC funding, but there's also loans and revenue-based financing and so on. So in this type of kinda marketplace situation, what, what are the most relevant types of financing?

[00:31:04] What type of financing do you provide? I. And, you know, maybe just give us kinda like some of the pros and cons of, of some of the different options that are available.

[00:31:11] Juan: I think generally when it comes to acquisition financing, there aren't that many options available. 'cause you, you mentioned revenue based financing.

[00:31:18] Revenue based financing is great for SaaS businesses, but more like for working capital for growth. So platforms like Capchase, Founderpath, all, all these people that are providing funding to, to SaaS businesses will provide funding for growth rather than foreign acquisition. So if you want to narrow it down to who is providing acquisition financing, I think many people go the, the, the SBA route and SBA is good because the cost of financing is lower that the payback term is, is long and in general.

[00:31:51] They provide a, a high part of the high percentage of the acqui acquisition price, but at the same time, it's a very slow process. They will request a personal warranty, which means you are risking your own personal assets and sometimes they won't understand as businesses because, because they will seek their, their SBA in general will work with banks and they will seek for some type of tangible assets, which obviously SaaS businesses don't have.

[00:32:17] And, and that's where we, that's actually how Boopos started the, the inability of finding financing options for, for acquiring businesses. We, as an alternative lender work in providing term loans, acquisition financing, loans. Generally around between 40 and 70% of the, of the acquisition price.

[00:32:35] That's the typical advantage rate that we give and terms of around four years, it's it's a good acquisition if you want to complete an acquisition as, as soon as possible and to complete your capital stack with your own cash and and external financing so you don't have to use that much of your cash.

[00:32:53] So that's that's one thing that you can also use. And I think that the third option, and I always like to say that Boopos competes with cash buyers, people who end up just buying it with their own equity because they don't want to leverage the business because they perhaps will leverage the business at a later stage or maybe on the second acquisition.

[00:33:14] So that's also another option and for that you can find, you know, raise money from family and friends, from small family offices. VCs are generally not there because VCs would want to find a very steep growth pattern and and acquisition is is not the way you're gonna get that. These are generally more mature businesses.

[00:33:34] So yeah, I like to say that we are pretty unique or in this acquisition financing space. But yeah, there's, there's other options as I mentioned.

[00:33:41] Omer: Okay. So, so basically you've either got a, you know, you, you're the SBA option. You know, acquisition financing through, you know, some, something like Boopos or clear out your savings right, or whatever, whatever you're bringing to, to go and buy that business.

[00:33:57] If, if someone is financing through you does, does a personal guarantee still apply, apply? Are they still having to do that?

[00:34:03] Juan: We don't request personal guarantees. And again, that's one of the reasons why people go with us instead of going the SBA route. Actually what happens in many cases is that people acquire a business with us and after a couple of years they switch to SBA once they are confident that they have stabilized the business and they have the risk it, and so they're willing to take that personal guarantee in exchange of perhaps a lower interest rate or in generally a cheaper cost of, of financing. So yeah, we don't, and we actually facilitate that process. We, we are in the end, what we want to make sure is that that business has the capital stack that it needs at every stage of maturity.

[00:34:43] Omer: Okay. So this, this acquisition financing that you provide, are there a lot of people out there doing that today?

[00:34:52] Juan: As far as I know, I, I don't think so. I, I haven't seen, especially in this smaller micro cap space in which deals range anywhere from 100K to 2-3 million. I haven't seen many lenders doing this. But I, I would love to see more people coming into the space actually think it would be good for the, for the industry.

[00:35:13] Omer: Okay. So you know, I'm, I'm. I'm a potential buyer. You know, I decide that, okay. Yeah, I think you know, what you guys are doing in terms of the acquisition based financing that, that kinda makes sense for me. You know, how, what's the process like? You know, how, how easy or hard is it to I. To get approved and what are the things that you look for?

[00:35:34] Juan: I think that one of the things that you would first do is come to our platform and see what's on the marketplace, because those deals have been pre-approved. And this, if there's something that clicks for you you've walked half of the path already. 'cause it's pre-approved and we looked at the business, we know that it's a, a good fit for our financing.

[00:35:53] So you only have to complete the buyer side, which we'll get to now. If you can't find anything compelling there, you will probably look into marketplaces like acquire.com, Flippa, perhaps brokers like FE International or you will have your own proprietary deal flow and you will come to us seeking an approval for the business.

[00:36:12] It's a very simple application. We look for cohorts, user cohorts, revenue cohorts. We look for that 24 month P and L split on a, on a monthly basis. And with that we can issue a, a pre-approval for the business. And then in terms of the owner, we will also ask for, we will want to see the credit score that's a soft pool so you don't have to worry about your credit score being impacted.

[00:36:38] We will want to see what your operational experience is. So we will request that you give us your LinkedIn profile so we can understand more where you're coming from and and why you want to buy a business. That's the other thing that we look into and the third one is given that we are going to co-invest and we're gonna finance up to yeah, 70% of the, of the acquisition.

[00:36:59] We'll want to see that you have the funds for funding the equity portion of the, of the acquisition. So we will request for a proof of funds other than that, generally the process is, is very quick and under one week we can provide an answer of whether it's a go or a, or a no-go.

[00:37:15] Omer: So, yeah, I mean, because basically I just kind of clicked to me that, you know, not only are you investing in the business you know, that someone is planning to buy, you're also basically investing in the buyer.

[00:37:27] And so you need to make sure that both sides of that look good and they're, you know, they have the potential and, and they're gonna be set up for, for success. I, I kind of got me thinking like, well, when, if, if I wanted to list my business, let's say on. And you know, maybe you, you, you look at that and say, you know, this is not the kind of business that we'd actually we'd ever invest in.

[00:37:51] Would I still be able to list on your marketplace? Or, or do you kind of, I, kind of get that to a point where it's like, no, there's, there's a certain criteria that we look for before we even list you on, on, on our marketplace.

[00:38:02] Juan: So we have we have two sets of criteria. One of them is underwriting criteria, which is criteria for providing the financing.

[00:38:08] And we have listing criteria, onboarding criteria, which is a little bit more open, but obviously there's still a curation in the type of businesses that we want to list on our, on our platform. I, you know, out of transparency, I must say, if that if we can't provide financing for your business.

[00:38:27] Your chances of selling with us are going to be lower. So perhaps you will want to figure out whether you want to sell with other marketplaces. There are, in general, you have marketplaces that are very open in terms of vertical. So other than SaaS businesses will, they will list, I don't know, lead generation platforms and other types of business models.

[00:38:46] That's not something that we typically do. So in the end, I strongly advise to try to go through both the listing process and the underwriting process to understand whether you get a, a pre-approval for financing as well.

[00:38:59] Omer: One other question about the financing. We, you, going back to like, you know, SBA, the acquisition based and being a cash buyer, does the type of financing that you choose have any impact on negotiations or the structure of the deal?

[00:39:17] Like, for example, if someone says, you know, I like the SBA option, great, there's benefits to that, but does that mean, you know, by the time you actually get approved, the business may have been sold to somebody else?

[00:39:29] Juan: That's one of the reasons why people engage with us because we're very quick and and we're not a bottleneck.

[00:39:33] So sellers want in the end. SBA is very slow, and that means that at some point in time through the process, the seller might just want to seek other opportunities. If the, if you got a patient seller, then perhaps you can structure an SBA loan from the, from the beginning or since inception. But that's again why many people end up buying with us and after a couple of years, they refinanced with SBA.

[00:39:57] Omer: Okay, great. So we covered. The, the general process of selling your SaaS business. We talked about buying a business and, you know, some of the do's and don'ts with that. And we've covered the different revenue, sorry, the d different financing options that are available to you if you're thinking of buying a business.

[00:40:22] I also appreciated that you mentioned, you know, a bunch of other options that are out there, like, you know, acquire.com and, and Flipper and FE International and so on. So there are some options out there that people can go and research. Let's say if someone decides they wanna go for Boopos, like, you know, either as a buyer or seller. What, what are, what are the next steps? What would I do?

[00:40:41] Juan: Yeah. Well, first of all, I, I mentioned a few other people because I think they're doing a great job. I think one of the things is that this ecosystem is really healthy because you have many different options and you will just have to find the, the most suited for you.

[00:40:53] But if you want to work with Boopos, you have to just go to boopos.com that's b-o-o-p-o-s.com and, and sign up. And then the app will direct you to whether you're a buyer or a seller. And it's a very simple onboarding process for both sides of the, of of the marketplace. And then at some point in time you will be contacted by one of our advisors which we, which can handhold you through the process and can work with you in understanding your objectives and and achieving your, your goals.

[00:41:23] So I, I think it's a, it's a very straightforward process. Just go there and and, and get going.

[00:41:29] Omer: Great. Is there any sort of vetting that happens? Like is like, if, if I wanted to think about buying a business, can I just go up and, and sign up today and start looking? In, in the marketplace? Or do I have to get vetted before I can even look at what's available?

[00:41:41] Juan: You can start looking at businesses. You will see a list of businesses, but you won't be able to interact with sellers unless you go and complete the qualification process. Or the vetting process.

[00:41:51] Omer: Okay. Great. Well, Juan, thank you so much. It's been it's been really helpful to go through this.

[00:41:55] I hope we did a great job in helping founders you know, just to educate them in terms of, the buying and selling process on, on marketplaces. As I said, we've, we've given them some options in terms to think about, in terms of where they go and look to, to buy and sell. Some, some of the, you know different, albeit, you know, slightly limited financing options that are available if you're gonna go and acquire a business.

[00:42:19] And you know, any, any parting words, any kind of. You know, advice or anything you'd leave, you know, people with,

[00:42:27] Juan: I think buying or selling your business is very exciting. So I would you know. Definitely recommend the, the experience. I think it might be a life changing experience, either because you cash out and you can move on to something else or because you are embarking in a new adventure.

[00:42:45] So I would definitely I would definitely encourage people to explore that route.

[00:42:49] Omer: Okay, great. So if folks wanna check out Boopos, they can go to boopos.com and if folks wanna get in touch with you, what's the best way for them to do that?

[00:42:57] Juan: Or they can find me on LinkedIn, Juan Ignacio García, Boopos.

[00:43:00] So it's a, it's an easy find. Yeah.

[00:43:02] Omer: We'll we'll include a link to your LinkedIn profile in the show notes as well, so we people can find you. Great. Thank you so much. Appreciate your time and thank you for educating us on the process of buying and selling, a SaaS business.

[00:43:15] Juan: My pleasure, Omer.

[00:43:16] Thank you.

[00:43:16] Omer: All the best. Cheers.