
How I Sold My Bible App Company - reuven
http://trevormckendrick.com/how-i-sold-my-bible-app-company/
======
trevmckendrick
Trevor here, creator of the Spanish Bible app.

IkmoIkmo got this spot on in his/her comment.

Biggest two mistakes people are making in this thread:

1\. $100k was revenue, not profit.

2\. I get capital gains rates on the sale, versus ordinary income rates.

(If you didn't know about #2 you should probably sign up for my accounting and
tax course for freelancers and entrepreneurs:
[http://trevormckendrick.com/accounting-course-for-
entreprene...](http://trevormckendrick.com/accounting-course-for-
entrepreneurs-and-freelancers/))

~~~
Veratyr
Sorry if this is incorrect but wouldn't a better term be long term capital
gains rates? Short term capital gains are taxed at ordinary income rates but
they're still capital gains.

~~~
trevmckendrick
:) Yes you are correct.

I try to avoid details when higher levels of abstraction are sufficient for my
audience.

------
mattchamb
For anyone interested, this is the relevant information about the sale in
Salem Media's SEC filings:

> On September 3, 2015, we acquired the Spanish Bible mobile applications and
> their related website and Facebook properties for $0.5 million in cash.

------
emptybits
I sold my company (Verrus PayByPhone.com ) several years ago and so much of
this resonates with me. Thanks to the author for his candid sharing. It was
cathartic to read, even.

> ... over 7 months, hundreds of emails, ... psychologically exhausting and
> definitely the hardest part of the 3.5 years I ran the business.

This. The hardest part for me and my cofounders was keeping the business
operating, and _growing_ , while spending what seemed like full time on the
"distraction" of a sale process with several potential buyers.

> I always assumed it was dead until the cash was finally in the bank. ...
> various levels of depression occurred throughout the sales process.

Yet, in the end:

> The deal made a ton of sense and I’m glad it got done.

Amen and congrats to you!

~~~
jastanton
Hey, I use PayByPhone all the time in Seattle, I'm really glad you made it, it
brightens up my day any time I can use it! Thank you, and congrats on the
successful exit!

~~~
emptybits
Thank you for the kind words. Seattle was a good, early proving ground for us.
(We were HQ'd in Vancouver, BC.)

~~~
jastanton
Did you do Seattle before Vancouver?

~~~
emptybits
Off-street lots and garages in Vancouver and Seattle went PayByPhone gradually
around the same time (early/mid 2000s). City streets didn't happen until much
later.

------
bigtunacan
Trevor,

This is an interesting read and congratulations to you.

If I understand it correctly the app was pulling in $100,000 a year and
required only an hour of maintenance per month? I'm curious why you chose to
sell for $500,000 rather than continue with a long term revenue stream? Was
there concern on your part that you could keep these revenue up in the long
run?

~~~
fencepost
I suspect there was also an element of "A big dog in Christian Media wants
something like my app. I can sell to them or I can fight the new thing they'll
build and cross-market."

By selling he gets a chunk of money in the bank (possibly less than he'd have
earned over time and certainly less than Salem thinks they can earn with the
app), but he also avoids a marketplace battle and he can go work on other
things. Salem avoids having to develop a competing app and gets a significant
and likely fast-growing installed base.

My suspicion is that both sides feel like they came out ahead - Trevor got a
couple years of good revenue followed by a nice exit; Salem got a market-
leading app that likely will prove popular in some global markets where
smartphone usage or capabilities are likely to increase over the next decade -
what are the forecasts for smartphone usage in Central and South America?
Additionally, if Salem isn't already an international player, having a top-
rated app may let them expand other operations to cover more international
international markets without having to do a lot of risky physical investment
or international marketing first to break into those markets.

~~~
jscheel
There's something to say for his place in the market, but I think you are
right. Salem has infinitely more capital to create a competitor. By selling,
they don't have to deploy that capital, and he doesn't have to fight against
competitors eating away his revenue.

------
flippyhead
> Basically I spent 2 weeks convincing them to let me write this blog post!

And I'm grateful you did. This was very interesting to read. Thank you!

------
Sealy
> My wife was out of town so to “celebrate” I treated myself to In-n-Out for
> lunch!

I love your frugal approach. You deserve everything you got. Nice to see how
professionally you both handled the negotiations and it certainly teaches me
the virtue of patience!

------
yohann305
What a great story! I want more stories like these. The author Trevor, really
gave us so many behind-the-curtain information, at some point I even thought
it was so much that he could get in trouble for it if the buyers read the
story. (he mentions later in the post that he got it covered)

Thank you!

------
junto

       The joy of Streak, and the fact that they work remotely, 
       is that I could see them forwarding my email to each other.
    
       You’ll see in the map below that it was opened in multiple 
       locations, multiple times.
    
       It’s like sending a text to someone you’re interested in 
       after a date, and knowing that they’re talking to their 
       friends about how to respond. They’re interested.
     
       This doesn’t always work obviously, but it gave me a ton of 
       confidence in the moment.
    

Interesting... Tracking people opening your app. I assume this tracking using
a hidden image in the email?

~~~
frgewut
"hidden images" don't work with most clients. I guess it was some link with a
token they were clicking.

~~~
andyjohnson0
See [1] for a description of how the tracking works - scroll down to "So how
does that tracking work?". It appears to use embedded links to message-
specific 0-by-0 pixel remote images.

[1] [http://www.ghacks.net/2014/02/22/can-streak-really-track-
gma...](http://www.ghacks.net/2014/02/22/can-streak-really-track-gmail-emails-
read/)

~~~
frgewut
"Whenever a user opens the email without proper protection" is the caveat
here.

~~~
peteretep
Someone posted a site they'd built recently that would send you an email with
all the nasty tracking tricks in them, and let you see which your client fell
for. I was sad to see gmail choked on most of it.

~~~
sp332
Make sure to check that the IP addresses are yours. Gmail loads images to
their own servers and then serves them to your Gmail UI from there, so
trackers shouldn't get your actual IP.

------
x5n1
I don't see how any small time hacker agrees to any indemnification. It's not
as if you could even if you wanted to even defend a small lawsuit (I don't
know how much they paid him). So what's the point. If you are afraid of being
sued, buy yourself insurance. You are a large company, that's something you
can do. And it will actually provide you protection rather than a contract
which I can not possibly fulfill.

~~~
roddux
I was also rather confused at this. Why would he be liable for anything that
happens with the app after it's been sold? Is this standard practise in such
deals?

~~~
JabavuAdams
I imagine it's the acquirer protecting themselves against due diligence
oversights.

------
Sealy
> Since the app performs so consistently and takes so little of my time (~1
> hour per month) it needs to make financial sense to give it up…

Can I ask what you did with the rest of your time?

------
timsayshey
There is a ton of opportunity in the christian media industry with huge
markets. I hope more christian developers get involved and start making stuff
that would help believers, missionaries, churches, etc. There are so many
things to disrupt. For those that are interested and want encouragement or
help finding ideas. I found a christian startup slack community
[http://thirdpathinitiative.com/christian-startup-
community](http://thirdpathinitiative.com/christian-startup-community) and
there is also a really cool hackathon organization
[http://codeforthekingdom.org](http://codeforthekingdom.org)

~~~
misterbwong
I'm interested in joining your community but there are a couple things that
look like red flags to me about this.

1\. It costs $25 to join the slack community. Is this normal?

2\. The overview" page mentions all the things in the ThirdPath coaching
process but lacks one important thing-how it has anything to do with
Christianity. It reads like every other startup coach/bootcamp process.

Makes me think that this bootcamp is just targeting Christians because it's a
big niche, not because you believe that there's truly a need for _Christian
startups_

~~~
arsalanb
No, it's not. Your religion doesn't affect how well your startup does, as you
pointed out. This is just an unfortunate case of somebody using religion as a
tool to sell you something you may not purchase otherwise.

This is against the Slack Terms of Service.

[https://slack.com/terms-of-service](https://slack.com/terms-of-service)
Clause #6.7

~~~
timsayshey
I wouldn't build a christian startup because there is something magic about
the christian label. It might even fail. It's about personally believing in
the mission of Christ and wanting to share the love of Christ through your
gifts and talents.

Also I will reach out to Slack's team to find out about the ToS. If this is
truly the case then many other slack communities are in violation as well :/

~~~
treebeard901
I find it odd that someone would charge a fee to join a chat room. Doubly so
if that chat room is meant as a way for like minded religious people to
communicate. Is there at least an animated collection plate that comes up
during the sign up process?

~~~
nkrisc
Sounds like exactly the sort of thing someone looking to exploit religion to
make money would do.

~~~
saryant
I've seen a number of Slack rooms try to charge that had nothing to do with
religion (nomads.io comes to mind).

------
kdamken
This was actually a really fascinating article. It was cool to read what it's
like when you finally hit it big. I have a lot of respect for your negotiating
as well. It's hard enough keeping that up during the interview process for a
job, I can't image doing it for six months, for that much cash.

Congrats on your success man.

------
robbiet480
This was an excellent read giving a great insider look at an acquisition from
the seller side

------
bpicolo
That full page ad on first load is incredibly annoying

~~~
giarc
I thought I had clicked on the wrong link.

------
titomc
@Trevor, Curious to know how did you get hold of the content for the Bible
App. Did you purchase it or compiled it on your own ?

~~~
nkrisc
The first comment on his blog post actually asks that.

Q: Yen Tan > I’m very curious – isn’t there copyright on the bible/ translated
bible? How did you deal with that?

A: Trevor > Great question. The first first I used was in the public domain. I
also sold other versions later as in-app purchases, but I licensed those from
their respective copyright holders (i.e. Biblica and The American Bible
Society)

------
wtbob
> A few more emails/phone calls laters (this became a theme) they finally made
> their first offer. It was around 3.5x revenue.

Is this the standard opener now? Also, is that 3.5 _annual_ or _monthly_
revenue? For centuries I believe that 20x annual revenue has been a rule of
thumb for properties, companies &c.

~~~
vinceguidry
I think online properties are generally worth less because they take less time
to cultivate and build. Also while their earning potential might be solid over
the short term, over the long term it's not so easy to gauge.

His Bible app is obviously different than most such properties, which is why
he was able to bump up the offer. But still, if the app landscape changes,
that can make their purchase worthless overnight. So you have to price that
into the offer.

~~~
prawn
Some online properties are valued at 17-20x monthly revenue. This guy did
fine!

------
raverbashing
I wonder where did he got the Bible text from though? Was it a public domain
translation?

~~~
workitout
You can get it free here:
[http://www.gutenberg.org/ebooks/10](http://www.gutenberg.org/ebooks/10)

There is an aspect to be considered about making money on this topic.

------
novaleaf
can anyone give advice on what a reasonable indemnification clause would be?
(reasonable for both parties)

~~~
OldSchool
I'm surprised this isn't more discussed in the comments. It's a major element
to consider when you're selling your business. He correctly identified it
after all, as a potential deal breaker.

You're selling something, so in an acquisition you will have to represent and
warranty what you actually own and you're selling. This sounds simple on its
face, but technology isn't nearly so well-defined and legally sorted as, for
example real estate.

In software, even if you are 100% certain you can transfer all of the code and
there are no potential content copyright issues or latent prior agreements by
yourself or other sellers, current/former employees who think they own
something, etc, you still have at a minimum, a hard-to-quantify "Sword of
Damocles" in the form of thousands of potential patent claims hanging over
you, trolls or not, it doesn't matter in a sale. As in business itself, the
bigger the money involved, the more visible you become to potential claims.

A publicly-traded buyer is likely to be less flexible on terms, but in any
case you as a seller have also to consider that in a sale, you're most likely
going to be forced to shift liability from your corporation to yourself
personally. If you're prudent, as this seller was, you realize this creates a
time period _increased_ personal risk, despite your increased assets. Keeping
this period as short as possible and limiting its scope and magnitude is your
objective.

A few limitations I can vouch for making it past public company scrutinity are
1. any dispute costing less than $X are not your responsibility. 2. a maximum
liability limitation equal to the purchase price in cash / shares (in case
share prices drops) 3. a time limit of two years or less. 4. escrow of a
portion of the purchase consideration (shares and/or cash) as a warranty cap
for the duration of the warranty, perhaps with release/reduction over time.
The tax treatment of this arrangement would have to be considered carefully.

Finally, it's worth noting that insurance for an acquisition deal may be
available from big name insurers, likely for some low single-digit percentage
of the deal value. However, their legal department will undoubtedly be more
sophisticated in this area than your counsel, so at its worst insurance gives
you little more than a contract with an insurance company over which to sue,
likely at great cost.

Overall, as lawyers always say, "it depends." Unless the deal and/or your
resources are immense, likely it is a problem with no risk-free solution. If
you're young and have nothing to lose, risk is an easier choice. For everyone
else, all you can do is optimize based on present knowledge.

~~~
shostack
So assuming you get a short time limit of <2yrs, would it be smart to stick it
in a low risk account somewhere and not touch it until that term is up? Or was
that the intent of the escrow?

~~~
OldSchool
I'll suggest that the escrow route is an alternative to agreeing to
indemnification in a simpler form; I can't imagine a situation where having
both would be of benefit to the seller at least.

I think ideally escrow would nicely encapsulate risk for a seller and ramp it
down over time. When applied to cash it could create tax issues if a payment
is recognized as income in one tax year and only becomes available in a
subsequent year. For shares received by exchange for existing shares
structured as a merger, this is likely solvable. If a selling party holds only
stock options though and is issued shares on closing, again, my initial guess
would be that would be deemed a "taxable event." Another aspect of escrow is
that it eventually requires sign-off from the buyer to release it to you,
effectively giving them control of your proceeds that they might attempt to
exercise outside of the original intent of the escrow.

So, as for handling your windfall during the indemnification period, yes,
purely the simplest approach would be to hold the proceeds in the most risk-
free way until your indemnification period ends.

This is however, again complicated at least by tax implications if you need
some of the money to pay taxes due on cash received in the closing.

Furthermore, there is a strong argument for using some cash to hedge against a
decline in the value of shares received (if any), simplistically illustrated
by purchasing put options on the acquiring company's stock, since you're
forced to hold it throughout some inevitable lockup period. Put options on a
reasonably closely-correlated financial instrument might also be viable if the
acquiring company isn't so large as to have an active options market, since
public stock prices seem to move broadly, barring any company-specific
failures.

To put some entirely fictional numbers to the hedging argument, imagine you're
obligated to sit on $10M worth of public stock for two years and you could
spend $250K cash today to gain a significant level of protection against a
drop in the share price. After your two-year wait, you either have $10M or
more in stock if the price held or rose ($250K is gone but you spent it on
insurance of a sort) or perhaps the stock dropped 80% and you now have $2M in
stock but another $4M made back from the put options you bought, so while $6M
pre-tax isn't $10M, it's a lot more than $2M.

------
bpg_92
Congrats!!! I got a small app and some ideas, stories like this make me want
to pursue this fultime.

------
aprdm
Thanks for writing this! Really good article.

------
seibelj
1 hour of work per month, $100k per year, each hour of his time was worth
nearly $10k. Cool story but I never would have sold. This is the ultimate side
business.

~~~
rpgmaker
It's crazy, he was dying to sell his first company. Vanity makes us do crazy
things.

~~~
cpwright
He has 0 risk once his check for $500K clears. Every month he keeps the app
there is a risk that something goes wrong; and that 1 hour a month probably
doesn't include time that is spent thinking about those things going wrong.
Getting the money all at once reduces his ongoing cognitive load.

~~~
infinite8s
Well, except for the stuff he indemnified them against.

------
ericjang
This was a great read. Congratulations!

------
bambax
> _8\. If there is any content in the app who wrote it?_

Err... God?

~~~
pbhjpbhj
God wrote it with His Spirit in the hearts of the believers and they provided
a translation in to [mainly] Hebrew and Greek, those that have translated
those translations then created new copyright works (NASB, NIV, NKJV, ESV,
Vulgate, etc., etc.). I think it's these later translators the question is
concerned with.

For example News International owns Zondervan who own the NIV copyright; I
wish that those who got together to write the NIV (one of the most popular
English language translations) would have used a CC license.

------
itaysk
Very interesting!! thanks for sharing

------
pklausler
Another app idea for making money off Christians: the Rapture Alert, which
would set off an alarm if a configurable proportion of its users suddenly
vanish.

------
overcast
$100,000 a year doing basically nothing, and you sold it for basically
nothing. They made the deal of the year, and you lost out big time. I applaud
this guy for creating something popular, and monetizing it well. But that is
up there with one of the worst self offs I've ever read. With only $500,000
now you're on the five year crunch to get a new product built or find a new
job.

~~~
sixQuarks
There's no guarantee that app would continue doing $100k a year - competitors
pop up, platforms change, economy collapses, you name it.

I think he did alright.

~~~
overcast
So rather than a chance that something may happen, you've guaranteed nothing
will. The app could have just as well doubled its revenue. Selling out such an
absolutely minimal work involved app is not worth the chance that the "economy
collapses". Spend all that free time setting up apps on all platforms. You
don't get anywhere without taking chances.

~~~
rconti
$500k is nothing to sneeze at. Some folks get too wrapped up in how important
they THINK their business (or stock options, or whatever) should be worth or
might be worth.

Rather than valuing them at what they're ACTUALLY worth.

