Hey folks,
For the last 10 years I've been following HN, and saw how people got great answers to some hard questions here. Hope I can get one for what I'm dealing with.
Background:
I bought a SaaS company with 2 Shopify Apps, Jan 2023 with my partner. We put all our savings in and got a 6x loan to buy it. Since then we brought the ongoing cost to almost $100/m, and income is about $7k/m now (just enough to pay the loan). Also we both have day jobs. We easily work 12-14 hrs/day every day of the week.
Customers Acquisition:
We don’t spend a dime on marketing. Basically we don’t know much and Shopify app ads are just a waste of money with no returns. Our installs are pretty organic/word of mouth. We have about 80 uninstalls and 60 installs per month. Basically loosing 2-4% of our customers per month.
Our tech stack:
We have fully re-written the apps to be modern (Shopify was also pushing us by saying they are going to delist us).
Question:
We are now lost. What we should do to at least stop losing customers. Any ideas, books, sites, articles welcomed :)
1. First, 6X of what ? Revenue ? Profits ? I see a tendency these days that every seller thinks their small SAAS/app is worth 6x of revenue or even profits when most small businesses should not be priced more than 2.5x-4X of Profits (not revenue) max. Even software companies especially these small ones. Anyone who thinks otherwise is delusional. Exceptions are if it is growing ultra fast like 100% year by year. Most that are sold don't. So you most likely overpaid in the first place.
People, a small business software app is not worth 6X usually as it is most likely not growing fast enough and even if, there are many factors to consider. THe higher multiples touted are usually for VC backed (which are overvalued anyway in my opinion). Don't get fooled into thinking that.
2. 2% churn. Did you vet the business before buying it ? What was the average churn for past 18-24 months before you bought the business ? Did you not ask the seller ? Perhaps that is standard in this industry. May be not.
2. "Basically we don’t know much and Shopify app ads are just a waste of money with no returns."
Big red flag. You bought something that you don't understand. Never ever do that just because it sounds like "Free Cashflow". Buying a business of any size is no joke. It is not passive income. It requires constant work. If you didn't understand how this can make money without ads, you made a big mistake again. A tech business is not software development. It is a business. You need to know how to sell, market and support the customers. You are realizing that now anyway.
3."We have fully re-written the apps to be modern"
Not at all important especially when you just buy something. The goal is to understand how to keep it going, reduce/minimize churn and only then you can think of enhancements. I don't know the Shopify Apps ecosystem so can't comment on why they pushed but in general, this is a bad idea early on.
I am sorry to say but you have bought something that you have no understanding of. I don't know if I could honestly tell you a way to figure out how to reduce the churn or do better. You may want to find a Shopify expert who knows how to market those apps and see if they can help. But at this point, you are bleeding cash because your revenue barely covers the loan itself. Start learning how to acquire customers in general for a business specifically for shopify apps. Start talking to the existing customers on what you can do to keep them happy.