Thomas Smale, co-founder of FE International, a company with seven-figure revenues that specialises in brokering the sale of online businesses. Listen as Nathan and Thomas talk about valuing SaaS companies, brokerage models, and the importance of focus.
Favorite Book? – The Tipping Point
What CEO do you follow? —Elon Musk
What is your favorite online tool? — SEMrush
Do you get 8 hours of sleep?— No
If you could let your 20 year old self know one thing, what would it be? — Focus. I used to jump from idea to idea - it’s far better to focus on one thing.
Time Stamped Show Notes:
01:06 – Nathan’s introduction
01:50 – Welcoming Thomas to the show
02:00 – FE International started at university when Thomas was 22
02:30 – Completed just over 300 deals
02:50 – Last deal was a SaaS business
03:20 – Model: FE will value a business, put together a package, and look for buyers
04:10 – How do you value a SaaS business?
The amount of time the owner spends on a business: more time = less valuable
The growth prospects of a business
A multiplier of 4-6 times on annual net revenue
06:10 – Why use net?
06:30 – When valuing smaller businesses, it makes more sense to use net revenue
07:05 – Business in last deal had around $200k net revenue
08:11 – Recent public deal was with PlanScope - around $100k
09:10 – The buyer was a developer looking for a safe investment project
11:00 – 7-12% churn rate is normal for businesses they deal with
11:30 – FE International charges 15% brokerage on each deal
12:00 – Currently have a team of 12 people
12:30 – Made $1.5 million in commissions in 2015
16:00 – Famous Five
3 Key Points:
Focus on one thing. It’s tempting to jump from plan to plan - but focus leads to success.
Small businesses need a different valuation model to large ones. Make sure you’re looking at the right numbers.
Always be looking for opportunities - a start-up can expand incredibly fast with the right input
Freshbooks - The site Nathan uses to manage his invoices and accounts.
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Show Notes provided by Mallard Creatives
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