How Derrick Reimer Bootstrapped SaaS to a $128,000 Exit

0:00we know theoretically that software is incredibly scalable and you can build a lot of value with relatively small amount of you know Capital invested and even even sometimes time and effort um you know cachy being a just a little kind of side project that I was hoping to maybe grow into something big one day and then ultimately that didn't turn out being its trajectory I just remember finding it quite surreal that I was able to pull in six figures as a you know mid 20-year-old just building some software on my laptop in uh you know cafes on the nights and weekends and this week we're trying something a bit different where

0:35we're going to Deep dive into a process that most entrepreneurs hope to get to at some point exiting their business before we dive in I want to say thank you to our sponsor for this video Quiet Light brokerage I'll tell you more about them in just a bit and if you stick around till the end you'll learn about the most luxurious thing Derek bought after he sold his company for six figures derck Rymer thanks for joining me thanks for having me what was code tree and who was is it built for so Cod treat was a project management application built on top of GitHub issues so things similar to like linear

1:08or jira but a bit simpler uh specifically for software development teams that were on the smaller side and still wanted to use GitHub issues but needed a little bit more structure and specifically what problem did it solve that was unsolved before you built it so gab isues has always been notoriously stripped down kind of intentionally as part of their product but there's a lot of elements of iub issues that work really smoothly if you kind of follow the GitHub workflow where you're opening poll requests and doing review on github.com so I think a lot of teams kind of start out that way using GitHub issues as sort of lightweight um issue

1:42tracking uh but then you know if they need to do things like prioritize issues or want to see them in a can band View and all the number of things you might be able to do in a modern project management tool get up at the time especially was just not innovating on those things these days they have projects built in but back in 2015 that didn't exist so Cod tree sort of existed to fill in the gaps that GitHub was not building so what were the basics of the business model maybe like the customer types the size and your price points yeah so I think I followed a pretty

2:10typical three or four tiers 2449 $99 a month and it was roughly based on number of projects and number of users on your team uh so it wasn't exactly per user pricing but it was tiered based on number of users and I think most people were probably on the $24 a month plan but then you know had a couple on the larger tiers as well and how large did it get in terms of mrr I think at its peak we were just over $44,000 Mr and what was your trigger to consider selling it so at the time I was actually working with you on drip uh Cod Tre was

2:44very much a side project it was just um me getting my feet wet as an entrepreneur kind of building my own sass on the side some might call it Indie hacking these days and so I was building it and committing 8 to 10 hours nights and weekends on the project but really at at times felt quite stretched thin um around the time that I decided to sell it we were really starting to pick up steam with drip things were starting to work and I just felt like you know I couldn't really do this app a service um you know while also focusing all my energy during the daytime on drip

3:16so I knew that I was probably leaving opportunity on the table there was probably growth to be had but because I couldn't commit the time to it I wanted to explore seeing if I could just cash out some of that value yeah and so you have an idea that you want to sell it you have this inkling maybe it's time to exit from there what was the process what was your process for getting it onto the market yeah so obviously I considered you know should I just try to sell this myself but um I didn't really give that too much thought because I think similar to like trying to sell

3:44your own house there's so many things that I don't know how to do you know and so much experience that I'm lacking versus a broker who this is their main thing they are steeped in this they have hopefully a network of buyers that they're already in contact with all the time they know what valuation should look like they know where we can push and and and say like no I think we're going to we're going to hold fast to this price point that we want in these terms and those are just all things that maybe I could have gotten that knowledge on my own but it would have taken so

4:13much time and I wouldn't have felt confident even if I did try to do my own research so for me it was a pretty big no-brainer just to go with a broker who would obviously take you know a cut of the ultimate purchase price but for me that was well worth it what did the broker do for that cut yeah so I believe I started out with with sort of a long question that was like you know digging deep into the internals of the business some of these questions you've already asked me what does it do who's it for what are the unit economics where are we

4:37getting customers from today what's kind of the the web analytics what are the opportunities that I see so it was a pretty in-depth um questionnaire for me as the seller and then they took that and produced a prospectus it's just a document that includes kind of all the highlights and sort of pitches it um you know to the market unlik a product that's up for sale and then I think they started with shopping at around to some of their internal network of buyers people who had expressed interest in buying SAS products or had previously bought products if I recall we actually found our buyer through that private

5:09process so I don't even know if it went fully on the public selling Market throughout that process and even the negotiations and closing the deal what kind of advice did the broker give you yeah so the broker was was mostly there to help set expectations around you know this is what we think we can get for this on the market and then when a prospect would come through I think spoke to maybe two or three different interested buyers they would first vet the prospects for me and determine if it was going to be a good fit or not and if they were then um they would arrange a

5:41call for us to talk and the broker would be present so they you know the potential buyer can ask me questions the broker can step in and and sort of play uh play the bad guy in the room sort of and and help defend against questions that were maybe not appropriate for the right time or just you know something that we wanted to to not disclose or whatever so really was was there as my sidekick to help me navigate the process make sure I didn't screw up the negotiation side of things and uh really just provide structure around the whole process how did you decide on the price

6:13that you were going to list it at and I'm curious once it's sold did it sell for that price more or less so we kind of based it on a multiple of sellers discretionary earnings so that's the money that the business brings in minus the core kind of operating costs but not including what I'm paying myself as the founder so it's sort of the potential amount of money that a new buyer could make um if they were replacing me as the founder and this you know was just sort of kind of the the prevailing way to value a a a lower priced SAS product like this and so I went ahead and went

6:46with that and at the time given market conditions we felt like three and a half times SD was a fair price to ask for um I think the the ultimate buyers you know pushed back on that a little bit uh asserting that it was maybe a bit on the high side but I think that's exactly where I wanted to be you know right on the upper end of kind of what the market would support obviously multiples have changed these days cuz 3 and A2 is I think it's like 5 to S now maybe for SAS yeah but then this is how things go cuz this was what 8 years ago yeah yeah this

7:16was back in 2016 I think yeah and so how long did it take to find a buyer and then how long to actually close once you found the buyer it went shockingly fast I think we listed it in miday uh had a serious buyer in the pipeline by June 1st and kind of wrapped up negotiations in a couple of days and then closed due diligence by mid June so it was about a month and to end and what was involved in the due diligence process so once you've signed a letter of intent you go into what they call DD right and they kind of dig through and ask a lot of

7:49questions but from your perspective what was involved in that process yeah due diligence was pretty I mean it's kind of daunting at first because it involves usually a really large spreadsheet with a bunch of questions you know a lot of those questions you need to try to back up with actual evidence so it's like what's your Revenue okay we we established that now prove it and so it's you know gaining access to stripe accounts or or readon views of stripe accounts or bar metrics or whatever you're using to to verify your actual dollar figures you know copies of bank statements um so just a lot of little

8:20things that you know is natural for the buyer to want to ensure that they're actually getting what you're um what you're representing as the truth um so it it was kind of a lot of a lot of paperwork a lot of kind of you know passwords to share and things like that to to make sure that um that the buyer could get a good sense for the authenticity of the listing between the time that you signed the letter of intent and actually closed the deal did the offer or the deal change in any way so there were a couple points where this the buyers were wanting to push back on

8:50a few things there were if I recall a few little discrepancies in some of the revenue reporting that we had versus actual cash and I think it had to do mostly with annual sales of the product so Revenue that we collected for annual accounts that obviously the the buyer wasn't getting going to get to participate in because the cash was already collected there was some some negotiation around normalizing for that um and I think my broker actually did a pretty good job in advocating for keeping it simple and accounting for the fact that as time had passed during our negotiation potentially I could have been able to sell for a little bit more

9:26because Revenue had gone up a little bit so sort convinced the uh the buyers to just let it be a wash so there were a couple things like that in particular during due diligence that I was especially thankful to have a broker on my side who knew what they were doing because I probably would have you know um had a little too much empathy for the buyer and and collapsed under the the pressure of it and and capitulated some things and so the broker was there to just sort of tow a hard line he knew that um you know they were already kind of committed to the deal so he knew

9:56where he could push just to to keep it simple and not change the terms and throughout the whole process were there any big surprises that you remember I think I was quite surprised how quickly uh the process went from end to end um that was probably the biggest thing and I was also just um quite surprised that a six-figure deal could come together this quickly like I don't know I just you know deals of this size that I'm aware of outside of stuff like this is like buying a house and I know how laborious that process can be and how much of a big deal it is and this felt

10:27just relatively Qui and easy um and that was just uh very surprising to me sounds like it was a pretty quick and almost painless process but do you recall what the most stressful part of the process was for you yeah overall it was pretty pretty painless but I think I was most stressed at the points where I needed to be involved in contact with the buyer because you know I put a lot of pressure on myself to you know not screw this thing up and even though I knew I had the support of my broker to to kind of be there to help guard against making

10:59mistakes negotiation is just not something that I had any experience with at the time and so you know entering a phone call where I'm talking to the buyer and trying to you know cast a vision for what the product can be um I know I felt a lot of pressure um in those conversations like I felt confident because I had good advice from my broker but it still was was a bit stressful I want you to take me to that moment when you looked at your bank balance which I'm guessing was probably on your phone and you saw this pretty large number for someone who you know

11:33someone your age at the time and for someone who had never had like an exit I mean this was your first exit how did it feel how did it make you feel to see that money in the bank account yeah surreal is probably the the right way to describe it you know like we know theoretically that software is incredibly scalable and you can build a lot of value with relatively small amount of you know Capital invested and even even sometimes time and effort um you know cachy being a just a little kind of side project that I was hoping to maybe grow into something big one day

12:06and then ultimately that didn't turn out being its trajectory I just remember finding it quite surreal that I was able to pull in six figures as a you know mid 20 year-old just building some software on my laptop in uh you know cafes uh on the nights and weekends and that it could actually materialize into you know a down payment on a house or a really really nice car you know you just start framing that amount of money in terms of things that that you know you can actually see in the real world and it's it's pretty mind-blowing yeah the ultimate purchase price we haven't really mentioned right it was

12:39$128,000 and if you've never had I'm going to guess at that moment in your life maybe you'd never had more than 10 grand 20 grand in a bank account and suddenly you see that number and you're like wow I didn't I don't know about you I always feel I'm not sure I worked hard hard enough to earn that much money right it's kind of like we live in the future in terms of of SAS multiples yeah totally and and actually I don't know if I answered your previous question but that was what we came out asking for so we basically got the price that we were

13:08asking for in the end after a little bit of back and forth on on negotiating in a minute Derrick's going to share the thing that he bought the expensive trophy that he bought after selling Cod Tre but before we do that I want to thank Quiet Light brokerage they are the sponsor for this video and they have an impeccable reputation having been around for believe it's 15 years years now helping buyers helping sellers sell their websites their SAS apps their content sites their e-commerce sites WordPress plugins the gamut of internet properties and matching them up with willing buyers who are able to close deals quiet light has been around the

13:45microc comp circles for years and they are a trusted Source in The Brokerage space to learn more about Quiet Light head to microc comp.com sell and now here's Derek telling us about the expensive thing he bought after selling code tree so as it happens um I sold code tree shortly before we um exited drip as well together but um my main trophy from that time was a really nice espresso machine that uh I have talked about a lot publicly because I just love it so much some people buy Ferraris you or buy a manual well like it's like a $1,500 espresso machine rather a really nice one yeah awesome

14:25well Derek Rymer thanks again man thanks for joining me on the micro comp YouTube channel thanks for having me and letting me relive this fun experience from the past indeed as Derrick was building and selling Cod tree he was also working with me pretty much full-time at drip which we grew and then later sold to lead pages to hear the story of how we grew drip into a multi-million business check out this next video