# They Bought a 'Hated' Shopify App for 2X Revenue (Now Worth Millions)

Channel: ethercycle
Video: https://www.youtube.com/watch?v=gGdS45JY2Yo
Duration: 19 min
Language: English
Words: 3584
Transcript page: https://viewrankai.com/tools/youtube-transcript/gGdS45JY2Yo

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[0:00] Within about the first week or so, we ended up having like a six-hour outage. Uh they sent over this big slide with a bunch of apps that supported this and 75% of those are no longer with us. How have you seen the the app store in this ecosystem evolve? [Music]

[0:28] You purchased a distressed infamous app and in the have now run it 10 years and turned this thing into, you know, quite the quite the powerhouse, quite the enviable business. This is the unofficial Shopify podcast. I'm your host, Curtster Ster. Today my friends we are going to talk uh about about a real life story of acquiring and turning a Shopify app around because certainly within the Shopify ecosystem of of partners and merchants I think there's a lot of the grass is always greener right I had a Shopify agency my first thought I should build an app and certainly we see merchants who start agencies and agencies who start stores and you know

[1:12] merchants and agencies who start apps right we're all really we all want to play in everyone else's sandbox and so uh I have been lucky to get to know the current owners of Cleverific the order editing app I'm sure you have heard the ads for Cleverriic you know I I take great pride in my ad reads um as they have been gracious enough to sponsor the show this year and you know I want to hear the story I want to know you know as someone who develops apps you know what I can learn and take away from it and then just you know that that general

[1:48] experience and of course you know what has made this app successful. So let's start with uh introductions. I've got Andrew Lee and two fam. Uh who are you guys? Introduce yourselves. Um I'm Andrew co-founder um and I'm the lead developer and technical guy at Cleverrific. So two and I started uh together uh I think in 2009. Uh we started on a nonprofit project together um and then very quickly found out that we worked really well together. Um and over the next couple of years we worked on freelance projects together. Two has a deep background in the fashion industry. Um and so we ended up working on e-commerce sites um and also kind of

[2:29] medical e-commerce sites for um some pretty big companies. Um, and after a while we said, you know what, like maybe we should just start a company together, right? And that's when Cleveric was first incorporated. We incorporated around like 2012. Um, but we didn't come on to edit order and having an app in the Shopify ecosystem until around 2015. We've got two folks is it the number two, not to the person. We have we have uh two individuals who have discovered they work well together which is harder than you'd think. You know a lot of people like being solo founders. I have a business partner. I like it. Um two

[3:11] let's hear your experience. Twofam co-founder and I head up marketing and design. We're clever and Andrew is not the first developer I worked with. I had to say adios to many others before you know finding someone that worked really well. We worked really well together on projects where we were um separate consultants. So what that means is, you know, I have a business that is valuable to me. Andrew

[3:39] had a business that was valuable to him. And so we really relied on each other to build great products um and trust that that person would deliver. So that's really how we started. When did you find the were you in involved in the Shopify app ecosystem when you found edit order edit? What was

[3:58] it called originally? So, it was called edit order originally. Does what it says on the box, right? It edits orders. And this was at a time when in Shopify, it wasn't even possible to edit an order, right? You had to do all these workarounds. If you were to tweet at Toby directly, he would say, "Yeah, just cancel the order and tell

[4:15] the customer to create a new one." Right? Um, but everybody knows that, you know, for customers, it's hard enough to get them to hit the checkout button the first time, right? you're going to ask them to do it one more time, right? Once you have that sale, you want to be able to service the customer in every way possible to get them through to the end of that train or even through to the next step. Um, and telling them to, hey, you know what, stop everything, start over, was kind of a no-go. So, we worked with a couple of companies where that was a problem. Um, and this was in I

[4:48] think the shoe industry uh with a with a shoe brand that two worked with um and that I was brought in uh to kind of basically rebuild their uh Shopify or their their shop e-commerce systems from the ground up. Uh we chose Shopify for that. You know, at some point we had been working on both client work and then also on our own app ideas for a little while here and I caught on to um a couple of key people who I'm I'm still in this ecosystem of bootstrap founders

[5:17] called MicroCom. Oh yeah, Micro Comp. Yeah. Yeah. With like Rob Walling. And so I started listening to his podcast. Um and then there was another guy who was early on in the Rails space. Um his name is Patrick McKenzie. He was talking about what he his the sale of his app. So he had built an app called appointment reminders at the time and then went to go you know sell it because he wanted to get out. Um and was talking about how good of an experience he had with um FEI with Thomas Schmail

[5:44] business brokers FEI. Yeah. Yeah. Um and so uh just on a whim I started you know just cruising around there. Um at the same time Rob Walling with Microsoft and uh I think the podcast is called starts for the rest of us was talking about his stairstep approach right and as product people you know we always assumed that you know if we're going to build a product or we're going to have a product it needs to be a product that we built ourselves with our own hands that was like wholehog like kind of imagine from our brains then put into code. Rob opened my eyes to that

[6:18] you didn't have to do it that way that you could stairst step you could acquire a business you know I had all these things kind of swirling around in my head and then I came on to the opportunity for edit order I saw it on FEI's site and I went back to two and said two this could be a really good opportunity right it's already got revenue you know um there's a there's an app store uh that you know that we're already all familiar with um it's in the e-commerce space is on Shopify and we know that stuff like the back of our hands at this point. Like, you know, why

[6:51] not buy some revenue right now? Um, use some of the use some of the money that we have and buy revenue. This dad joke maniac comes to you and says, "Hey, we should buy a Shopify app because I heard about it on a podcast." Like, what what was your reaction here? I basically said, "Do you want to do this by yourself or are you asking me to buy this thing with you?" Right. Like I wasn't really sure. His enthusiasm was like, "Do you want to just take this and run with it or are you asking me a question?" And so, you know, he's like, "I, you know, I really want to do this

[7:25] with you." At the time, because it had revenue, this is one of the key things. It made it made it like a an easier Yes. and to be able to carve time because we had gone back and forth about creating a product together and you know that first step is the hardest step, right? And then with no revenue coming in, we feel like, oh, this had the bones for us to just get in and work on something together right away. And that was more important than waiting another few years for the right idea or the right something else. And so I just said

[7:56] bye-bye. Is it too forward to ask what it cost? I I'm not a 100% sure what it is, but compared to today's valuations, especially if you're talking about like 2021, early 2022 valuations there. Um, we got it for kind of a song, right? So, if you're looking at around 10K MR there, um, you know, that's like 120K

[8:17] ARR. Um, we got it for about 2x revenue. All right. So, our multiple is 2x. Not that's quite reasonable. Yeah, it's it's it's it's actually almost free if you think about it, right? If you were selling the same app for today, you're probably going to expect somewhere between three to 5x, right? Um, you know, so and especially and if you bought it in 2021,

[8:40] you know, apps are for like 10x. Yeah. That Yeah. 2021 that pricing it would like 5x would be a steal, you know, today two and a halfx would be would be really good, you know, 2x. Yeah, quite extraordinary. Um, okay. good deal, you know, like yeah, it it's a lot of money to come up with um especially like bootstrapping, you know,

[9:02] but also not impossible. We both had we both were able to buy Well, we were able to buy it um almost 100% cash on hand and then we had a seller's note um for I think maybe about 70K. So, a seller it was partially seller financed. Yeah, partially seller financed. Um, so but that was only about maybe7 $70,000 on that, you know. So if you're, you know, if anybody out there is thinking about acquiring that, there are a lot of financing options. There's a lot of options that you can potentially

[9:31] negotiate. You know, any issues in this purchase or handoff? Yeah, in the as far as the purchase was concerned, um, the transaction went through just fine. However, uh, within about the first week or so, we ended up having like a six-h hour outage. The problem turned out to be that during the handoff, we were handed off one, we were handed off the GCP accounts, the Google uh cloud platform accounts, and there was one that said that it had everything in it, and we updated the billing information for that, but the other one we weren't aware of at all or that it had any production systems on it. And

[10:10] that did not get the billing information updated. And so that ended up getting turned off. and I said, "Oh my god, what is going on here?" And um after about 6 hours, we're able to figure that out um and get that updated and then everything back online. At no point have we actually really like laid out the use case, the utility of this app. And it just I want to share anecdotally if we have as an example a store like uh tactical baby gear who sells diaper bags and someone buys a diaper bag and we as soon as we have this continuous problem where someone does not buy the accessory

[10:52] items but our free shipping threshold is 100 something bucks and so if it's like well I want to buy an accessory item that's going to be way less than 100red I'm going to pay shipping and so customers will buy the bag and then immediately the customer support gets an email. Hey, I bought this bag. I forgot to add such and such accessory and I don't want to, you know, reorder and pay shipping. Can you just add it? They're

[11:15] like, okay, you know, that's a big pain. That's where your app solves this on that thank you page. They say, you know, you could put some in there like, hey, you need to change your order, forgot something, you know, messed up the size. That's a common one. And then there's like a a time limit, but within it the person can edit the order and fix this themselves. How cool is that? That's that's the like I've accurately described the primary use case for

[11:40] Clever Ever, right? Yep. Okay, good. When you acquire this app in any business, generally when you acquire it, the business books will tell you you're supposed to have a 100 day plan. Like what was the plan here, you know, to acquire it and then improve it? One of the first I would say the very first thing that we did before we even got the tool, right, is that we knew we kind of acquired a little bit of a distressed property here, right? It was starting to get one star reviews. Um things were, you know, not always in the best uh uh kind of possible case there, right? And

[12:13] so the first thing that we did is that we sent out an email blast on day one that said, "Hey, you know, I'm Andrew. too. And together we are the new owners of Edit Order, right? Um and laid out what our plans were when we did the technical side of this for Edit Order. Um you know, we did it as part of a two-year process moving things piece by piece. um in what's called, you know, if you're familiar with some of the terminology or the or some of the jargon here, it's like the strangler fig approach on that, which is basically we build a shell around it that basically

[12:53] eventually strangles the the inside of the uh of the app while and then piece by piece all of the key functioning moves out to the more updated components. Um, and so we did it in a very safe way, uh, and in a very kind of way that we knew that we can keep the app running and reliable without stopping service to merchants just to rewrite an app because the last thing

[13:17] you ever want to do is rewrite an app. But if you have to do it, then this is basically the way you want to do it. When you have an app, you know, this long and you're you're playing in Shopify sandbox, right? like they control whether you get to be in the app store and you that's true for any of us as Shopify app developers and that gives them the power to such like to dictate changes to us. Um and they also good or bad like feature changes happen and they go like look these are things you have to change to support this feature that's coming down the pipe. You know you have

[13:50] to think it's this huge platform you have to think of it as every time they do anything it is you know rebuilding the plane in flight. It's difficult. Your app really fairly complicated. Like a lot more complicated than anything I've done. What's that experience like as you know app product people where you get these edicts that are like, "All

[14:10] right, here's what you got to do next." Okay. Yeah. Um building a plane while it's in flight is or rebuilding the plane while it's in flight is exactly what it feels like. there's sort of like this feeling of kind of shifting sands um you know with what Shopify might do next right and so as a strategy over the years and and even very early on because we knew what you know the risk to the platforms were right like the risk to the platform is that Shopify one could just build your stuff and then uh just you know basically come by and eat your lunch at any point in time um the other

[14:45] risk is that some API change is going to cause major problems um or they're going to remove the API that your app maybe just fully depends on or maybe never build the thing that you want um so that you could support some merchant use cases. I think as app developers, it's really important for us to develop great

[15:02] relationships with the team at Shopify. Um, and we've always been able to kind of h have that um even from the very earliest days. Um, in that um, one open communication um, with the dev dev advocates or people on the product team if you can make contact there um, and showing up at, you know, back in the day it was called Unite. These days it's called additions. Showing up at their there additions.dev dev. I got corrected by Harley Finkelestein himself on that

[15:30] point. All right. Well, Harley could come me. I call it an additions, right? So, um, having good contacts there and, you know, just generally being a source, you know, because Shopify at the end of the day, a lot of the pe like everybody there is actually really open to listening to feedback. Having done this for 10 years, how have you seen the the app store, you know, this ecosystem

[15:56] evolve? There's definitely more um apps than there there were when we started for sure. Um I think it's 10,000 or so now. Is that the number? I could be wrong. When we first launched um Shopify as a Shopify flow um launch partners uh they sent over this big um slide with a a bunch of apps um that supported this and I don't remember what that year was but I was looking at that um fairly recently and 75% of those are are no longer with us the the apps that I could recognize like oh yeah I remember back in the day they were big player and now they're no longer there

[16:36] and and you know it's ever evolving. There's people who come, there's people who grow um and there's people who exit um the app store. I think with any app, you know, when people ask me about it, they're always like, "Yeah, but isn't the support a nightmare?" Talk to me about the experience of providing app support. Um I would say that it was um one of the most important things for us we knew from the get-go because our first hire was a besides us was a customer support person. That's how we were doing it. Um, we were splitting it. I don't remember if it was like we take like each week we

[17:11] hand off like one week I would do and then the other week Andrew would do it at at the beginning until we hired our first person. Um, and when we hired that first person, we that that seat has never really been empty and to this day sometimes we we both rotate into customer service because we value that so highly. What's the biggest mistake

[17:32] you see new developers make? So, you know, churn rate definitely probably the biggest one there, right? Um, if you're buying as like a distressed property kind of the way that we did it, you know, you could also look at churn rate as part of your negotiating tactic there. If you really think that you have some ideas to kind of reduce that churn rate, generally your benchmark for churn is that you want that below 5%, right? below, you know, down below at like two or 3% is even better. Customers are always going to turn at some point, but you know, down below 5% is great. Um, so if you're

[18:07] up at like 10%, you're basically you're losing half if not more of your customers. I forget the exact math is every year, right? So every year you've got to replace half of your entire customer base. So really really important to get that number down there. You know, the next thing uh for app developers is to really think about think hard about pricing um and work on changing or updating the pricing model or doing pricing experiments at least once a year so that you can figure out what's the right model that's going to

[18:41] work for your app. If someone wants to solve these order editing problems with Cleverific, where do they go? What do they do? Go to clever.com or you can email to two or at any point in time. Uh two is to the number two clever.com. You can reach me at andrew clever. Um and we're basically

[19:02] always around. We talk to everybody. You've built something really special and I really enjoyed hearing the story. It's chicken soup for for my soul. You know, it gets me reinspired into, you know, working on and investing resources in our Shopify apps. Andrew Lee, two fam, clever. Thank you so much. Thanks, Bert. Thanks, K.

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