What kind of businesses to buy and where to find them?
TL;DR — You need to buy something that is broken and fixing the broken pieces is a sure-shot recipe for profitability. Also, make sure fixing that aspect of the product is something that is up your alley.
There can be 100 different ways for you to assess a product’s worth but I ask myself a few questions before making any purchase.
A few questions I ask myself before making a purchase:
- Is this a “pain killer” or “vitamin”?
- Will it boost my main business?
- Do I have access to a new distribution channel that the current founder doesn’t have access to?
- What will happen if I buy and don’t do anything?
- What happens if the tech is too complicated to change?
Here are a few KPIs that you may want to ask:
👉 But let’s be honest, metrics are just a small part of the picture. They are here to quickly eliminate (or highlight) something to deeply look at.
How to identify the right fit?
Quick Tip: Look to buy startups that you can quickly 5x. This would sound counterintuitive, but it’s best to go for products that are broken in either of these four areas — Business Model, Distribution, Tech, or UX. If you know how to fix them, they will grow.
In the same way, buying a perfect product with great stats, awesome tech, and good user acquisition channels, will be very expensive and risky.
I see two types of acquisition:
- Combined with your existing resources, you can x10 the results
- Broken product that you can fix to x10 the results
Thomas Smale on “what to buy”: ”have a plan. Don't just buy something and expect to figure out how to grow it once you takeover. If you don't have a plan to grow it, do not acquire. Businesses eventually die if they do not grow” Tips from Thomas Smale
While searching for products, here are the things I usually look for:
- Good Product with Poor Distribution: A high-quality product that lacks visibility due to poor marketing (I can leverage my personal brand here)
- Product with Attention, Poor Execution: If a product has generated significant attention but lacks effective execution, it may be worth considering.
- Mild Success with Broken Product/Distribution
- Bugs Are Great: Surprisingly, acquiring products with bugs or technical issues can be great. If you have the expertise to fix those issues, you can acquire the product at a lower price and enhance its value.
Basically, you want to buy something broken:
- Broken distribution
- Broken business model
- Broken UX
- Broken tech
Things to Consider
A few things you should keep in mind while looking to acquire businesses:
- Check Frequently
- Act Quickly - In an open marketplace, everyone has access to the same deal flow that you do. Active buyers will pounce at good opportunities so you have to move fast.
- Beware of Scams - There are many low-quality / misleading listings. You have to know how to weed them out. For ex. It is easy to pump MRR with fake subscriptions.
Damon Chen on “what to acquire”: ”Since we have a small team, when acquiring new business, it's beneficial to invest in products that have a product-led growth effect, this means that the product has the potential to grow on its own, without relying heavily on external marketing expenses like ads or partnerships” Tips from Damon Chen
Buy Traffic or Revenue, not Tech
Honestly, technology is becoming increasingly easier to build. With the traffic and revenue, you have the leverage to funnel your audience into different value propositions of yours.
On the other hand, a product that has found its market has great value as it will make you save countless experiments before understanding what people really want.
The rationale behind my acquisitions
- Typeframes: Videos are the future, period. Already having a product market fit, given a plethora of investments in the field made me jump to this opportunity. The product sells because the USP is straightforward yet powerful, and I could compound its growth with my personal audience. Usage was there but user acquisition and business model were broken.
- Twemex: With Tweet Hunter, this product fits right into the current suite, helping people grow on Twitter. Not only does it have a good PMF, but it also helps drive traction to the existing product, contributing to a cohesive product portfolio. The product didn’t have a business model and therefore was not profitable in any way.
Where to find these businesses?
Here is a list of platforms where you can find great products:
1. Product Launch Platforms
- ProductHunt
- Indie Hackers
Why? Because the products being launched here haven't been publicly listed for sale, which means you can secure a deal without facing competition.
2. Product Marketplaces
- Acquire - https://acquire.com/
- Good for small to medium acquisitions (Average deal size: $800,000)
- Empire Flippers - https://empireflippers.com/
- Good for micro-acquisitions (Average deal size: $475,000)
- Quiet Light - https://quietlight.com/saas-businesses-for-sale/
Here’s a detailed guide for you 0on how to find businesses via the mentioned channels!
Hunting On Product Hunt
There are two ways you can approach ProductHunt:
- Keep an eye out for products ranking in the Top Products Today section. These are the products that managed to grab attention and may have some really compelling use cases. The maker probably did the marketing bit right but messed up the product and that’s where your buying window opens up.
- For ex. Viral Post Generator went viral and we quickly made our move to make the most of the hype. We acquired the tool and integrated it into our Taplio ecosystem right away! Why did the seller agree to sell? Because he didn’t know how to make money with this, but for us, it was obvious.
- Target products launched 3-4 months ago, as they may have gained some traction, but momentum is gone. 3-4 months are enough to figure out if the product owner is able to make the product pan out well or not after the hyped-up launch. Many founders give up on their projects and are more likely to go ahead with taking your offer.
A struggling product does not necessarily mean it is a bad one. Sometimes, it just requires a great operator to make it work. Makers often lose interest in their own products because:
- They just started as a hobbyist and ended up losing interest
- They have other businesses/products and are not able to manage it all
- The product is broken beyond their fixing expertise
- They fail to cope with users’ expectations and stop shipping
How to hunt on (app) stores?
Interesting stores to look at:
- Shopify store
- iOS App Store
- Mac App Store
- Google Play Store
- AppSumo
- Zoom App Marketplace
- Chrome Web Store
- Slack App Directory
- Go to any of the app stores and look for a niche that interests you / in which you have some expertise. Having an eye for potentially great products is the key here. In my case, it is Social Media, Content, Marketing, etc.
- Sort all the products by reviews and find the ones that are facing challenges - bad reviews, low ratings, bad UX, bad customer support, etc.
Lots of bad reviews can be a positive sign as well – it just means that the product is actually being used and there is something to fix that could prove to be a game-changer for the product. The logic: It drives down the acquisition price while giving you a clear direction of what to fix.
- Filter the ones with a decent number of reviews but majorly negative ones.
- Check if the product is still being actively developed and also has the potential for improvement. If it is not being developed anymore, it just might not have any active user engagement left either.
- Cold DM/email the maker with your credentials and an offer to buy the product.
For example, you could say, "I see the potential in your product and believe, I really love what you did. If you have any plans to sell it, I would be happy to make you an offer. Let me know". As simple as that, to get the conversation started, but we will get back to this later.
How to use Acquire?
- Register as a Buyer - Visit Acquire marketplace, click “Join Now” from the top right of your screen, and opt for “I want to buy a startup”.
- Answer a few questions to help Acquire curate a relevant set of suggestions for you. For ex.
- Which startup types interest you?
- What is your ideal asking price range?
- What TTM profit range are you looking for?
- What should be business models, tech stack, etc?
- Finally, browse startups by acquisition criteria, popularity, and staff picks.
- Set up Instant Slack Alerts to get real-time alerts of new startup listings. With Acquire for Slack, you'll also be able to:
- Customize notifications by startup category, revenue, and profit
- Talk with your customers and site visitors directly from Slack
- Easily collaborate with your team to better answer your customers
- Sign up for Platinum to get access to the makers.
- If you find a great SaaS product, go to the listing and click Request Access. You will see the listing getting added to your My Deals tab.
- Create custom lists to keep different listings of your interest under different categories for better tracking.
- Finally, you can review and send a Letter Of Intent (LOI), including your purchase price, closing payment, seller financing, etc.
Making the best use of platforms like Acquire:
- Set Clear Search Parameters: Define your target product categories, price range, and quality criteria to narrow down your search effectively.
- Read Reviews and Ratings: Don't just focus on the product description; take time to read reviews and consider the reputation of the sellers.
- Track Price Trends: Use tools available on acquire.com to monitor price fluctuations, allowing you to make informed decisions.
A lot of times, I come across makers who already know where the problem lies and what can be done about it. They just don’t have the time, energy, or resources to fix the issues themselves and hence end up listing their products for sale. Such makers are actually great and offer great assistance when you plan to go about growing the SaaS product efficiently.
For example
Damon Chen acquired a dying product in April ’23 and turned it around based on feedback from the maker by Nov’23. The maker served the growth opportunity to him on a silver platter and without any delay, he acted upon it.
The result speaks for itself. Here’s how the MRR grew after Damon implemented the strategy.
Twitter Lists and LinkedIn InMails
This is more of a passive approach but worked very well for me when sourcing acquirable products.
- Increasingly, people are going for the “Build In Public” experience and sharing their product launch, growth, and downfall. Follow the maker whenever you come across a good product mentioned on Twitter.
If you don’t wanna mess with your following list, just use the Twitter Lists feature to keep track of all the products and makers in a “Hunted” list.
- At times when the product is not growing well, founders stop posting much about it. Some might just share their failures too. This is when you reach out and express your intent to buy the product. Send a simple DM, start the conversation, praise the maker, and be clear about your intentions.
- This is a long shot, but I had to use LinkedIn InMails in some cases as I didn’t find any other way.
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