I am curious why you aren't counting the owner's income. If he's doing work within the business it seems reasonable to exclude that as the next buyer will have to either take on the work or hire it out.
Normally, I'd agree with this, if the owner is in fact doing any active work on the product. In this case, the seller has divested their interest and the product has continued to grow despite them not paying any attention to it. In short, they're already holding it, but are growing anxious to focus on other projects that take their attention.
This is a typical context with a lot of offers. Sellers list their products because they are tired of working on them, uninterested in the products anymore, or, as is the case this time, are looking to shift their focus fully elsewhere.
Part of my investment thesis is to only buy products that have extremely low support burden and net revenue growth. I like selecting products that do one function really simply and consistently so the need to improve the product is reduced, and sometimes fully removed.
That said, it would be foolish to assume zero involvement. After closing, I have an immediate "just fix it" playbook where I ensure all the marketing and support systems are in place for low owner involvement.
That said, I plan to work a few hours a week on the whole portfolio. Since I'm fully technical, I may end up working on product or marketing for either product in the portfolio. Whatever would have the highest ROI.
I hope that gives some perspective. I hope to release a more formal post describing my thesis in greater detail.
I am curious why you aren't counting the owner's income. If he's doing work within the business it seems reasonable to exclude that as the next buyer will have to either take on the work or hire it out.
Hey Michael, thanks for the message.
Normally, I'd agree with this, if the owner is in fact doing any active work on the product. In this case, the seller has divested their interest and the product has continued to grow despite them not paying any attention to it. In short, they're already holding it, but are growing anxious to focus on other projects that take their attention.
This is a typical context with a lot of offers. Sellers list their products because they are tired of working on them, uninterested in the products anymore, or, as is the case this time, are looking to shift their focus fully elsewhere.
Part of my investment thesis is to only buy products that have extremely low support burden and net revenue growth. I like selecting products that do one function really simply and consistently so the need to improve the product is reduced, and sometimes fully removed.
That said, it would be foolish to assume zero involvement. After closing, I have an immediate "just fix it" playbook where I ensure all the marketing and support systems are in place for low owner involvement.
That said, I plan to work a few hours a week on the whole portfolio. Since I'm fully technical, I may end up working on product or marketing for either product in the portfolio. Whatever would have the highest ROI.
I hope that gives some perspective. I hope to release a more formal post describing my thesis in greater detail.
Well, that got me to quickly subscribe. Great article and overview, Eyal. Now close it👊! Good luck! And thanks Andrew Gazdecki for the fb post!
Wow, thanks Brian! Hope I can continue living up to that!
Great write up Eyal. Best of luck for this deal and more to come..
Thanks Vikas! Hope it was thought-provoking.