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  • Unique Business Opportunity Presented to Me, need advice

    updated 2 years, 10 months ago 0 Member · 1 Post
  • Katie

    Member
    January 16, 2020 at 5:02 pm

    I’m an independent software contractor. Over the last 10 years I’ve worked with a client regularly, writing the software for a web application and accompanying mobile app that power his business. We’ve met in person several times, he’s always paid me on-time, and even throws in bonuses (even though I’m not an employee). He was frank with me that he was trying to sell his business and couldn’t get what he wanted for it. His business is in the education space and the prospective buyer is a non-profit. They wanted to buy the software and not the client base, but at 50% of his asking price. Soon after he reached out to me and offered to sell me the business with no cash out of pocket. As far as what’s in it for him, he will be entitled to 30% of the revenue (top line) but will grant me the option to buy him out at 20% of the company’s value after 5 years. He’s stated that he believes me to be more than capable of taking over and growing the business and that this is an investment in me. He’s shared his P&L for last year and books for the last three years. Most of his expenses are personal expenses that have been folded into the business (health care premiums, travel, cell phone bills, utilities, office space rental, etc.). The company is grossing around $100K annually and with his personal expenses not factored in, monthly operating expenses are in the ball park of $500/month (not counting the time I will put in for support, sales, development, etc.) The opportunity is very enticing to me as I’ve been in search of a SaaS model to launch on my own for some time but have failed to come up with any solid ideas I wanted to run with. Here’s an opportunity where someone is offering me a SaaS business in which I’ve written all of the software for, so in a sense, I’ll be able to hit the ground running on the technology side of things. The downside is that the business is very seasonal with high workloads for a couple of months out of the year, and being that it’s in the education space, gaining and retaining clients is a nuanced art that I’m not familiar with and will have to work on. He’ll be providing brain dumps, customer interactions via CRM data as well as making himself available to clarify processes and other aspects of the business over the first year. No contracts have been drawn up yet, and we’re still discussing the specifics to come up with a deal that both of us are comfortable with. I’m reaching out to the community here to get advice on what things to watch out for as we move forward in this process. I have no reason to distrust the owner but sometimes seemingly good people do bad things, and being new to this I want to make sure I’m keeping an eye out for red flags. – by /hq/ctorx – –

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