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Should I sell my side project for 5k to my co-founder?
Hi,
Currently, our app dogfluence.com has an MRR of 1.5k. I've been working on it for the past 2.5 years (AVG of 6 hours a week). I really enjoyed working on it, but my passion has waned in recent months.
Some stats:
- 3292 users;
- 15616 on the mailing list;
- 372 companies;
- 5k impressions per day - 300 clicks (in search console);
- 1.5k MRR;
https://simpleanalytics.com/dogfluence.com
It's a very cool product but the code base is not that good, because we shipped fast and did not know what direction we wanted to go. If I proceed with the project it should be rebuilt from scratch (backend/frontend code).
It's a very big project and complex project, and in relation to the code base and the number of users, it still generates too little money.
What would you do? Should I sell it to my co-founder who definitely wants to go through with it, for 5k?
Or should I give it 1 more year? If I sell the project I will invest my time in other Saas projects.
Please let me know your opinion :)
Currently, our app dogfluence.com has an MRR of 1.5k. I've been working on it for the past 2.5 years (AVG of 6 hours a week). I really enjoyed working on it, but my passion has waned in recent months.
Some stats:
- 3292 users;
- 15616 on the mailing list;
- 372 companies;
- 5k impressions per day - 300 clicks (in search console);
- 1.5k MRR;
https://simpleanalytics.com/dogfluence.com
It's a very cool product but the code base is not that good, because we shipped fast and did not know what direction we wanted to go. If I proceed with the project it should be rebuilt from scratch (backend/frontend code).
It's a very big project and complex project, and in relation to the code base and the number of users, it still generates too little money.
What would you do? Should I sell it to my co-founder who definitely wants to go through with it, for 5k?
Or should I give it 1 more year? If I sell the project I will invest my time in other Saas projects.
Please let me know your opinion :)
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if that don't attract you anymore i would sell it, but you can sell more than this
I completely understand your feeling, this is what I think:
Thanks for your reply! Yes expanding would be possible but not with the current code base. It needs a rewrite but that will take a lot of time. I agree 5k is not that much for these numbers and my work already.
Does 5k sound like a motivating amount of money to you? If not, you shouldn't bother with the headache of selling.
Afaik prices for selling a SaaS are usually 3x to 5x ARR – 50k+ in your case. You can probably find guides online on how to price a SaaS for sale.
If you don't want to be involved and the partner won't buy you out for a good price, there's always the shareholder approach where you simply own part of this asset and get some sort of dividend and/or part of proceeds of any future sale.
Thanks Swizec, I suggested this to my co-founder.
Assuming you currently own 50% of the business, then a $5k buyout imputes a $10k valuation on the business. That's less than 1x your annual revenue which seems extremely low.
If you no longer want to work on the business, I agree it's fair to your co-founder to sell your share (or at least the majority of it) but it should be for a more reasonable valuation IMO.
A 3x annual revenue multiple for 100% of the business is a typical valuation, if you have decent profit margins and the site doesn't require on-going work to keep running as-is.
So that would be a valuation of $54k or $27k for your half. Let's call it $25k to simplify.
Rather than your co-founder having to pay it all upfront (which would be quite risky as perhaps the revenue implodes, etc), you can structure it such that you continue to get X percent of the revenue (maybe even 100%) until you've received the $25k.
Whether it's $25k or something isn't just an accounting matter, but also subjectively what seems fair.
If you're basically "walking out" of the business and leaving your co-founder hanging, then maybe it's fair for you to walk away with less than 50%. Many companies have a vesting clause built-in for this.
On the other hand, you derisking the buy-out by having it done through revenue-based payouts might already make up for the fact that you're moving on.
One final thing to consider is that you'll need to make it worth it to your co-founder to continue. If your demands are too high, it's likely they won't want to continue either and you're both left with a dying business and no payout.
Thanks Marc. Appreciate your response! I have to think about it maybe 5k is indeed not that much. I have to take into account that the code base is bad and he has to find someone to continue with. It has a lot of potential but it takes a lot of development time.
That’s a risk the cofounder takes on, not you. You’re in a negotiation, you should negotiate your side, let the cofounder negotiate theirs.