I Built $140K+ MRR SaaS With No Audience & Sold It For $3.5M
Hello! Who are you and what business did you start?
Hi everyone! I’m @SpencePatterson, and in 2019, I launched a paywall platform for content creators as a niche-specific alternative to Patreon.
I bootstrapped my SaaS from $0 in 2019 with no employees and only one freelance developer. By the time of its sale, the platform was generating between $125,000 - $142,000 in Monthly Recurring Revenue (MRR) on 95% margins, with daily payouts from Stripe and PayPal ranging from $2,000 to $8,000. My startup was recently sold for $3.5M on Flippa. You can read their article about it on Twitter.
Due to NDA reasons, I can't disclose the name of the business or its current owners. However, the above link serves as proof of my accomplishment.
Initially, when I started the platform, it wasn't intended for use by others. I primarily developed it to streamline my own business operations and content distribution, offering impressive features to automate the process for myself. It was only after I began using my system and saw others struggling with Patreon or other makeshift solutions that I realized its broader potential.
What excites me most is the process of going from 0 to 1: conceptualizing an idea, developing a product, and watching it materialize. There’s a unique satisfaction in creating a product that people find useful and enjoyable
What's your backstory and how did you come up with the idea?
A bit about my background: I worked as a licensed broker for several financial institutions. During my many meetings with high-net-worth clients, I often inquired about their wealth acquisition stories. Interestingly, 99% were not doctors or lawyers, but business owners or real estate investors. This insight made me eager to switch sides of the table.
Leaving retail, I transitioned to a product developer role at a core processor for banks, but the drive to grow my income persisted. I got involved with online trading groups and eventually partnered with one of the expert traders. Together, we conceived the idea of offering educational and entertaining content for users. Our group quickly grew to hundreds of members, but managing them became a challenge.
To address this, I funded the development of an MVP for a system designed to solve our management issues. Its effectiveness soon caught the attention of other group owners who wanted to use my system, leading me to realize its potential for greater impact. My partner graciously offered me an exit to fully concentrate on this project.
I was convinced that this was the right project to pursue because it filled a specific gap in the platform I was using. It worked not only for me but also appealed to other content creators offering similar services. However, the system wasn't initially built for multiple users, necessitating modifications for multi-tenancy and a payment model. As a product developer with years of experience, I began designing what this expansion would entail. Being neither a programmer nor a developer, I had to hire someone to bring my vision to life.
What excites me most is the process of going from 0 to 1: conceptualizing an idea, developing a product, and watching it materialize. There’s a unique satisfaction in creating a product that people find useful and enjoyable. This journey with my platform was different from my past small online hobby businesses.
I fully committed to this project, even quitting my job to dedicate myself to its success. I believe that complete commitment, coupled with the realization that you are your savior and must act with intent and purpose daily, is the key to unlocking true potential and success.
Take us through the process of building the first version of your product.
The first iteration of the MVP was, frankly, a disaster. It took a few weeks to put together with a complete rookie coder and we went back and forth on revisions for another month or two. I lacked knowledge about the most optimal programming language for the project. I used Upwork to find someone, investing $6,000 to build what turned out to be the crappiest MVP imaginable.
I don't have screenshots of it (plus, they would reveal the brand name), but it was developed in Node with a Django backend and looked like a joke website from the late 90s. The platform would crash every few days under heavy traffic. Despite these flaws, I aggressively marketed it through DMs on social media and other channels.
When I designed the MVP with a wireframe, I didn't foresee it turning out as poorly as it did. However, it was functional and began gaining traction in our hyper-targeted niche. Eventually, after interviewing hundreds of developers, I teamed up with one who was exceptionally skilled. We struck a revenue share agreement and set about rebuilding the platform from scratch. I focused on the business aspects while he handled all the technical details and feature requests.
Working tirelessly together, we iterated the platform based on customer feedback. The catch was, that without the initial MVP's customer base, convincing a skilled developer to join me for a revenue share would have been impossible. So, I had to continuously promote the system to keep him engaged. Balancing customer satisfaction and a developer who held the keys to your financial success was no walk in the park. Maintaining a positive attitude and charm was essential 24/7.
Only Stripe had charting info, and PayPal only had CSV files which accounted for almost half the business:
Our team was just myself and one programmer. He was a 1099 contractor, managing everything technical – from feature requests to bugs, maintenance, and infrastructure. I handled the business side of things, including marketing, product development, wireframing, Figma, roadmapping, UI design, and influencer and merchant outreach.
However, due to our ideological and philosophical differences, we eventually parted ways. A year later, I found an even better programmer, a real powerhouse. He worked tirelessly, mirroring founder hours, and played a crucial role in maintaining the project while I focused on scaling it.
Describe the process of launching the business.
The launch was more of a soft rollout, as I initially intended the system solely for my personal use. However, when it began attracting interest, I reached out to others in the niche to gauge their reception to my solution. It turned out there was a solid product-market fit.
Since I already knew of people in the content creation space using platforms like Patreon and others that had similar issues to the ones I was having when I ran my educational content channel on options trading, I knew the pain points I had felt that I knew others were feeling as well. Once the system was live, people started reaching out to me to use it. So I started trying everything to increase outbound communications instead of just waiting for inbound.
My approach to increasing visibility involved creating an affiliate program, engaging in direct guerrilla DM campaigns, and organizing contests. The customer onboarding was consistent, though there was no dramatic "hockey stick" moment of growth. As a B2B2C platform, we had no direct influence on our merchants' performance or interactions with their end customers; we dealt only with the merchants.
Our revenue was affected by their sales and promotions – we shared in their losses of revenue and gains. Our business model wasn't a traditional SaaS subscription but was entirely fee-based; we earned only when the merchants did. Starting this business with just $6,000 from my savings was a risk. Fortunately, the ongoing costs were minimal; initial hosting was under $100 per month, and other expenses totaled at most $500 (Aside from adspend but that came much later).
I had the advantage of interested parties from the start because I was already using the platform myself, which naturally showcased the logo and URL. Initially, it was tailored exclusively for my use in a previous project, without any beta testing, waiting audience, or marketing efforts.
Once I noticed people reaching out to use the system, I realized the necessity of adapting it for a broader range of users like myself. The initial months saw little advertising – no paid ads, no trade shows, just straightforward, direct messaging campaigns.
The biggest lesson for me was that the clearest indicator of product-market fit, apart from building something I would use daily, is ensuring that others in similar situations would find it equally valuable. The key is to integrate into communities where your target users gather, offering them your system with minimal barriers to entry, even for free initially, to build a solid user base.
The 0 to 1 process excites me; the transition from 1 to 10 doesn't, as it becomes more about macro management and less about creativity. Wearing multiple hats and operating at a high level is rewarding, but I crave the freshness and creative spark of starting new projects.
Since launch, what has worked to attract and retain customers?
In the early stages, one effective strategy was launching an affiliate program. This allowed power users to essentially use the system for free while earning monthly payouts for sharing their referral links. Since we didn't offer a white-labeled option, our branding was omnipresent and visible to merchants, customers, and potential users alike.
At first, the affiliate program started out with a few users and we steadily added about 300 affiliates per month because of how insane the offer was. (50% of all the earnings for the life of the account) and we had strict anti-cheating controls to check IPs, emails, signups, etc. to make sure people weren’t double dipping.
Another factor that I believe played in our favor was our one-button signup process using OAuth. Prospective users could simply click one button to sign up and connect their accounts, making the process incredibly smooth, easy, and hassle-free.
To keep costs low, I struck a unique deal with a power user who was active daily on our system. We agreed that he would lead a volunteer team of other power users to provide customer support. This arrangement eliminated the need for paid customer service or handling most inquiries myself, except for escalations.
The support team members received significantly discounted rates and took on the responsibility of answering 99% of inquiries and assisting new customers with onboarding. This approach allowed me to concentrate on the most important objectives and key results (OKRs). The support team operated almost autonomously, requiring my involvement only for urgent issues through the main customer support representative.
We also began closely monitoring the origins of our customers and adjusting our marketing strategies accordingly, focusing on countries where we aimed to expand our market share. This insight significantly informed our advertising campaigns. Each day, the first thing I did was check these analytics to understand where our customers were coming from.
Noticing that Twitter and Instagram were our main traffic sources, I decided to refocus our efforts on YouTube, which was trailing as the third major driver.
The affiliate program, while not contributing significantly to our Monthly Recurring Revenue (MRR) directly, played a crucial role in casting a wide net. With thousands of people sharing our links, it created a ripple effect that caught the attention of social media influencers. These influencers reached out to my team, expressing interest in creating promotional content for us on a paid basis. Leveraging the short clips they produced, I reached out to other influencers within the YouTube community.
My pitch was straightforward: “Hey, this creator made these videos for us, could you do the same for $X?”. The response rate was about 1 in 50, but after contacting over 200 influencers, the number was sufficient to achieve the traction I desired. I had specific criteria for these collaborations: the influencers had to broadcast the content to their followers, possess a minimum of 25K followers, and ensure that the content was of professional quality and clean.
When we began investing in paid ads, I reached out to both Google and Meta to engage one of their specialists in guiding our ad campaign process. To ensure I got the attention I needed, I mentioned plans to spend about 10 times more than my actual budget. This strategy led to them assigning me a dedicated representative. This rep was instrumental in crafting, A/B testing, and setting up our ad campaigns from the ground up.
They checked in with me weekly to ensure the campaigns were meeting the Key Performance Indicators (KPIs) I had set, based on our conversion tracking. Who better to set up the ads than someone with access to all the successful internal campaigns and a vested interest in earning my business? Through analysis, we discovered that most of our customers were using mobile devices, prompting us to tailor our campaigns more toward the mobile segment.
Ultimately, the paid campaigns didn't yield results as effective as our organic reach and referrals from affiliates and other customers. Consequently, I decided to discontinue the large-scale ad spend. I ended up allocating around $1,000 per month for ads, primarily focusing on maintenance and competitor counter-campaigns. These counter-campaigns were crucial for situations when competitors set up paid ads to divert traffic away from our site. By initiating high bid campaigns, we effectively prevented them from securing the top spots in search results.
We then found the affinity that the main users were interested in based on their personas and targeted more merchants to bring to the platform which would allow for cross selling internally to boost conversions and add to the stickiness.
How are you doing today and what does the future look like?
The business turned profitable by the third month. From then on, the main consideration was deciding how much to reinvest for growth. Eventually, the business was sold on Flippa for a multiple that I was satisfied with. After exploring several platforms to sell the business, I found Flippa to be the most suitable choice. Handling all the mergers and acquisitions work myself was detracting from running the business. It's truly a full-time job, managing due diligence, negotiations, and preparing for deal closure among all the meetings and interviews.
Why did you decide to sell the business?
There were several reasons behind my decision to sell. The primary ones included losing enjoyment in the day-to-day management as the project scaled. Additionally, Covid delayed many personal plans for me, like my wedding and starting a family. I reached a point where I had sufficient funds to start enjoying life again and proceed with these significant life events.
However, I was still committing to 12+ hour days almost daily. I felt trapped in golden handcuffs and yearned to ease the pressure. While I still have a passion for creating products and need an outlet for my creativity, I can now engage in this at a more controlled pace as a consultant, advisor, or investor, ideally capping my hours at 40 per week.
The 0 to 1 process excites me; the transition from 1 to 10 doesn't, as it becomes more about macro management and less about creativity. Wearing multiple hats and operating at a high level is rewarding, but I crave the freshness and creative spark of starting new projects.
How long did the selling process take?
The sale process took much longer than I expected.
From the initial listing, it took about a year and a half to close, and this spanned across several listing sites. Before this experience, I had no idea how to sell a business of this magnitude. The learning curve was steep, with insights gained from interactions with a diverse array of buyers, deals, and structures. I encountered Private Equity firms, Venture Capitalists, Angel Investors, competitors, Family Offices/Small Outfits, Broker Agent Buyers, friends in the industry, and more. Each had their unique approach to due diligence. I was continually surprised by the variety and uniqueness of their inquiries.
Initially, I conducted buyer vetting myself on Acquired (previously known as MicroAcquire), before they offered advisory assistance. However, this proved tiresome, leading me to explore other sites like BizBuySell. Unfortunately, these were often swamped with third-party brokers charging exorbitant fees and offering little support.
Ultimately, I opted for a white-glove service with Flippa, where they managed the buyer vetting process. This left me only to handle the post Letter of Intent (LOI) with due diligence, saving countless hours. Mergers and Acquisitions (M&A) is a complex, time-consuming task – practically a full-time job.
This experience is why I'm now advising other startup founders on efficient growth and exit strategies, offering to manage the diligence aspect, allowing them to focus on running their business without losing precious hours. This is different from what typical M&A brokers can do because they won’t do the diligence for you or help assist in the day-to-day of the business.
What did you learn through the sale that you can apply to future projects and businesses?
The most significant challenge in selling my business was navigating the unknowns. It might sound cliché, but the saying "you don't know what you don't know" was incredibly relevant in this situation. The world of business sales is rife with complexities, loopholes, and traps, especially when dealing with experienced buyers.
These buyers often have strategies and tactics that can easily overwhelm or outmaneuver a first-time seller. I quickly realized how vital it was to be vigilant and cautious, to avoid falling into pitfalls that could jeopardize the sale or, worse, result in unfavorable terms. (There were several times that my lawyer or myself would catch things in the fine print that were unfavorable)
One of the key lessons I learned was the importance of not going through the process alone. It's crucial to surround yourself with experts – lawyers, accountants, advisors – who are well-versed in the intricacies of selling a business. These professionals provided invaluable guidance, helping me strategize and equipping me with the necessary tools to negotiate effectively.
They played a pivotal role in helping me understand the complex legal ramifications of the difference a few words can make such as “any vs all”, financial implications, and potential risks, ensuring that I didn't agree to terms that could be detrimental to the deal's success. Their expertise not only safeguarded my interests but also empowered me to make informed decisions.
In any significant negotiation, especially one as complex as selling a business, concessions are inevitable. Striking a balance where both parties make compromises is the essence of a good deal. A successful sale isn't about one side winning and the other losing; it's about finding a middle ground where both parties might feel a hint of dissatisfaction but, ultimately, come out better for it. Learning to navigate these negotiations was a crucial part of the process, leading to an outcome where both the buyer and I could walk away feeling that we had made a fair and beneficial agreement.
Having exited, I've now decided to transition into a role as a Growth/Exit Advisor, primarily for bootstrapped founders and small business owners.
I also plan on growing my social media channels (Mainly X and Linkedin) and in 2024 starting my YouTube channel.
If you're looking to get started, the most crucial factor is Product-Market Fit. Sometimes, you might build in a vacuum, adding all these incredible features and processes. But ultimately, it boils down to how many people are willing to pay for and use your product daily.
Through starting the business, have you learned anything particularly helpful or advantageous?
When I think back on everything I did, I think I would do it differently.
I built my startup before the whole #buildinpublic trend and let me tell you, it came with its own set of challenges as a solopreneur.
- Limited feedback from the community
- Reduced Visibility and lack of public profile
- Missed collaboration opportunities
- Slower trust building
- No building/release hype
- Reduced peer support or advice
- Developing in an echo chamber
What #buildinginprivate did have going for it:
- First mover advantage
- Market surprise
- Lack of public scrutiny
- Feature Request Rabbit Holes
Initially, I had no idea about the importance of documenting every step of the journey or tweeting about every thought I had. Looking back, if I were to do it again, I would choose to build in public to establish a built-in support network and feedback loop.
A crucial point to be mindful of: before offering anyone a revenue share or equity, it's essential to thoroughly understand their temperament, ideology, attitude, and work ethic. These factors can significantly influence the success of a working relationship, regardless of the hierarchy involved.
I'm a firm believer in the power of checklists and to-do lists. It's my habit to write down my tasks for the day. Completing at least 5-7 items daily gives me a sense of achievement.
Embracing long working hours is part of being a founder, and anyone suggesting otherwise is either exceptionally fortunate or downplaying the effort required. During my business venture, I averaged about 5 hours of sleep per night. Being constantly 'on call' in case of emergencies was necessary, as I had to make critical decisions swiftly. The success of a project often hinges on your ability to stay on top of things, so be prepared for those extended hours. Remember, if it were easy, everyone would opt for this path over a traditional W2 9-5 job.
What platform/tools do you use for your business?
The main tools used for the business were just Stripe, PayPal, Venmo, Apple & Google Pay, and some Crypto payments that were integrated into the system.
Finding the right development talent was a challenge in itself. I resorted to using Upwork, though I had reservations about it. My concern with Upwork stemmed from the perception that it harbored many scammers and heavily relied on outsourced labor, which often varied in quality.
However, given the limited resources and knowledge I had at the time, it was the most accessible option. Thankfully, this platform did connect me with the developer who eventually played a key role in our project. This experience was a significant learning curve, teaching me the importance of vetting potential collaborators thoroughly with not only technical questions but also personality questions to make sure we would be compatible working together. Skills are 90% but the 10% of personality can ruin all of it.
For tracking business performance and setting goals, I used Metabase and Google Analytics. These tools were instrumental in analyzing revenue streams, user metrics, and database health. Their insights allowed me to establish clear and measurable Key Performance Indicators (KPIs) and Objectives and Key Results (OKRs).
These were critical for guiding our weekly sprints, shaping our monthly goals, and evaluating our quarterly progress. The ability to dive deep into data helped in make informed decisions and adjust strategies to better align with our business objectives. This data-driven approach was a cornerstone in steering the business toward sustained growth and scalability.
What have been the most influential books, podcasts, or other resources?
I know it sounds super outdated, but I was a big fan of Rich Dad Poor Dad. I listened to that audiobook about 10x and was obsessed with the message of buying and building assets that cash flowed while I slept. Another great audio book that I listened to a few times was Hooked: How to build habit forming products.
Both of these books are valuable because they change your mindset on how to look at things. RDPD makes you look at the things you want to invest your time in and the things you want to purchase whereas Hooked helps you better understand how people consume and how to tap into people’s digital addictions to build better products that people want to use constantly.
Although as I mentioned earlier from my background, there is no advice like the advice from someone who has done exactly what you are trying to do before. Someone who has grown and sold a business, those are the people that you should be picking their brain and asking all the questions.
Advice for other entrepreneurs who want to get started or are just starting out?
If you're looking to get started, the most crucial factor is Product-Market Fit (PMF). Sometimes, you might build in a vacuum, adding all these incredible features and processes. But ultimately, it boils down to how many people are willing to pay for and use your product daily. If you can't get people to use the product for free, what makes you think they'll pay for it consistently?
Begin by offering the product for free to establish a core user base. Turn these users into power users who then become your brand ambassadors. Once you're confident in this base, start gradually increasing the price until you reach the optimal price point.
Before you have paying customers, go above and beyond. Provide something that significantly improves lives, without expecting anything in return. This approach ensures that you're offering something people are willing to pay for.
Take your time deciding whether to accept outside funding. Maintaining control over your company is essential, and investor money often comes with strings attached. My company was bootstrapped all the way, and I believe this is the future for most founders.
Remember, the odds are against you, and you're fighting to break free from society's financial shackles. There will be days you feel like quitting and days you'll have small victories. Celebrate those small wins. Pause and savor them. These moments are crucial; they remind you that you're on the right path. Also, be ready to pivot. If the small wins aren't coming, change things up until you find a formula for repeated success.
Are you looking to hire for certain positions right now?
I am currently building a collective comprising both technical and non-technical startup founders. The aim is to bring these minds together to form a venture capital studio, collaborating on building, acquiring, and running some exciting projects in 2024. We'll each contribute our unique skill sets and resources to make these ventures successful.
If this initiative sparks your interest and you're interested in learning more, feel free to shoot me a DM on Linkedin or X (Twitter). Let's explore how we can collaborate. Additionally, I offer M&A exit advisory services for founders looking to exit. If you're seeking guidance through the diligence, negotiations, and sale process, and prefer not to handle it alone, I’m here to help.
Where can we go to learn more?
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- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
