Putting a Micro SaaS Business on Autopilot

Regular readers of this blog will know that I announced back in February that I’m writing a short ebook on building Micro-SaaS businesses. So, what the heck is taking me so long to finish it? Well, I wrote it with a narrative structure, starting at the beginning, and as the first draft caught up to the present day, I realized it might be a bit premature to publish the book. I had just finished a period of heavy time investment into the business to get it to the point where it generated a comfortable full-time income, but I hadn’t put much thought or work into the end game of micro-SaaS.

What was the next, more or less final, stage of Storemapper and micro-SaaS in general. I thought I should work on this in practice before putting a book out there.

Three months ago I posted about Storemapper crossing $100k in annual recurring revenue. Since then revenue has still grown fairly steadily and is approaching $11k/month.

At this point in the business there are three main options: keep focusing on growing the revenue, sell the business, or put it on autopilot. As I mentioned in my last post, I don’t want to be the King of Store Locators and I have several other projects on deck that I want to devote my attention to. So focusing a lot of time on growing the business isn’t an option I want to pursue right now. Selling Storemapper would certainly free up time, but for now I’ve decided instead to try to put the business on autopilot. The goal of autopilot is to minimize the time that I spend working on Storemapper, while keeping my take home profits at least the same.

So why not just sell it?

That’s a good question. I’m not opposed to selling Storemapper to a good owner, but at the moment it’s not something I am actively pursuing for a couple of reasons:

1) Price The primary reason I haven’t already sold Storemapper is price. I’ve had a lot inbound inquiries and spoken to a few brokers and my sense is that SaaS businesses of this size can pretty readily be sold for between 3-4x profits or something in the $300-450k range. That’s a nice chunk of change, but when I really look at the numbers I don’t think it’s a good trade.

The financials of the business are public and they are really strong. It grows without any marketing budget and customers almost never churn. If I’m able to automate the operations of the business, the revenues alone will massively out-perform even the top end of that range. Particularly in the current financial environment where other investments are yielding such low returns.

What do you think? Am I making the right call there?

2) Tax: Storemapper is currently a single-member LLC. As I understand it, if I sold it right now, the proceeds from the sale would all be ordinary income which means I’d lose a lot to Uncle Sam right off the bat. If any tax gurus have some suggestions on a better structure I’m all ears please.

3) Synergies: Operating a growing profitable business is kinda fun. It’s nice to have material to blog about. I’ve met some really fun people through my customers and there are also lots of ways to use the customer base as an audience. I’ve been experimenting a little with cross-selling partnerships too. I’d give all that up in selling the business just for the cashflows.

Every time I considered selling Storemapper over the years I have come to the same conclusion: better to hold it. I think this will generally be the case, if the business is still growing at all, for most micro-SaaS businesses. Unless you need the money, or just have no time at all to work on it, most micro-SaaS businesses will be better off held on to unless market multiples rise further. I know myself I always kept thinking that the end game for Storemapper would be to sell it. But at the moment I’m fairly convinced that putting it on autopilot is the way to go. I also think that should be the dominate end game model for entrepreneurs just starting out. The idea of a big pay day is appealing, but autopiloting the business is both more likely and probably the better financial outcome.

So what does autopilot mean?

Putting Storemapper on autopilot does not mean abandoning it or letting it fall into disarray. It means maintaining and growing the product, but with the key metric being reducing my total time spent working on it, rather than MRR growth. The classic “managing myself out of a job” approach.

The actual work of Storemapper falls into three categories: software development, customer support, business operations. For the first two I have hired two folks part-time to handle the work and for the second I’m leaning on apps and services.

I was fortunate to recently meet Nico Appel, who runs Tight Operations (TightOps) a consultancy that focuses intensely on business process automation. We’ve been working together on strategies for how to put Storemapper on autopilot and you’ll see some stuff documenting the process coming from us soon.

Software development is all very straightforward stuff. Catching and fixing bugs, updating versions on different gems and plugins, releasing a few new features and tuning performance. To that end I’ve hired a developer part-time on oDesk (or I guess now it’s called Upwork) and things are going really well. For the hiring process, this post from WPCurve was helpful. I didn’t follow it exactly but I did hire several candidates for paid test jobs before selecting one. It was a time-consuming process but I’m really happy with how it worked out. Our workflow right now is pretty hands-on with me delegating tasks in Asana and reviewing code in pull requests from Github, but as the developer gets to know the code better I’ll start to get more of that process out of my hands.

A great suggestion from Nico at TightOps was to build in redundant layers of alerts for bugs and other issues. Making sure that the support “team” can directly register bug reports for the dev “team” (Each “team” is only one person for now). I’m using Airbrake for error notifications and New Relic for performance monitoring. We’ll be taking a look at setting those up with a series of escalations so that I can take more and more time away from checking them every day, but know that if something goes seriously wrong everybody on the team gets an alert, an SMS goes to me, and so on.

Customer support is the other workload that really needs a human. I’ve hired someone part-time to handle customer support inquiries. It’s been an interesting process since I built every aspect of the business and until now I answered every support question. I saw a lot of the same questions and became super efficient at solving problems quickly, typically on less than 5 hours per week. Not knowing any other way, I took an apprentice model of onboarding my first support hire. Essentially just throwing him in to the stream of tickets and seeing how he sorted them out, asking questions of me along the way. This has worked well so far, but it’s quite time-consuming, which is of course the opposite of what I’m trying to achieve with the autopilot process. However, after the first few months it will start to pay time dividends where fewer and fewer tickets require any involvement from me.

One of the things the TightOps team and I are working on is relentlessly moving all of the information in my head into searchable and updatable internal documentation.

With business operations my strategy has just been to throw small amounts of money at apps and services that provide automation. I signed up for the LegalZoom services that handle all the corporate filings. I recently started using Bench for bookkeeping. At first it seems a bit pricey at $135/month, but I hate bookkeeping (a bad trait for an entrepreneur I know) and Bench is so much better than using bookkeeping software because you have a real person that learns how your business works and does all the expense categorization and statement reconciliation so that I basically just need to login and check on it once per quarter. So far I love it. We’re starting up with ZenPayroll for payroll processing. Setting up payroll is still a big pain, but ZenPayroll is definitely the most painless option for this. And that’s pretty much all I can think of right now.

The end game is bigger better things to come

I’ve got a lot of exciting projects in the queue and I can’t wait to get started. One of the reasons I’m so excited about micro-SaaS businesses, and even feel compelled to write a little book about them, is that they are a fantastic financial platform for more ambitious projects. One of the primary reasons that my previous startup failed was that I personally ran out of money. When we exhausted our angel funding there was literally no way I could pay rent and keep working full-time on the startup. Things might have gone differently if I had a full passive income like Storemapper up and running before jumping into the startup game.

So that’s the plan, automate the business and use the time and money to work on some riskier projects. More on those to come 😉

By the way, if you have a profitable business, software or otherwise, and want to recoup some of your time with automation, you can reach out to Nico and TightOps team at nico@tightoperations.com, or shoot me an email and I’ll connect you.