MARGIN MASTERY: ANALYZING SIMPLE.INK'S PROFITABILITY METRICS FOR ACQUISITION

Likewise, I’m excited as well and happy and also honored. Thank you very much for the great intro and thanks for having me.

Yeah, sure. Absolutely. I’m Daniel, I’m currently 26. I just turned 26. I started my first online business or business generally when I was 15. I run this micro holding company, which at one point in the future I hope I’ll be able to take away the micro part, which is the CH group. We’re on a couple of online businesses. We’ve recently had our first exit. I’ve completed the circle because a year and a half ago, I’ve also acquired my first company, so done that as well. Much like you’ve mentioned, we run these companies. What else can I say? We’re just looking to build beautiful businesses that help people make money, but healthily make money, which is what I define as bringing value to people in a sustainable way and charging for it. That’s pretty much it. We have a couple of routes we can go down. I’ll let you lead here, Harshit. Which route should we go?

Yeah, sure. So for context, Simple.ink is a notion website builder. In case anybody listening doesn’t know what Notion is, it’s a popular, note-taking app, but at this point, it’s more than a note-taking app. It’s a productivity tool. Let’s call it that way. If the person listening to this hasn’t ever used Notion, all you need to know is that besides notes and all the stuff that comes with a to-do app and everything that Notion does, the important thing to know about Notion is the fact that it’s very aesthetic, very minimalist. What I want to highlight here is that it’s very hard to make Notion look ugly. There’s a lot of briefing space. Because of that, and here is what Simple.ink did, because of that, people wanted to turn their Notion pages into websites. What does the website mean? It means stuff like adding a custom domain so that you have your name.com instead of notion.com. They want to customize it and have multiple features, that’s pretty much what Simple.ink did. From launch to acquisition, it took us 18 months. I realized now, because I used to be in a position where I was listening to somebody doing this in 18 months or 12 months or 24 months, and I was like, Wow, how the hell am I ever going to be able to do that?

Is that even possible or is it just something statistically very unlikely? What I have to mention is that up until month 17, I didn’t know we were going to sell, and that’s mainly because it happened very fast and we got a good offer and this is what happened.

Yeah, the process of selling is, Well, we’ve been lucky. We had a great acquirer with whom we still keep the relationship. I guess this happened a few months ago. It’s not like it happened years ago, but to this day we have ongoing conversations about working together. The process simplified was put up the company for sale. We pretty much listed it just to see what demand there is. I’ve heard this many times before. Founders sometimes do that. They get an offer. You’re like, Yeah, I’m not looking to sell. But then you consider it and you’re like, What would life be in that way? So we put it up as a listing on acquire.com. What I should have done, if I were to sell a company right now, is listed everywhere, even on Facebook groups, even, I don’t know if Craig’s list, but whatever. Because the more demand you have, the more you can create a bidding war between the possible acquirers. That’s something we should have done. That’s something I would do differently now. But yeah, the process was straight forward for us. We listened, had a couple of conversations, back and forth, and got an offer.

There were some negotiations with the offers because we had multiple offers. Then as I said, we were lucky to have a great acquirer who was fast and straightforward, and I cannot praise them enough. But I guess there are also bad acquirers. This is how the acquisition went. Now, the actual acquisition, what happened was we listed it and for some time, we had a couple of conversations, even with competitors, that ultimately led to nothing. Now, I didn’t include that as part of the acquisition because we didn’t lead to an acquisition. But once it started happening, it was straightforward. Back to how it went, we had those conversations, but they led to nothing and it was a bit frustrating. But then we started the listing, restarted the conversations from the listing, and then it was smooth from down there. I suppose we can talk about this if it’s of interest. We got the chance to see what a good acquirer looks like and what somebody who’s not looking to acquire your company looks like. I don’t want to say bad acquirer because I suppose for a bad acquirer, you need to sell to them.

But yeah, it just felt like a lesson there, going from both ends of the spectrum. Yeah, that’s pretty much how it worked.

Yeah. When you say me and the team, it’s pretty much me and David, my co-founder. It’s only the two of us that own the company. How did man? It was a lot. It was a lot in a short period, but we felt that it was wise, so ultimately it led with that. Of course, we had feelings of, Yeah, but what if this 10X is in this amount of time and then we can get 100X or whatever?

Absolutely. I’ve also been told by reading online that if you sell a company, you have to sell when it’s good and when the trend is still looking up for you. Just like you can’t time the market, I was told that, and I thought at worst, it’s too early. But let me just look at it in terms of what I get today and what it feels like. I have to mention as well, something worth mentioning is the fact that we haven’t been focused on the product. I was daily answering customer support and helping people, customers prospective customers, or free users because we had a freemium plan that was very much used. But we haven’t been actively developing the product that much. It was something that ran on autopilot, so to speak. So that was an important factor there as well. And the reason why we took this into account was that, and I didn’t mention this in the listing. I wasn’t specifically looking for the highest amount of money. I was looking to put the company in the hands of somebody who has operational skills so that I can learn from a distance, so that 12, 24, 36 months from that moment, I can look and say, Okay, I’ve cashed in, but let me see.

It’s like you have a time machine and you look at it, or maybe I’m fantasizing about it now, but it’s like you have a time machine and you look at a parallel universe scenario. I’m pretty confident that new acquires will grow the company as it deserves to be grown. With the context that I have on the business, I can look and say, Okay, this is what I should have if I was going for the long run. I think the value, and as I said, I mentioned this in the acquisition post as well, the value isn’t that much in the money for myself. Of course, there is the money as well, but the main value isn’t in that. It’s also in, hey, I want to learn from you running this. Now, I didn’t keep a stake in the company, it was a full acquisition. But because I have all the context up until this moment, because it was the company we grew from zero, that’s what the value is for me. The same way when you learn a sport or boxing or dancing or whatever, you have a teacher and they do it and then you do it.

It’s how humans learn. So by just observing and maybe even mimicking. Of course, there were many factors, but that was one of the main factors. Something you cannot pay for, something you cannot, Maybe not even with a mentor, because in this situation we’re in, and I highly recommend this to somebody who has the option to do that, there are more skilled people doing something where you have context. Because advice, I was writing a piece for another interview, and sorry to go off track, but I’ll be quick. Advice is like sometimes people use wrongly fitting advice. They’re trying on clothes in the changing room. The T-shirt is an extra small and you fit a medium, but you’re like, I want to get it just maybe because that doesn’t fit you. So advice isn’t always fitting you because the person doesn’t have the context. It might not fit your context, etc. The point I’m making here is the reason why I recommend selling a company to somebody who is very experienced is that you have all the context and you see a future scenario that hopefully is positive. I think that’s in between somebody mentoring you directly and doing it is the best way, but then you lose and you waste time.

This is a solution I found and I think is valuable. I guess we’ll check in in three years to see if it was as valuable as I thought.

Yeah, sure. I attribute it to luck. I think people who say you make your luck in a definite way, as in it’s 100% the luck I’ve made for myself. I don’t see it that way. I think you make your luck by putting yourself in a position where you can be lucky. It’s a philosophical discussion, but yeah, this is what we’ve done. We’ve put ourselves in a position where we might end up lucky, and we did. What does that mean practically? We built on top of Notion. We got lucky because Notion grew, so we grew, but we also could have gotten unlucky. Maybe Notion closed or maybe they weren’t growing as well. Maybe they were just stagnant at one point. What would have meant for us? We would have been stagnant or if not even going downward. So that was lucky. Lucky was as well, listing and finding a great acquirer and whatever. I guess hard work and the possibility of getting lucky increase the surface area of luck. This isn’t my original thought. This is something I’ve heard as well, so I’m just relaying it to you. I suppose this is one part of it.

The second part of it is making the most out of that luck. Because if you get lucky and you don’t make use of it, it’s as if you didn’t get lucky at all in the first place. What that meant for us was, for instance, once we quote-unquote, got lucky with some of the SEO efforts we’ve done, we try to squeeze the most out of that luck. I can’t think of something that was at the moment, but if another example comes to mind, I’ll share it. I don’t have a definite answer, and I think nor do you have to have a definite answer on how you deal with luck. But this is the way I see it. I think what I’m sharing now is only helpful retrospectively. At the moment, though, I suppose it only helps to put yourself in a position where you could end up lucky. If you do, that’s if you do, that’s great. If you don’t keep on doing the hard work you can increase the chances of that luck or the effect of it.

Yeah, first of all, it’s not as glamorous as one might think, but I’ll get back to this. Once you do it, it’s not like your life is changed. It is changed in some aspects, but it’s not like that part in the movie where everything is just forever perfect, or if it isn’t for long. But I guess let’s talk practical stuff first. I’ve mentioned this in the past, and I think I’ve stressed it enough. I think the main thing is, and it sounds try it, but fundamental advice, it sounds try it, and we too often forget it, and this is human nature, build something you would want to sell, build a company. Maybe you have a product, but not a company that you can sell. Building a company you would want to acquire means having processes in place, having everything documented well, having SOPs, having people, and having the freedom to work on the big picture while the day-to-day stuff is being handled if you can. For instance, for us, we never hired somebody for customer support so I did it. That’s not to say you cannot sell a company if you don’t have somebody hired in customer support.

Having it documented, though, goes a long way because the person or the people acquiring the company will massively benefit from that and it reduces risk and everything. If you can put yourself in the shoes of somebody who says, I’m going to give you eight or seven or six or whatever amount of figures. Today, all cash, and wire transfer, you get it next week. I’m going to give it to you today for this. They have to at least have an idea of how they can make their money back, plus or more. Building a company you would acquire is ground zero. Another thing that I was told as well that was helpful was you have to sell when you don’t have to sell. So when you’re not required or where you’re if you don’t sell. Of course, if a deal falls through, you’re going to be disappointed for a bit. But then you’re not devastated if it doesn’t go through because you’re winning either way. We were at a point where we found some new features, some new avenues we could explore, building a couple of features, and some new marketing efforts. We were like, Are we selling or not?

If the deal fell through, we said, That’s fine. If the deal went bust, then that’s fine too, because we had this other route to go. I suppose religion has a bit to do with this because we were like, Okay, the universe will guide us, but I guess to each their own with religion. Those are the fundamentals. Selling when you don’t have to sell and building a company you would acquire, of course, it’s hard to imagine if you weren’t in that position, you could go a bit in the right direction. Maybe somebody who acquired the company and you asked them, Hey, would you buy this company? You don’t have to. But how can I make this company desirable for the acquirer? Because that’s what they keep in mind, risk and all that dimension of assessing everything they can do with it and turning a buck. That’s what I would say when it comes to practical stuff about how to sell a company.

Yeah. So for context, my first success, a bigger success was innovation. I got lucky. I squeezed that luck and everything. Then I wasted about, I estimate, about $100,000 in a couple of products. The usual entrepreneur route, unless I guess you’re super lucky, we burnt about 100K, building some four, five, six, I don’t know how many products that nobody wanted, that nobody asked for that nobody needed, etc. Then I just got tired and I said screw innovation. If it goes, well, it goes well. But I’m not here to test my genius capability. I’m not here to focus. The thing with innovation is, in a certain way, it’s a test to find out if you’re a genius or an idiot, but you find out a couple of dollars and months, if not years later. I said I don’t care how smart I am. I’m here to make money healthily help people and create value. So screw this. I’m going the other route. I’m not innovating unless you have the budget to, I guess, afford it. But that’s a separate discussion. In the way that I do business building, because, again, context, I’m not technical, I cannot code.

I have to hire people, which is where the 100K went or whatever amount I spent and wasted. I cannot code. I have to measure a couple of times and cut once. I can do design and I can do product development. But yeah, so I just wanted to.

Yeah, we do distribution as well. But in terms of choosing what product to build, I can only do this part, the design part, and the product management, sorry.

No, he isn’t either. We both do distribution, content, SEO, or whatever thing we can do to increase usage, and user base. That’s pretty much what we do. Business building, but everybody running the company has to be doing that, so I’m not counting that. I had to go down that route and pay for development and everything.

So given my toolkit, I had to find something that was a safer bet. In other words, I thought to myself with David, if I’m going to spend a year writing content, making a logo from the small to the big things, and spending all this effort, I want to increase my chances of success. You can do that by taking something that already works and adding your twist to it. I’m not saying clone or replicate, and I have to make this mention every time. Even then, people sometimes in Reddit comments are like, Oh, yeah, blah, blah, blah. I’m not saying clone. I’m not saying replicate. I’m saying look at something that already works. For instance, we’ve built an e-signature tool. There are 20-plus great solutions out there.

Yeah, more than that. It’s an old industry. It’s a huge industry. But it’s growing. If we can add our twist to it that adds value in a certain way, nothing is guaranteed on this world, on this planet. But it’s closer to being guaranteed than innovating with something. I think if you do that, again, this is what I’ve chosen given my toolkit my skill set, and my limitations because that’s something else. I said, Okay, I can do good design, not great but good design. I can do content, I can bring users. How are we channeling this? I said, Look, if it’s going to take a year or five, I’m choosing eSignature because of this and this. One of the reasons, for instance, is the fact that eSignature tools have a viral loop. When I send an email to somebody with a document, that person finds out about Signhouse as well. Signhouse is our tool. This is one of the reasons. If I send to 100 people across the year, one user brings you 100, maybe not users, but 100 people that get to know about Signhouse. Fifty acknowledge it, 30 enter your website, five get to sign up, and two of them pay.

[00:21:52.840] – Ch Daniel

Good, that’s fine. That’s free CAC. Customer acquisition cost is zero for that. But anyway, I’m digressing here. This is why we’ve chosen something that already works instead of innovating. I’ve burnt my hand on the stove with enough time and money, and perhaps I will innovate again one day. I’m not angry because of the money and the amount and the time I’ve wasted because I got lucky in the first place, which allowed me to do all this, so I cannot be grateful enough for that. But this is why I recommend if somebody listens to this looking for advice and advice is saving time effort energy and resources based on somebody else’s experiences, I would just copy something that already works and edit it so that it’s unique because it has your twist and that twist has to bring value differently. You don’t just change the logo and you make the button blue from red because you like blue. No, you have to bring value to people in another way. Then it’s just a matter of time, I would say. Back to the fundamentals, which I won’t repeat because they’re boring, but if you have that patience and are ready to do it every day, and if you’re able to do it because life situations sometimes can be tricky, then you’ve just increased your chances and chances of luck as well.

Back to what I was, By my other point in the previous question. Does that answer the question?

What do you do? Are you a fan of innovating? Have you been through it or just this way, maybe something in between?

It is sexy. Innovating is sexy. I think Hormozy had this analogy of the woman in the red dress from The Matrix movie for anybody listening who’s watched Matrix. Innovating is the sexy thing, but it’s sexy because I suppose, I would say when we imagine it, we imagine a positive scenario. The problem is chances are so low and chances are in any way low and it’s hard to build business. My thinking was let’s make this less hard. Can’t make it 100% guaranteed success, but yeah.

For the acquirer or users when they were signed up to For.

I guess we’d have to ask them, but if I were to guess,

I did, but I guess they’re in a better position. I think one of the main things they liked, let’s say in no particular order, I think it was attractive because it was profitable and highly efficiency. So it wasn’t 100% profit margin, but it had a high profit margin. I’m looking at this now as I’m looking at possible acquisitions after certain MRR, monthly recurring revenue, for anybody listening to whatever. After a certain MRR and high-profit margins, there’s enough bandwidth to make a couple of hires. So that was good. It was stable. Because sometimes too much growth. I don’t know if I want to say this, but I’ll say that then I’ll change my mind if needed. Sometimes too much growth in a certain way can be risky and can scare some acquirers. I’m not saying if you’re growing 40% month over month for two years in a row, that’s not scary. But if you’re growing 40% in the last two months because you’re an AI product, that might tank and that might be scaring some customers away, some acquirers away. In our case, we had constant growth that was across a long enough period.

We weren’t an old company, so our acquirer knew what to do. They knew what they were dealing with. But it was like we’re going up, down, up, down, and then very much up and then very much down. They looked at it and they said, Can we predictably assume that this is going to keep on going this way? Look, it’s not going off the charts and it’s pretty stable if you do an average. Great stuff. This is something I didn’t know up until now. We were an old company for a micro SaaS. Again, 18 months isn’t a lot. But if your SaaS is three months old, forget about acquisition, revenue multiples, sorry, the average revenue multiples. You might find somebody, you might. But the conversation is just so wild and unpredictable. The conversation is we can go either to a very high multiple to a very low one or something in between. Maybe you’ll be at average, but if your company isn’t very old, you’re in uncertain waters or at least the water.

Think about it. Let’s say, I’m not coming from a rich family, but let’s just, for the sake of argument, say that your father or your parents give you 100,000 and they say, Look, I’ll go buy a SaaS company. Would you buy somebody who has? Then next month they only made $800 and then they made four grand and then they made 50? You wouldn’t because it’s your family’s money. Most of the time, acquirers, might be dealing with somebody else’s money. They have LPs and limited partners, they raise the funds, maybe not. If it’s somebody else’s money, it’s their money. And if it’s yours, you work for it. So you have to be careful with buying a house or buying anything. You’re buying a car. Would you buy one that is rusty and everything? This is something I didn’t know. Age had something to do with this because we were a year and a half old. Again, not very old, but it’s not like it was three months old and it had predictability. Profit, age, let’s see what else was attractive. They liked the Notion ecosystem. This is a bit personal, but this meant they saw the value behind Simple.ink

Because if you don’t know what Notion is, you will not be looking to buy Simple.ink. Okay, here’s an example of something I’ve shared earlier about putting yourself in a position where you can be lucky. A reason why I chose Simple.ink was because ultimately, once you build a website, we also host it. And website hosting, it’s the nature of the beast. Website hosting means long billing cycles because let’s think about it. When do you shut down a website? When did you shut down the business or when did you switch? But sometimes switching is very hard. Long billing cycles, pretty cheap at the level of websites we were doing. It’s not like people are. So if you’re not spending a lot, it’s also hard or you’re less likely to disable it. We were growing with Notion. Something else that was attractive was because of the Notion ecosystem, I’ll give an example. At one point, one of my developers said, It’s getting a bit tiring because we’re playing catch-up with Notion. Every time they release a new block, so maybe a quote block, let’s just say, or maybe they change the settings on how the bolded font looks like, we have to play catch-up and this and that.

I thought about it long and hard, and I’ve shared this with him and he was like, Dan. I said, Look, somebody in Silicon Valley is being paid 300K a year and it’s not just one developer, it’s a team of developers building this beautiful product. They carry 99% of it and we just did the last 1%. Because when we make the code block look just like Notion because they changed something, it’s just a styling change. We didn’t have to do anything under the hood. For context, what happened was the way Simple.ink worked when you made the change in Notion, we looked, our system automatically looked at how your page looked and we updated the website. So ultimately you were doing changing things in Notion. This was something that the Aquarius liked as well because we were piggybacking the product based on Notion. That beautiful text editor and all the capabilities, it’s built-in like Apple, designed in California, built in China. Same for us. It was built in California, probably because Notion is in San Francisco and just translated over to Simple.ink. I would say those would be the top picks of why Simple.ink was an attractive offer.

But ultimately, it was a business worth holding. That’s it. Okay.

No, I don’t think it impacted the other businesses in a way directly. So obviously this podcast, for which I’m very grateful, helps, and sorry, helps as well, but is a consequence of the acquisition news. I don’t think it drives revenue directly in terms of we didn’t see any increase in sales in our other companies. However, it does increase trust and awareness. So maybe it does come with time, but it’s not like any of the other business fights. But let’s say, look, for Signhouse, we offer something solid, it’s important, e-signature, so e-signature software. When you store your documents, you might be looking and say, Who’s the founder? Who made this? How can I know I trust you? Where are you located? Are you respecting e-signature laws, privacy laws, and data protection laws? Okay. They might be looking up online and maybe they see the fact that you’ve sold the company. I think it’s stuff like this indirect stuff that solidifies you.

Yeah. So it’s not like Gary Vee made the video with me, but I guess it’s like getting a trust pilot positive review that buys you a bit of trust that might move the needle in some late stages.

Yeah, the thing is, because we know we also continue building or maybe even buying other businesses. As I mentioned picking a business to build where I have to work within the limitations, we have to set some limitations as well with the holding company, which is we can only have at most one or maybe two companies because it’s two people, myself and David. We can only have one or two companies at most that require your time actively. Other ones have to or not autopilot, but they have to not require a lot of maintenance. This is it. And this is really what we’ve seen, we’ve learned by mimicking from other holding companies. We can’t be running 10 agencies because I think we’d either go crazy or we would implode and neither is a good option. If the companies can run by themselves on autopilot, which is a luxury of software companies, anybody listening to this is probably running or looking to start a software company, However, we’re looking to start the agency, SaaS pad. That’s not scalable, so we’re playing with Fire there. We have to be careful because in an agency you can implode, you can have too much demand, you can have too little demand.

Maybe you have costs that are too high. Yeah, we’re just trying to stay lean bottom line, and that’s our thing.

Sure, let’s go. Let’s do it.

Kindness? A little cliché, but this is the first thing that came to mind.

My parents, you said?

Just the CH, which is at one point, just the way people call me. Ch is just the short version of my full name. That’s how I sign. But yeah, nothing like that.

Oh, my God, let me look it up. I was looking for an outdoor dining table made out of metal, but it had to be hard metal. I was unlucky. That was my last Google search. I think in the future you might change this to What was your last ChatGPT conversation?

Iranian food.

What was the last bit?

A torture, you said?

If the T-shirts in my wardrobe are not aligned down to the line, the same way you enter a clothing store, they’re all perfectly aligned.

That bugs me. I’m not proud of it, but it’s true, so I cannot lie.

My brother, David, and I watching memes. We have the same humor. We’re not in the same city for half of the year. When we do, we have this thing where we sit down and watch all the memes we’ve sent each other. It’s a bit silly, but I guess it’s a sibling thing to do. I think it’s funny.

Six years. He just turned 20.

Yeah, I’m the elder one.

I appreciate it. It’s been an honor. I think you’ve been doing a great job. I feel like this was a conversation, not a podcast. This didn’t feel like an interview at all. I just want to put this out now on record as a praise to you. Keep on doing what you’re doing because it’s great. Thank you.