Earlier this year <a href="https://baremetrics.com/blog/i-almost-sold-baremetrics-for-5m">I failed to sell Baremetrics for $5m</a>. But <a href="https://baremetrics.com/blog/5-things-i-learned-failing-to-sell-baremetrics-for-5m">I learned a heaping pile of things from that</a> and one of the biggest things I learned about was the world of asset sales and stock sales. This is about to get real nerdy but this is crucial if you're trying to sell a company. It could literally save you millions of dollars.

Earlier this year I failed to sell Baremetrics for $5m. But I learned a heaping pile of things from that and one of the biggest things I learned about was the world of asset sales and stock sales. This is about to get real nerdy but this is crucial if you're trying to sell a company. It could literally save you millions of dollars.

Founder’s Journey: Building a Startup from the Ground Up

Saving you millions of dollars: asset sale vs stock sale

I failed to sell Baremetrics for $5m. While failure is 100% a part of success, it's only useful if you learn something. So, here are some of the things I learned from this little failure. Hopefully these are some things you can apply to your own company (present or future) that can save you a bit of pain.

I failed to sell Baremetrics for $5m. While failure is 100% a part of success, it's only useful if you learn something. So, here are some of the things I learned from this little failure. Hopefully these are some things you can apply to your own company (present or future) that can save you a bit of pain.

5 things I learned failing to sell Baremetrics for $5m

In the past six years of Baremetrics' existence, I've received dozens upon dozens of emails from folks interested in acquiring Baremetrics. When you're <a href="https://demo.baremetrics.com/">running a transparent company</a> that's growing, it just comes with the territory. Generally these conversations quickly fizzle once they realize I'm not even remotely interested in some quick, 1x revenue sale.

In the past six years of Baremetrics' existence, I've received dozens upon dozens of emails from folks interested in acquiring Baremetrics. When you're running a transparent company that's growing, it just comes with the territory. Generally these conversations quickly fizzle once they realize I'm not even remotely interested in some quick, 1x revenue sale.

I almost sold Baremetrics for $5m

Intros, a product we launched to great fanfare three months ago, is being shutdown, having never made a single penny and costing our team months of work. https://baremetrics.com/blog/sunsetting-intros

Intros, a product we launched to great fanfare three months ago, is being shutdown, having never made a single penny and costing our team months of work. https://baremetrics.com/blog/sunsetting-intros

Sunsetting Intros: A post-mortem on shutting down a product we just launched

Yesterday I wasn't feeling great, mentally. I had a level of anxiety I hadn't felt in a long time that started in the morning and really persisted through the night. I can't pinpoint it to any one specific thing. It was more the sum of a dozen small things. I felt like I hadn't been leading the team well through a big product change, parenting has been taxing lately, I was second guessing all sorts of life decisions, the things that typically bring me joy day in and out have just felt really uninteresting and on top of that, the weather yesterday was dark and stormy...which perfectly matched how my brain felt. https://baremetrics.com/blog/founder-mental-health

Yesterday I wasn't feeling great, mentally. I had a level of anxiety I hadn't felt in a long time that started in the morning and really persisted through the night. I can't pinpoint it to any one specific thing. It was more the sum of a dozen small things. I felt like I hadn't been leading the team well through a big product change, parenting has been taxing lately, I was second guessing all sorts of life decisions, the things that typically bring me joy day in and out have just felt really uninteresting and on top of that, the weather yesterday was dark and stormy...which perfectly matched how my brain felt. https://baremetrics.com/blog/founder-mental-health

Staying mentally healthy as a founder

As founders, a lot of our identities get wrapped up in our companies. Certainly within our industries, but even to family and friends it’s how people know us. And over time, we sort of become our companies. Most founders or CEOs are the “face” of their businesses and eventually they’re inseparable. Being wholly consumed by your company hurts not only you and the people around you, but even the company itself.

As founders, a lot of our identities get wrapped up in our companies. Certainly within our industries, but even to family and friends it’s how people know us. And over time, we sort of become our companies. Most founders or CEOs are the “face” of their businesses and eventually they’re inseparable. Being wholly consumed by your company hurts not only you and the people around you, but even the company itself.

Why founders need hobbies

A couple of years ago, we were in a hard spot. I had just realized we were mere weeks away from running out of cash and had asked the whole team to take a pay cut while we figured out how to get profitable. But in addition to cutting costs, we needed to figure out how to speed up growth. One of the things we did to speed up growth was figure out who our “perfect customer” was. We’d spent the first two years making some big assumptions about who our ideal customer was and who we should target, but had no imperial data to back that up. https://baremetrics.com/blog/perfect-customer

A couple of years ago, we were in a hard spot. I had just realized we were mere weeks away from running out of cash and had asked the whole team to take a pay cut while we figured out how to get profitable. But in addition to cutting costs, we needed to figure out how to speed up growth. One of the things we did to speed up growth was figure out who our “perfect customer” was. We’d spent the first two years making some big assumptions about who our ideal customer was and who we should target, but had no imperial data to back that up. https://baremetrics.com/blog/perfect-customer

How to identify your perfect customer

When you’re just getting started, everything feels like a big deal. Everything. The tinniest things can turn in to huge showstoppers that drain time and, in many cases, money. But the longer you’re in the game, the more you realize how few things actually matter.

When you’re just getting started, everything feels like a big deal. Everything. The tinniest things can turn in to huge showstoppers that drain time and, in many cases, money. But the longer you’re in the game, the more you realize how few things actually matter.

No, that thing is not a big deal

Where to publish something has becoming a difficult decision for a lot of businesses. You read so many stories about using various channels to distribute content and grow traffic, it's hard to know what does and doesn't work. Medium, in particular, has become a major player in the world of startup content, but is it really that great? https://baremetrics.com/blog/medium-back-to-blog

Where to publish something has becoming a difficult decision for a lot of businesses. You read so many stories about using various channels to distribute content and grow traffic, it's hard to know what does and doesn't work. Medium, in particular, has become a major player in the world of startup content, but is it really that great? https://baremetrics.com/blog/medium-back-to-blog

Why we transitioned from Medium back to our own blog

When building a startup, so much emphasis is put on “the product” or even “the customers”. Everything else takes a backseat. On some level, and at some points in a company’s lifecycle, this makes sense. Of course you’ll make sacrifices and you’ll have to work really hard and work really weird hours. But eventually, you’ll have to stop. The downsides far outweigh the benefits and the damage done to you and your team can be detrimental. That’s what I’m writing about to day. Managing the long term health of you and your team. https://baremetrics.com/blog/startup-health-well-being

When building a startup, so much emphasis is put on “the product” or even “the customers”. Everything else takes a backseat. On some level, and at some points in a company’s lifecycle, this makes sense. Of course you’ll make sacrifices and you’ll have to work really hard and work really weird hours. But eventually, you’ll have to stop. The downsides far outweigh the benefits and the damage done to you and your team can be detrimental. That’s what I’m writing about to day. Managing the long term health of you and your team. https://baremetrics.com/blog/startup-health-well-being

Don’t let personal health take a backseat in your company culture

Last week I hit some sort of boiling point with life and work. July was an incredibly stressful month for me both, personally and with work. Just lots of extremes, and it wore me down. Every single founder is struggling with something. Maybe it's big, maybe it's not. But there's always something. Even the most successful founders deal with this stuff and don't know what to do. Everybody’s winging it. https://baremetrics.com/blog/winging-it

Last week I hit some sort of boiling point with life and work. July was an incredibly stressful month for me both, personally and with work. Just lots of extremes, and it wore me down. Every single founder is struggling with something. Maybe it's big, maybe it's not. But there's always something. Even the most successful founders deal with this stuff and don't know what to do. Everybody’s winging it. https://baremetrics.com/blog/winging-it

Everybody’s winging it

There can be some really exciting days when you’re building a SaaS company, but the large majority are a slog. Just one foot in front of the other, slowly trudging your way up the hill in the muck. The hockey-stick growth you’ve envisioned feels laughably far away. Amazingly, you are growing every month, but it’s just…so…tedious. This, my friends, is the long, slow SaaS ramp of death. It’s perfectly normal and par for the course for the large majority of SaaS companies. Check it out! https://baremetrics.com/blog/long-slow-saas-ramp-of-death

There can be some really exciting days when you’re building a SaaS company, but the large majority are a slog. Just one foot in front of the other, slowly trudging your way up the hill in the muck. The hockey-stick growth you’ve envisioned feels laughably far away. Amazingly, you are growing every month, but it’s just…so…tedious. This, my friends, is the long, slow SaaS ramp of death. It’s perfectly normal and par for the course for the large majority of SaaS companies. Check it out! https://baremetrics.com/blog/long-slow-saas-ramp-of-death

Navigating the long, slow SaaS ramp of death

Founding a company is hard. You’ve got an infinite number of decisions to make while simultaneously trying to catch lightning in a bottle with creating something out of nothing. It’s even harder when you’re doing it alone. Being a solo founder, in many ways, stacks the deck against you. You’re left shouldering the weight of every single decision and don’t really have any one to share it with. However, there are some ways to make it easier and, in many cases, it can actually be a major pro to start a company solo. Let’s take a look at some of the benefits as well as drawbacks so you can figure out if being a solo founder is right for you. Then we’ll tackle some ways to make being a solo founder a pretty great thing. Check it out! https://baremetrics.com/blog/startup-solo-founder

Founding a company is hard. You’ve got an infinite number of decisions to make while simultaneously trying to catch lightning in a bottle with creating something out of nothing. It’s even harder when you’re doing it alone. Being a solo founder, in many ways, stacks the deck against you. You’re left shouldering the weight of every single decision and don’t really have any one to share it with. However, there are some ways to make it easier and, in many cases, it can actually be a major pro to start a company solo. Let’s take a look at some of the benefits as well as drawbacks so you can figure out if being a solo founder is right for you. Then we’ll tackle some ways to make being a solo founder a pretty great thing. Check it out! https://baremetrics.com/blog/startup-solo-founder

Being a Solo Founder: Pros, Cons, Tips & Tricks

https://baremetrics.com/blog/most-startups-are-not-crushing-it Ask any startup founder how things are going and they’ll tell you it’s “going great”. They’ll talk about some new feature they’re rolling out, or a new round of funding. Or maybe they’ll mention how much user growth they’ve had or that they just got covered in TechCrunch. All signs will point to “crushing it”. But, for better or worse, there’s a very high probability that they are, in fact, not crushing it. The exact opposite, actually. We’ve conditioned ourselves to fake it until we make it, but most companies never make it…so we’re perpetually faking it and never actually being honest about our struggles. That prevents us from getting the actionable help and feedback we need and just perpetuates the false narrative that you’re some sort of failure if everything isn’t roses all the time. “That’s great, Josh, but certainly things aren’t that dire, right?” Wrong, little Jonny. Let’s look at the numbers. <h2>The data</h2> If dig in to our <a href="https://baremetrics.com/benchmarks">live SaaS Benchmarks</a> you’ll find a few of interesting data points about small to medium sized SaaS companies. <ol> <li>Average User Churn is 7.7% per month</li> <li>Average <a href="https://baremetrics.com/academy/saas-quick-ratio">Quick Ratio</a> of 1.4</li> <li>Average Monthly Recurring Revenue is $19,000</li> </ol> Then one additional, crucial data point not listed on the Benchmarks page: the average SMB SaaS startup has 12 employees. Now, let’s translate that. <h3>Average User Churn</h3> Average User Churn of 7.7%. You may think that’s not terrible, and you’d be right. The companies that have 25%+ user churn are in a much worse spot. But what does 7.7% user churn functionally mean? It means that every single year most businesses are losing all of their customers! Every 12 months, they’ll not only need to replace the lost customers but add new ones as well. There aren’t an infinite number of customers and at that churn rate, you’ll quickly plateau. Outgrowing your churn will becoming impossible. <h3>Average Quick Ratio</h3> We’re going to have a quick lesson in growth efficiency, because it really puts things in perspective. To measure growth efficiency, we use a metric called <a href="https://baremetrics.com/academy/saas-quick-ratio">Quick Ratio</a>. How reliable can a company grow revenue given its current churn rate? That’s the question the Quick Ratio metric answers. To calculate your Quick Ratio you simply divide <code>new MRR</code> by <code>lost MRR</code>. The higher the ratio, the healthier the growth is at the company. To put it in a formula: <code>Quick Ratio = (New MRR + Expansion MRR) / (Contraction MRR + Churned MRR)</code> Say a company has $10,000 in MRR growth. That growth could be made up of any combination of MRR types (New, Expansion, Contraction, Churn) and the Quick Ratio shows you the difference in “growth efficiency” between them. Let’s look at a few scenarios of how that company got its $10,000 in MRR growth and what the Quick Ratio would be. Scenario A <code>$12,000 (New + Expansion) / $2,000 (Contraction + Churn)</code> = Quick Ratio of 6 Scenario B <code>$15,000 (New + Expansion) / $5,000 (Contraction + Churn)</code> = Quick Ratio of 3 Scenario C <code>$20,000 (New + Expansion) / $10,000 (Contraction + Churn)</code> = Quick Ratio of 2 Scenario D <code>$50,000 (New + Expansion) / $40,000 (Contraction + Churn)</code> = Quick Ratio of 1.25 All four scenarios result in $10,000 of Net New MRR, but Scenario A is vastly more efficient at growth as the company is adding the same amount of Net New MRR with much less effort. So, now, when you see that the average Quick Rate of most SaaS companies is 1.4, you realize how untenable that is. There simply aren’t enough customers in the world for any company to survive when your growth efficiency is in the pits. <h3>Average Monthly Recurring Revenue + Average Team Size</h3> In the companies we benchmarked, the average <a href="https://baremetrics.com/mrr">monthly recurring revenue</a> was $19,000. I want to be very careful here and not imply that “$19,000 a month” isn’t impressive or something to be proud of. It’s a heck a lot more than a lot of startups ever make and for you, individually, it may be exactly what you want or need out of your business. But there’s another metric that when paired with this number is just frightening: the average team size is 12. Let that sink in for a moment. The average startup is making $19,000 per month…with 12 people on their team. Sweet beard of Zeus. <h2>Still crushing it?</h2> Still think all those startups are crushing it? This is the reason founders and teams get burned out. This is why CEO’s become Chief Fundraising Officers. This is why so many companies get “acquihired” for the people instead of the business (because there wasn’t much of a business there at all). This is why the fairytale “everybody’s crushing it” mentality is insane. It normalizes terrible economics. Now look, if revenue isn’t your goal (or you’re delaying revenue in the name of growing another metric for a while), that’s cool. Everyone has different motivations and outcomes they’re pursuing. There are certainly multiple ways to get what you’re after. But can we just be honest for a change? Can we stop pretending everything is amazing when the economics clearly show they aren’t? What’s the benefit of that to anyone? Next time someone asks you how your startup is doing, try not sugarcoating it. Maybe say, “You know, we’re having a tough time with user acquisition” or “churn has been a beast to tackle”. Then, instead of the incessant high-fiving and pats on the back, you’ll get legitimately useful feedback. You’ll likely find others are struggling with the exact same things and they may even have some business-altering advice for you. Remember, we’re all winging it.

https://baremetrics.com/blog/most-startups-are-not-crushing-it Ask any startup founder how things are going and they’ll tell you it’s “going great”. They’ll talk about some new feature they’re rolling out, or a new round of funding. Or maybe they’ll mention how much user growth they’ve had or that they just got covered in TechCrunch. All signs will point to “crushing it”. But, for better or worse, there’s a very high probability that they are, in fact, not crushing it. The exact opposite, actually. We’ve conditioned ourselves to fake it until we make it, but most companies never make it…so we’re perpetually faking it and never actually being honest about our struggles. That prevents us from getting the actionable help and feedback we need and just perpetuates the false narrative that you’re some sort of failure if everything isn’t roses all the time. “That’s great, Josh, but certainly things aren’t that dire, right?” Wrong, little Jonny. Let’s look at the numbers. The data If dig in to our live SaaS Benchmarks you’ll find a few of interesting data points about small to medium sized SaaS companies. Average User Churn is 7.7% per month Average Quick Ratio of 1.4 Average Monthly Recurring Revenue is $19,000 Then one additional, crucial data point not listed on the Benchmarks page: the average SMB SaaS startup has 12 employees. Now, let’s translate that. Average User Churn Average User Churn of 7.7%. You may think that’s not terrible, and you’d be right. The companies that have 25%+ user churn are in a much worse spot. But what does 7.7% user churn functionally mean? It means that every single year most businesses are losing all of their customers! Every 12 months, they’ll not only need to replace the lost customers but add new ones as well. There aren’t an infinite number of customers and at that churn rate, you’ll quickly plateau. Outgrowing your churn will becoming impossible. Average Quick Ratio We’re going to have a quick lesson in growth efficiency, because it really puts things in perspective. To measure growth efficiency, we use a metric called Quick Ratio. How reliable can a company grow revenue given its current churn rate? That’s the question the Quick Ratio metric answers. To calculate your Quick Ratio you simply divide new MRR by lost MRR. The higher the ratio, the healthier the growth is at the company. To put it in a formula: Quick Ratio = (New MRR + Expansion MRR) / (Contraction MRR + Churned MRR) Say a company has $10,000 in MRR growth. That growth could be made up of any combination of MRR types (New, Expansion, Contraction, Churn) and the Quick Ratio shows you the difference in “growth efficiency” between them. Let’s look at a few scenarios of how that company got its $10,000 in MRR growth and what the Quick Ratio would be. Scenario A $12,000 (New + Expansion) / $2,000 (Contraction + Churn) = Quick Ratio of 6 Scenario B $15,000 (New + Expansion) / $5,000 (Contraction + Churn) = Quick Ratio of 3 Scenario C $20,000 (New + Expansion) / $10,000 (Contraction + Churn) = Quick Ratio of 2 Scenario D $50,000 (New + Expansion) / $40,000 (Contraction + Churn) = Quick Ratio of 1.25 All four scenarios result in $10,000 of Net New MRR, but Scenario A is vastly more efficient at growth as the company is adding the same amount of Net New MRR with much less effort. So, now, when you see that the average Quick Rate of most SaaS companies is 1.4, you realize how untenable that is. There simply aren’t enough customers in the world for any company to survive when your growth efficiency is in the pits. Average Monthly Recurring Revenue + Average Team Size In the companies we benchmarked, the average monthly recurring revenue was $19,000. I want to be very careful here and not imply that “$19,000 a month” isn’t impressive or something to be proud of. It’s a heck a lot more than a lot of startups ever make and for you, individually, it may be exactly what you want or need out of your business. But there’s another metric that when paired with this number is just frightening: the average team size is 12. Let that sink in for a moment. The average startup is making $19,000 per month…with 12 people on their team. Sweet beard of Zeus. Still crushing it? Still think all those startups are crushing it? This is the reason founders and teams get burned out. This is why CEO’s become Chief Fundraising Officers. This is why so many companies get “acquihired” for the people instead of the business (because there wasn’t much of a business there at all). This is why the fairytale “everybody’s crushing it” mentality is insane. It normalizes terrible economics. Now look, if revenue isn’t your goal (or you’re delaying revenue in the name of growing another metric for a while), that’s cool. Everyone has different motivations and outcomes they’re pursuing. There are certainly multiple ways to get what you’re after. But can we just be honest for a change? Can we stop pretending everything is amazing when the economics clearly show they aren’t? What’s the benefit of that to anyone? Next time someone asks you how your startup is doing, try not sugarcoating it. Maybe say, “You know, we’re having a tough time with user acquisition” or “churn has been a beast to tackle”. Then, instead of the incessant high-fiving and pats on the back, you’ll get legitimately useful feedback. You’ll likely find others are struggling with the exact same things and they may even have some business-altering advice for you. Remember, we’re all winging it.

Most startups are not “crushing” it

https://blog.baremetrics.com/startups-keep-it-classy-5bba13285cc6 Building a business makes relatively sane humans do some insane things. The past 10 years have been the modern day gold rush for tech. And I mean that in the sense where lots of people risk everything and make nothing while a few hit it big. And that “gold rush” culture makes people do some desperate things in the name of business survival. Every day founders have an infinite number of tiny decisions to make and it’s easy to get decisions fatigue. In a moment of weakness you may do something dumb that hurts you, your team, your company, your brand or any one of a thousand other things. So here’s an easy rule of thumb to help you when making decisions: keep it classy. Seriously. It’s that easy. Just ask yourself, “Am I being classy?” If the answer is anything other than “yes” you’re likely taking the route that may have short term gains but long term negative consequences. You don’t want to be a low class business. You never want to leave a bad taste in someone’s mouth. You’ll almost always regret your decision later on if you go the low-class route. Copying others’ product designs, badmouthing competitors, taking advantage of customers, overworking your team…there are just so many problems that aren’t solved but actually completely avoidable by keeping it classy. There are so many things working against the success of your business. So many variables out of your control. Don’t make it harder on yourself by choosing the low-class option. Successful businesses, the ones that survive the ups and downs, are built on having class. Sure, the occasional bad apple slips through and for whatever terrible reason the universe lets them succeed, but nobody actually wants to be the sleazy used car salesman. Deep down we all want to be respected by friends, family, peers, coworkers and customers. That doesn’t come from taking the low-class route. Make decisions you’re proud of. Decisions that, although maybe not the easiest route, don’t leave you feeling icky at the end of the day. Keep it classy.

https://blog.baremetrics.com/startups-keep-it-classy-5bba13285cc6 Building a business makes relatively sane humans do some insane things. The past 10 years have been the modern day gold rush for tech. And I mean that in the sense where lots of people risk everything and make nothing while a few hit it big. And that “gold rush” culture makes people do some desperate things in the name of business survival. Every day founders have an infinite number of tiny decisions to make and it’s easy to get decisions fatigue. In a moment of weakness you may do something dumb that hurts you, your team, your company, your brand or any one of a thousand other things. So here’s an easy rule of thumb to help you when making decisions: keep it classy. Seriously. It’s that easy. Just ask yourself, “Am I being classy?” If the answer is anything other than “yes” you’re likely taking the route that may have short term gains but long term negative consequences. You don’t want to be a low class business. You never want to leave a bad taste in someone’s mouth. You’ll almost always regret your decision later on if you go the low-class route. Copying others’ product designs, badmouthing competitors, taking advantage of customers, overworking your team…there are just so many problems that aren’t solved but actually completely avoidable by keeping it classy. There are so many things working against the success of your business. So many variables out of your control. Don’t make it harder on yourself by choosing the low-class option. Successful businesses, the ones that survive the ups and downs, are built on having class. Sure, the occasional bad apple slips through and for whatever terrible reason the universe lets them succeed, but nobody actually wants to be the sleazy used car salesman. Deep down we all want to be respected by friends, family, peers, coworkers and customers. That doesn’t come from taking the low-class route. Make decisions you’re proud of. Decisions that, although maybe not the easiest route, don’t leave you feeling icky at the end of the day. Keep it classy.

Startups: Keep It Classy

A weekly podcast by Josh Pigford, founder of Baremetrics, on his journey growing a startup.

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Founder’s Journey: Building a Startup from the Ground Up

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