How does one go about handing off/selling software business to another party?


3

I think Bob Walsh mentioned something similar in one of his blogs or podcasts and there are a few other examples around that I have heard about, but I have not heard many of the details.
(One is a Mac-based blogging tool I think)

Specifically I am interested in:

  • How the parties found each other and what suggestions anyone has for finding them. (I have my own ideas)
  • How was the transition? I suspect there was some hand-holding for a period of time
  • How was the customer reaction and what were the short and long term changes in revenue, number of sales, etc.

I ask this because I might want to either open source (I doubt anyone would take it over) or give away or sell one of the products I wrote so I can devote the rest of my time to a more promising venture. For me it is more about freeing time AND ensuring that the hardware manufacture I wrote the software for (and his customers) are not left without support - I am not looking to make huge money - just to hand it off.

UPDATE:
I have a tentative agreement with a buyer for 2x revenue. I also contacted the hardware supplier that this software supports and he is interested in buying the product so that he can distribute it for free. I will report the outcome here when it is done.

The primary goal I have is to give the users the best long-term option.

The sales process has been at least as distracting as running the product/business. However, there is an end in sight. I just transferred the domain to the buyer today. He got a clean build on the first try after getting from my svn repository. All in all a fairly clean sale. the buyer did a lot of homework and asked a lot of good questions. he then made up a purchase and sales agreement.

All that is left are some circuit boards to send him.

So far I guess between a month to two month for the entire process.

I expect if there was more money involved it would take far longer.

Selling Business Exit Strategy

asked Dec 6 '09 at 15:57
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Tim J
8,346 points

4 Answers


2

In the deals that I have been involved with, the parties usually found each other by introduction from the hardware vendor that there was an opportunity to purchase the software outright or offload some of the support.

The transitions took varying lengths of time and there was always a seller support clause for a period of time (6-12 months) at some reasonable rate. The rate was important since if it was for free, they would usually abuse the privilege.

Customers were usually fine with a sale as long as they were supported and had faith in the supporting company. As long as the transition is handled well and they have the backup of calling on the original vendor (at a fee), they were OK with it.

In terms of the short term sales aspect, I did not get the sense that it changed. If I recall, long term was an issue because if the customer wanted changes or additional features, the supporting company was not be able to provide that.

answered Dec 6 '09 at 23:55
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Jarie Bolander
11,421 points
  • thanks for the answer. – Tim J 9 years ago

2

I did exactly this -- we sold off 4 of our 6 products.

The best target to acquire the products are your own customers, because they already understand your products both technically and (sometimes) from a marketing point of view.

Sometimes selling your software makes sense, but more likely it's folks who used to work for one of your customers but who are now off doing something else.

Our case was the latter -- folks who peeled out of a large software company to start their own consulting business, and who already liked and used our software. They were able to sell the stuff and get billable hours.

answered Dec 7 '09 at 09:13
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Jason
16,231 points
  • Good comments. unfortunately my users are not developers - they are typically lab researchers or pharmaceutical companies or masters and phd chemistry and biology students. – Tim J 9 years ago

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I just got the final payment from the purchaser today. It has been a great transaction for both sides.

I sold it for just over 2X gross revenues (which is also 2x profits as there is no overhead at all). I expect that the new owner will be able to increase sales tremendously.

He was able to get up to speed on the code quickly and has built a website and licensing key/payment system rather quickly as well.

It did take a lot of effort during the sale and transition - more than I had hoped, but I suspect that should be expected.

This turned out well in that I can now focus on the new venture without the distraction and the customer base is also well served for the other product.

answered Jan 5 '10 at 14:06
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Tim J
8,346 points

1

Tim,

Tom Lions of Faelon Partners Ltd has a pod cast at http://www.todaysbusinessradio.com/. His firm specializes in selling companies. Several of his pod casts address similar questions to the one you just asked. This may provide some insight into selling your product. Listen to “Mergers and Acquisitions”

answered Dec 30 '09 at 06:55
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Jed Regan
266 points
  • thanks for the link. i will try it. Note that this is a paltry revenue stream and almost not even worth talking about. – Tim J 9 years ago

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