MrJoe Talks to... Series: State of SaaS Exits in 2024 | Jon Hainstock

Ever wondered when the best time is to sell your SaaS business? In this episode, Jon Hainstock shares hard-won insights from his experience building and selling ZoomShift. We don’t just talk about financials – this conversation dives into the emotional aspects of selling something you’ve poured your heart into.

Jon unpacks how to read market signals, the nuances of buyer motivations, and why timing is everything. For founders and CEOs, this episode explores more than just valuation – it’s about understanding how to position your business for success and why some deals fall through while others skyrocket.

Senior leaders, this one's for you if you’re thinking of an exit but want to make sure you get it right.

www.JonHainstock.com
www.QuietLight.com
or Email Jon at Jon@quietlight.com

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Transcript

Joe Leech: 0:02

Hi everybody, welcome to Mr Joe Talks To. Today I am talking to Jon Hainstack. Jon, do you want to give the listeners a bit of your background and let's let people know what you're up to now?

Jon Hainstack: 0:12

Yeah, thanks so much for having me on the show. My background is in software. So specifically built a SaaS called a self funded journey. And through that journey, it was building an agency. So we did some custom web development and some digital marketing really just projects to pay the bills while we also bootstrapped the company, which was called ZoomShift. And that company was built then in the background as we were building the agency, both at the same time, very much in line with the principles of the folks from Basecamp, Jason Freed DHH, and they're very much inspired by their book, Getting Real. So we did that for Several years and eventually were able to go full time on ZoomShift shortly after we were contacted by what I would consider to be a holding company, which we can talk more about in the future here about buyer types. But this holding company was interested in buying ZoomShift. And at the time we weren't really ready to let it go. And so we ended up continuing to build the business for another year and they reached out almost a year exactly a year after that. I think partially just this was due to them working with a buyer broker and trying to avoid having to pay fees to be honest, but they had, they came back and at that point we. We're ready to reassess. And so we actually did through a little bit of turmoil end up selling to them. And that closed out in 2020. So early 2020, right before the world shut down. And thankfully we were able to make the sale. The business actually took a bit of a nosedive because we serve restaurants and retail and hospitality. And as you probably remember, the world was shut down. And so those businesses were having a hard time. So we were fortunate to have sold when we did. We'll talk about the ideal timing of things as well. I'm sure in this podcast, but that one was impossible to predict. And I still hold me and my co founders still hold a small piece of equity that we rolled into the entity that bought us. And yeah, still cheering from the sidelines, hoping it goes well, but it was a very minority share. And after that took a little bit of time off, didn't really know what I wanted to do. And this was in the peak of COVID. And so I had a lot of time to just tinker and try to figure out what was next. Decided that the best path for me was something slightly different than what I had done before. And around that time, actually, there was a lot of money that was being accessible to investors. And this was called 2021. I don't know if you guys remember that, but it was pretty crazy. There was a lot of money being dumped into a little bit riskier investments. And so there was a big move of folks buying online businesses at that time. I didn't realize this, but this was the happening. And so I got recruited, I guess I call it recruited, but quiet light, which is where I'm at now. I'm an MNA advisor for quiet light. They brought me on during this frenzied period of lots of businesses selling and realizing that the timing was right due to the amount of buyer activity that was happening around then. So join them. And I've been with them for the last few years and. The kind of unique thing there is that a lot of people who get into M& A start as financial folks, investment banking that kind of background. And what Quietlite does is we work with only advisors that have been there and done that. So entrepreneurs who have actually built and sold their own companies. Some of those are SaaS, some of those are e commerce or content media businesses. And so it, at first I felt like it wasn't going to be a fit because in my mind it was very much a, suit and tie role, whatever you might think of in your mind when you think of investment banker, but realized that a lot of the lessons that I had learned going through the process could be applied not only just from a practical level, but also the emotional level and trying to understand how to navigate the ups and downs of a deal cycle and some of the critical things that I've learned along the way. So was able to join them and I've been with them now for a few years and worked on probably around 50 or so transactions Not all of those have closed, so I think what's interesting and we'll talk about this is getting an understanding of what makes deals fall apart. It's very common. So that's a long winded background,

Joe Leech: 5:12

It's been really good hearing that actually, cause it gives a lot of context to how you're going to talk about what we talk about today as well. Cause you were very right on that, that many folks in your space are coming from that financial world, so haven't been there and done that and had that or experienced the emotional side of selling their business, right? It's not just the practicalities we're going to talk about today. Just also the emotional part of that you go on to, the separation of your identity. There's loads of things that are part of exiting that you don't really think about. So I think your experience having. done it yourself, as well as advising others on it is really helpful to the listeners today. Definitely. So let me ask you a question then. So what is there like an optimum size that you should be when you sell a business, right? What's the difference between selling your SaaS business when it has. A million dollars in ARR versus say five or 10 or 15 or 20. What's different? Cause again, we're gonna have lots of people listening to this, whose businesses are at different sizes and we're thinking about an exit. What changes as the business grows in terms of size for an exit?

Jon Hainstack: 6:11

Yeah. So the nuanced answer is, I think that it depends on what your goals are when you want to sell and why you're selling your business. But there are characteristics that buyers will be attracted to at different levels. And so there are several different types of buyers that you will most likely encounter. And the folks that I speak with all the time typically people put these into two categories. Buckets. Financial buyers, financial institutions, you might call that the private equity, the folks that we talked with, which were more of a holding company model, and then strategic, which has some sort of synergy or competitive nature. There's another reason beyond just your financials that they're looking to buy your business. So those are the broad two buckets that things usually fall into. When it comes to the size of the business. Businesses can be any size when a strategic acquirer is interested in it, because a lot of times it's more about the technology. It's more about the market and what's happening there. And that's why they're approaching you. Now, if it's a financial one, that's probably actually more of the decision or more of the answering your question here, where there are different tiers that you're going to see different types of buyers. And so within those financial buyers, you have. Individuals. Individuals are folks that are, probably previous SaaS operators or folks who have worked at large SaaS operations and they're looking to operate, they have come from their unique set of skills are in sales or marketing, or they have paired up with somebody who's very technical. And so it's usually a pairing or some sort of partnership that allows them to acquire businesses in the usually sub, 1 million in ARR range. And so individuals are the most common buyers that you will see under 1 million ARR. Those folks will usually use a mix of their own personal capital. Sometimes they will raise from friends and family, but it's not an institutional financial type of transaction where it's been committed capital and they're looking to make investments. It's, Hey, this fits the type of business I feel I can run. And I'm going to use a blend of my own money, friends and family. Oftentimes in SBA alone, which is very common here in the. In the States, small business loan and to purchase those businesses over a million in ARR is where you start to become a lot more attractive to holding companies. I call them holding companies, but they're essentially just businesses that are looking to operate several SaaS businesses and oftentimes sharing resources across the portfolio because that will help them reduce The expenses and therefore the cashflow of the business. And so oftentimes it's around that million dollar mark that you become a lot more appealing to those types of buyers. And then as you approach two, three, four, 5 billion and onwards, you're going to be much more of a target for a private equity investor. Institution that is looking to buy the business, grow it over the next three to five years and sell it. And so those are typically what we see. Strategic buyers as well often have thresholds that they're looking to, in terms of size. But some of that is not just the amount of money that the Business is making, but what does the team look like? Cause a lot of times they're, it could be an acqui hire type of thing. And very similar to private equity, where they're looking to buy, not just the technology and cashflow, but oftentimes having the team stay on as a part of that next transition to grow the business and then sell again in three to five years. So that's what the landscape looks like from the, call it the micro SaaS up to the top of the SaaS kind of world where those in the most buyer, those are the most likely buyers you're going to run into at those stages.

Joe Leech: 10:25

That's a great overview. Thank you. And what's interesting as well is timing for this, right? It sounds like there's timing thresholds that kind of suit cause the classic thing you often hear from founders is, yeah, the exits in. I want to do an exit in three to five years. And that, the answer to that question changes every year. They're always looking, it's always three to five years out this exit, right? This fabled exit. What, talk about timing. Is there a sort of, is there a timing? Is there a sort of a moment of truth within the business when it's a good time for you to think about selling? Or is it just something you think you wake up one morning and go, yeah, now I've had enough of this. I want to sell. Is there a way to think about timing strategically for selling your SaaS?

Jon Hainstack: 11:01

Yeah, absolutely. So there's a few signals you can look for when you're thinking about going to market. Besides the we'll talk about a couple of things, signals in the market, signals in the market, meaning. There is a lot of activity, a lot of buying activity in your industry. So if you're in a vertical and there's a lot of, let's just take healthcare as an example, and you've heard your, one of your competitors was just acquired or something, you've heard several other businesses that are adjacent to you have been acquired. It could mean that there are, there's a good opportunity to sell because What you might see is a private equity company looking to essentially acquire several businesses within your category and they call this bolting on or adding on to their platform, which would allow you to get acquired for a slightly higher multiple than normal, because they are trying to make acquisitions quickly. As a part of an inorganic growth strategy. So when you think about like growing a business that you can grow by just revenue, sheer revenue growth and sales and marketing and whatever efforts you have there, you can grow inorganically by acquiring businesses. And that is often the playbook of Private equity to add on businesses and therefore the size of the business and the net profit or EBITDA is larger. And then those, the larger the business, typically the larger the multiple that you'll see. And so that's a good signal that it might be a time to go to market is when you start to see or hear about other folks that are being acquired in your industry. If you're not getting a lot of rumblings about that, the second best time is when there is a growth movement in your business. And so you're starting to see 20, 30, 40 percent year over year growth consistently. The business is mature. And you have things in place so that you are not the bottleneck in the company. So this is just a stage of the business that everybody I think hopes to achieve at some point, which is, I'm not the one in the business every day. I'm overseeing it and the business is growing well. So in a lot of cases, The best time to sell is when you don't need to sell, when you, we don't want to sell really when things are going very well. And because what happens inevitably is the business will go through ebbs and flows, it's going to go through peaks and troughs. And so you don't know exactly when you're at that peak, but it is on the ride up that you want to be going to market. Because so oftentimes I see businesses going to market when they're either plateaued or on the way down, and that is a much, much more difficult business to sell than one that is growing consistently. So market signals. The growth of the business, the maturity of the business as a whole that could be partially due to the age and also just due to the management team that you have in place that you feel can work with the next acquirer and transition well.

Joe Leech: 14:03

That's really interesting, isn't it, that like you said, there's two sets of signals there, some are signals from the market. The external ones and some of the signals from your own business internally. Then it's you can match those two things up or follow one of them. That gives you a clue as to when it will be. It's really interesting, isn't it? So the question then, and you mentioned it earlier on about motivation to sell, right? The motivation I hear, the primary motivation I hear from most founders is that cash reward. Is people always talk about the value, don't they? That's the thing that's at the front of their mind when they're in doing this process. Can you talk a bit about valuations then at different sizes and roughly how those are calculated? I know that's probably quite a big subject, but what are some of the things you can start to look at if you're a SaaS founder about the potential value of your business?

Jon Hainstack: 14:46

Yeah. So when it comes to the valuation of the business and I'm looking at businesses every day, And trying to think about how buyers are going to perceive them and what buyers are most likely going to make an offer on your business. So when we talk about those two types of buckets of buyers, the strategic and financial, let's just call those two, the two main buckets. Strategic acquirers are looking at a buy versus build analysis. That's the primary driver of how they're going to be looking at whether or not it makes sense to acquire a business. Oftentimes it's little concern over the actual revenue that it's going to bring in. It could be if there's a potential for selling cross selling, but to me that's also a little risky for a buyer. And outside of just the main motivations of of making this synergistic kind of acquisition, it's what is the risk and return that I'm going to see from this? If you think about the overarching kind of theme of a buyer, when they're evaluating their businesses, what is the risk and what is the return that I can expect? And your goal is to position the business in a way where you have reduced the risk and the return is going to be very clear. And so if it's a strategic acquirer. Those valuations, again, are mostly based on internal calculations around buy versus build. They will also follow some like of their own data in terms of what are some comps that we've seen in the market recently. What is market rate? One really good tool that I like to use in this is by SaaS Capital and they have called the SaaS Capital Index that they use. And a calculation behind it. I actually created a little tool that does an instant SaaS valuation based off of their models on my site. That if you want to check that out, you can do it. But essentially what people are looking at there is a the growth of the business and the net revenue retention of the business. And so those are the two primary factors that are considered when you're talking about a larger business. SaaS business on the lower end of the scale. So if you're talking about smaller businesses, most of those are done based on what's called sellers discretionary earnings, which is your EBITDA plus any sort of ad backs that are really just, seller benefits. Think about, their salary, their health insurance, their phone, their, some people are putting their cars through these things, right? There's a lot of other things, owner benefits that people are adding onto that. That we take a detailed look at to understand what is the real cash flow of the business. And usually you're going to see a multiple on that cashflow. Usually in the ballpark of, four, five, six times those types of discretionary earnings. And then as the business grows and you get over that million, 2 million ARR mark, now you're talking about four looking ARR multiples. And if a business is relatively flat or plateaued, you're going to talk about maybe. One to two times. And if the business is growing, then as the model that I used in that calculator will show, it's in that four to five, six times earnings and, or not earnings, I'm sorry, annual recurring revenue, ARR for the larger SaaS businesses. So there's like the split in the market in terms of the buyers and how they typically value the businesses and it's on the lower end. It's primarily off of earnings on the higher end. It's typically ARR. But one thing to note is that all of these things still have to eventually get for financial buyers still have to get to a positive EBIT or returns. So even a forward looking ARR multiple, they have to be able to project that they're able to get the earnings in the future. It's a promise of earnings in the future. If you have. Low net profits and growing ARR because you're investing in R& D, you're investing in sales and marketing and the recurring nature of your business will mean that will that shift to profitability and growing the profitability is ahead. And so even forward looking ARR multiples. These are somewhat derived off of the idea that net profit and cash flow and profitability of the business is in the future. So again, really long winded way, I'm trying to

Joe Leech: 19:06

but to be honest, Jon, that's great because the challenge you have a lot in our industry is that numbers get thrown around multiples of ARR. People want it to be a simple answer, right? And the reality is what you're saying is it's no, it's, there's a lot of subtleties there, depending on. Not only what, the performance of the business as well, but the willingness of the buyer too, in terms of the valuation as well. So it's not a simple, it's not a simple way of calculating this, although we'd love it to be, it really isn't like that. It can't be like that.

Jon Hainstack: 19:35

You're right. And I think that's what's really challenging is everybody has an anecdote, a story of somebody who sold their business for A really high multiple and a really low multiple, and I think that it's easy to fixate on just the multiple itself instead of what were the deal terms? How was, what was your motivation for selling? Who else was on the cap table and the preference stack that was driving this decision? Those are the more important questions I think to dig into as somebody who's considering a sale, because you have to really think about what am I walking away with? Why am I walking away? What are my options at that point in time? And what does the future really look like for me? Am I going to stay on with this business for the next two to three years and have to, reach my earn out? Is that a part of what I'm willing to do? If so, then you can probably expect a higher multiple because you are reducing risk for the buyer. So lots of variables at play. I just, gave you some high level numbers in terms of what you might expect to see. But this is a calculation that I think that is not it's not just science, there's an art to positioning your business in a way that makes sense to a buyer and you can position it for, they take all the risk and they, you They're the ones that are going to be on that side of the risk, or you share the risk, and then I think that the size of that pot grows together. Lots of nuance in it, and I think it's always a very challenging subject to, to discuss. But when I was coming into this process myself, I remember thinking the same things. I remember saying, man, like I got to get a, whatever, a five times multiple. What's the, what are the multiples? Tell me what the multiples are in the marketplace. It's it depends. And I hate just giving cop out answers. That's not, I don't, that's not the goal, but I really want to provide. Specific advice and specific recommendations. And instead of just blanket statements it's, we're seeing 10 X in the ARR right now. And that's what's market. It's market compared to what? Compared to

Joe Leech: 21:42

and that's quite a nice way to think about it as well, cause if you're a founder and you're looking for somebody to support you in this, it's very easy to be a broker and say, Oh yeah, 10, to offer a large number as an enticement to work with you. But the reality is you want that transaction to happen, not, there's, that's as important as the price at the end of it, really. And if you go in with an unrealistic expectation of what you will sell your business for, you're going to get disappointed. And that deal was more likely to fall through.

Jon Hainstack: 22:09

yeah. And I think there's always, there's an underpinning for me when I think about a broker or a banker or an M& A advisor, sometimes there's this, a little bit of pessimism or jadedness to think they're probably just going to try to sell my business for less so that they can just have an easy sale and whatever transact and it's just another transaction to them. For me and the way I look at this is I want to give you a realistic And an honest, the best of my ability, honest answer to how I believe buyers will react to your business. And we can have some disagreement about that. And if you believe the business is worth the investment. 10x ARR. Let's discuss it. Let's see why tell me why you think that's the case. And if it, I could be missing something. Let's figure out if that's really truly the case. And if so, then I'd be happy to support you in that and see how the market responds. So I don't, whenever I work with somebody, I'm there to not just tell you what the market is or tell you exactly how the market's going to respond. I want to see what are your goals? How can we achieve those goals? Where is the, where's the line here for you in the sand of I will never sell my business if it's, under X amount of price, because then I have to really do some like a gut check and say, is this sellable right now? I don't know. I would like it to be, I want it to be, and I want to help you. But I have to really assess that before we get into any sort of engagement because I don't want to have mismatched expectations. And yeah, it is a tactic in the industry, unfortunately, to say, Oh, yeah, you want to, 10x? Great. Absolutely. We'll get you that. And then you'll be in a long exclusivity period for a couple of years. And they'll just reduce the price over time and you'll get burnt out by the process and eventually come down to where the market is at that point. But that's really not the way that I would like to go out if I'm going to work with somebody. I want to be in a positive momentum situation where we're getting lots of attention. We're getting lots of buyer activity. We have options and, that allows us to negotiate for the best deal.

Joe Leech: 24:14

Yeah, that's a really nice refreshing way to look at it as well, isn't it? In terms of making sure that the expectations are met on both sides. Cause as we talked about before, it is an emotional journey. A lot of the work I do is helping founders to understand why do they want to sell the stuff you talked about and going in with a clear understanding of why you're selling your business and what you're prepared to do, what you want to do afterwards, gives you many more levers to be able to negotiate on, right? You talked about. Earnouts and, how long you want to stick around for in the business. That's a really strong lever you can pull either way to affect things like the price and the risk that the buyer takes for that. So if you're getting very clear about what you want, the deal is more likely to happen and you're more likely to get a price that's more acceptable to you if you know why you're doing this rather than, for the money, which a lot of people suspect that this is all about when reality is, it's never just that simple. And let's talk about, let's lift the lid a little bit then on this, shall we? So we hear all these great stories of. You read the blog posts of our amazing journey. We sold a business. It was great. High five, everybody. Off we go into the sunset. What's it, what's the reality of selling a business like at the moment in 2024, right? So if I'm trying to sell my SaaS, talk me through the realities of selling right now in 2024. What's the market like? How likely are deals? What's the experience going to be like for me when I go through this?

Jon Hainstack: 25:33

So in 2024, we've seen multiples compress and decrease since if you look back to 2022, 2023, things have decreased overall. And so when I look at a business today, what I'm trying to figure out is will this stand out in a buyer's mind? This feel like a standout business because the businesses that are selling right now very easily are the ones that are growing well. They're, they have weathered the storms of the economy well. And they are they're well positioned in terms of some sort of a moat, if you will, like some sort of differentiation in the marketplace, I have a really strong, I'm very bullish on those types of businesses. And then the ones that are really struggling, I also see as being very sellable because people are looking for deals. So when it's, there's not as much activity and people are hurting it's usually a time for the bargain buyers to come looking for businesses that are just burnt out and tired of going through a little bit of a rough season. So not all SaaS businesses have been that way. I've talked with other SaaS businesses, some SaaS businesses that have been growing like crazy. And others that have plateaued or been declining. But the market as a whole, I would say, has been slower in general to get deals done. I believe a lot of this is driven by the cost of capital and like the rate, the higher interest rate environment that we've been in. But I also just think that we had a lot of people that kind of got over their skis by buying a lot of businesses. There were some bankruptcies, there were some things that happened in the industry that kind of made people pump the brakes and, affected all things. It affected fundraising, all the investors are telling you to focus on net profit. Or, profitability and all that kind of stuff for the last couple of years. So today, as it is, I would say things are slower overall. But the businesses that are standouts are going to stand out tenfold because. They're less common. And so what's interesting is, somebody, people ask me, should I sell my business now? Should I wait? And it's let me take a look at the business. Let me see how it stacks up against what I've seen in the market. And if I feel like you've got an edge, then I think you're actually going to get a lot of activity. You're going to get a lot of eyes on this. And a lot of people are very interested. Because they are looking for investments. They are looking to buy businesses and the ones that are standing out are going to get a lot of attention. Some people call this a bifurcation of the marketplace, but it's really just the standout businesses. Getting a lion's share of the attention and then the distressed or, bargain businesses on the other side selling very quickly. Anything that's in between, plateaued, slightly declining low profitability and really difficult kind of gaining traction overall, like just in no man's land are very difficult to sell right now. And so that to me is where the marketplace is, I think, as we get through the election, as we get through any times of uncertainty then I think, honestly, things are going to open up even more going into 2025. So I'm actually pretty optimistic that we're going to see a lot more activity going into 2025.

Joe Leech: 28:52

Okay, and that's good to hear. So imagine that I've got a business, it's growing strongly. It's one of the standouts you mentioned. What else, what other warning signs do I need to look for that maybe the deal is not going to work? What's going to stop the deal for me? What kind of, some of the things that I should be wary of ahead of going into a deal that I maybe I could fix or sort out before I get into something like due diligence what are some of those kinds of things?

Jon Hainstack: 29:15

Yeah, there's a lot of things that can potentially kill a deal. The ones that come to mind that have killed deals recently for me has been declining trends of the business and legal issues. So getting into basically battles between two lawyers duking it out. And that's not something that really you can prepare for as much, but a lot of times it's difficult to get into Those negotiations, if your business is declining and then you don't really have as many options. And so that'll a lot of times kill a deal poor financials or things that get brought to the surface during due diligence that were not disclosed ahead of time can often kill deals because when somebody is recreating your books or doing quality of earnings or something of the, along those lines. They will find discrepancies that will affect how they value the business. And if you're not willing to adjust your expectations and change the price based on those things, then that can kill deals.

Joe Leech: 30:17

Also, and trying to hide them as well so you're going in knowing you've got a few things hiding under the carpet there that you hope they won't see, or if they do see, you can brush off,

Jon Hainstack: 30:28

Yes, it's counterintuitive because you want to try to frame the business in the best light possible. But honestly, the thing there that a lot of people miss is that when you are not disclosing certain things up front, they are, it's just prolonging it's just delaying the inevitable. You're just pushing the, kicking the can down the road at some point. There's nowhere left for it to go. And that is in the process of due diligence where all that is sorted out. Legal concerns can be costly and can kill you down the road. I've seen deals fail due to the inability to secure a trademark on the name of of certain things that they were promoting products and stuff like that. Other considerations would be just what is your customer base looking like? Where are they coming from? Are they personal relationships? Is there a lot of customer concentration that becomes very apparent as somebody digs deeper? Is there a lot of risk of churn with the business because you're in a bunch of annual contracts and. Those haven't come up for renewal yet. And there's a lot of changes in the business and that maybe it's not hard. It's very difficult to understand how active those accounts really are until somebody gets into due diligence and digs deeper. But again, really a lot of this gets down to the risk, like anything that you would perceive as risk for yourself of killing the business is also most likely going to be found out by the buyer along the way. So all these things I'm mentioning are functions of risk and whether they're identified before you go to market or during due diligence, that's where things can fall apart because either, either side can get uncomfortable with the changes that are made when you first go under contract with somebody, when you first say, yes, let's buy the business for X price. And now during the due diligence period, once that changes for a variety of reasons, usually it goes the other way for the seller, in the wrong direction for the seller, those unmet, those expectations can can kill a deal. Cause they're just, unwilling to change because of the expectations they had set when they first go into the process.

Joe Leech: 32:41

And that's interesting, isn't it? It's right. It all comes back to this idea of risk again. And everything's. Balanced on this risk profile and understanding the full risk of what the people are getting into. If you uncover more risk, that's going to change your feeling into the value or your confidence in it as well. So that risk balance between the buyer and seller needs to be absolutely level all the way through for the deal to happen, right? That seems to be, everybody's got to be fully aware of what the risks are and that's got to be then matched in the price that the buyer is willing to pay ultimately.

Jon Hainstack: 33:08

Yeah, exactly, because if the return is not, if the return ends up being not as great as maybe double what you would get in the market or in, even some of this with the interest rates as they currently are, you still are getting great interest on a savings account. So just thinking about how buyers are going to view the risk profile and is it worth it? Does the amount of risk or does the amount of reward outweigh the risk in terms of of how they look at it? And so you can actually boil this down. And when you think about multiples as a function of risk, you can think about as an example, like a three times a three times multiple on your EBITDA or discretionary earnings, let's just say cash flow is like a 33% internal rate of return. On, on, on that money that you're putting forward. So you can run the numbers in terms of what that looks like for a buyer and then how they might think about the return that they can expect. And if the business is growing, now that calculation changes, this is assuming no growth, like zero growth, or it's, totally you're totally plateaued. And so that functions into it as well. So you can imagine if that's decreasing or you're churning now that return doesn't look as great for the buyer and they have to put in safeguards so that they get the return they're looking for. Or they at least don't, completely lose their shirt and it just takes them longer to return the value there. But that's functionally how somebody is looking at this is there are calculations that are being made to even though there's an emotional component about whether or not you buy a business or not, you just have to still be able to make it pencil, if you will. Like you still need to understand. Is this going to be, is a risk worth the return here? And if it's, yeah, if it's not much more than what you can imagine, yeah. In the market, then it's just not worth it.

Joe Leech: 35:06

Great. Thank you very much for your time today, Jon. It's been really fascinating. I've learned, a huge amount today, so thank you. Where can people find out a bit more? And you mentioned a tool as well for, calculating the value of the business. Where can people find that and more about you?

Jon Hainstack: 35:20

Yeah, if you want to visit my website, JonHainstock.Com,, you can find a a SaaS valuation tool there if you'd like. We also have a ton of resources on quietlight. com for folks who are considering selling. And then if you want to just reach out for a valuation, I'd be happy to do that. I do a deep diving financials and learn more about the SaaS metric, your motivation for selling, understanding the market. That you're in and give you what I believe is going to be a good range of where I think buyers are going to come in based on all the things we're just discussing today. So you can just reach out to me at Jon@quietlight.com and I'll be happy to provide a free valuation for you guys.

Joe Leech: 36:07

Thank you very much. All those links will be in the description down there. So again, thank you very much for your time, Jon.

Jon Hainstack: 36:12

Thanks Joe. It's great.