How Sandhillsdev grew Sandhillsdev to $3.7M revenue and 15K customers in 2020.

hello everyone my guest today is pippin williamson he is a nature loving farm boy that somehow found his way into computers internet and business he runs a company called sandhills development they build e-commerce and membership software for websites but you're ready to take us to the top absolutely all right so i'm looking forward to this i found you on indie hackers where i think you stated the revenue i mean you were doing somewhere between two and three million bucks right yep what what what do you think you'll do here in 2020 with covet well so i can tell you our plans have changed a little bit uh we're originally estimating that we'd uh break four million um however just announced last week we actually sold one of our products uh which has caused our monthly revenue to fluctuate in the last couple of months and so we're still trying to figure out exactly where we're going to be uh since we no longer have the revenue from that product coming in but last month we did 311 000. that's great so tell us about that product what product did you sell uh we sold actually our membership platform uh so we'll have to adjust our tagline just a little bit uh so it was called restrict content pro and it was a wordpress membership plugin uh that basically allowed site owners to sell memberships so annual monthly daily any kind of membership any type of content that you wanted to walk away behind a membership interesting so that's obviously hot space people a lot of people believe today that community is sort of the new moat for any piece of software membership sites are a key piece of community how much of the 311 that you did last month 311 000 in revenue was from the membership tool uh uh for last month zero uh because the sale actually went through before last month but at the time that we sold it it was doing about 50 to 55 000 a month okay got it so a good chunk but not a majority of of your monthly rates right yeah interesting okay so why did you decide to sell it's 255 000 bucks a month i assume it's high margin why sell uh it was doing uh very hard margins uh frankly it wasn't something that we originally planned to sell uh but the opportunity arose and we've always tried to approach business with a mentality that everything is you know has a possibility of being sold at some point um and the right opportunity arose and what we ultimately decided was that it allowed us to narrow our focus uh at the time we were running five different product brands um and there was a little bit of overlap between them between the membership and e-commerce tools that we built and so transferring one of them basically allowed us to narrow our focus and we kept our whole team so we didn't transfer any of our team members with the product uh only the product so we effectively were able to hire three new people uh without actually hiring anybody because we took the people that were working on the product and have put them onto some of our other projects the toughest part about any sale like that obviously is number one finding a buyer that you think is gonna treat your customers right and then secondly seeing if buyer will potentially pay you what you want to let the tool go right so walk me through both of those let's start with the harder one first which is how do you think about valuation um valuation-wise we i mean frankly we had to look at it from a [Music] the price had to be right for us uh because it's like we mentioned earlier it was a profitable product already uh it is something that we had been running for a long time we had been uh running it for about eight years uh we were very comfortable with it we had a lot of long-term plans for it and so if we're gonna do it the price had to be right um so we basically came up with a valuation based off of annual revenue um and estimated profits for the next few years uh and basically told our buyer this is what we need and if we can meet there uh then we can make a deal where was your headed i assume what you're about to tell me it wasn't the actual price because there's probably some negotiation but when you first store went into this what was the sort of revenue multiple you guys were hoping for uh we wanted somewhere in the two to three x annuals and why did you come up with that like when you were sitting down with your team what was that why was two to three x the number uh number one it was a number that i felt that i could reasonably get um i thought it seemed fair from a buyer's perspective you know we can we can say that we would love to have 10x annual but you know it's probably never going to happen not not in any kind of reasonable negotiation so we really wanted to try to find a balance between what do we need to justify this and what is somebody reasonably going to pay because they're going to try to regain their investment um and in this case we didn't sell it to a private equity firm or somebody that is more not just able but maybe operates off of a business model of larger gambles we sold it to another team within the wordpress ecosystem and so we had to make it make sense for them too so so did you sort of end up in that two to three x range we did i can't say exactly where we got due to our contract um but it was uh definitely in the range of what we wanted fair enough and that you know there are a limited number of buyers in this space i mean was it public is the buyer gonna is it have they made an announcement hey we just bought this tool yeah yep it is public it all went live on september 1st uh and so if anybody wants to check it out you can go to sandhillsdev.com we wrote a blog post there uh and the buyer was ithemes ithemes.com which is a one of the brands under the liquid web family oh very cool very very cool okay so that's done congratulations on that you know how a little more cash to play with so what do you do you know personally as an entrepreneur that's a nice moment now you still have a business doing it sounds like 250 000 ish per month without the 55000 tool right or is that 311. okay no we did 311 without that member without it so you still have a tool that's doing 3.6 million a year in revenue now is that 3.6 million in revenue is that more like consulting or is that a true sas product on the e-commerce side so it's a combination of sas products and self-hosted products so we run we still run four separate um product brands uh and so that 311 is a combination of all four of those um with the largest being uh about 130 to 150 000 and the smallest being one to two thousand a month um what's the largest all of all you name it like what's the website for yep affiliate wp.com and what does it do your largest product it is an affiliate marketing tool so any it's a for membership or store owners anybody that's basically running an online e-commerce business of some kind if they want to run their own uh affiliate program and they want to own all of their data and maintain the tool themselves we basically build a software product to let that to do that um and i think people are going to love your story listening to this they just heard you you did a deal at two to three x if someone's listening right now in that space and goes oh wait a second that's doing 1.2 oh no it's doing what 1.5 million in arr i would pay i'd pay 3x right now to buy that would you sell that too uh you know so i said earlier that we try to approach everything with the possibility that may one day be sold um at this point we have no plans to sell it uh it is something that we're having a lot of fun with and it is our biggest money maker for sure now it also means that you know it could negotiate the highest price um and so you know we can i can't say what the future holds for us at this point we are building for the long term and we are aiming for longevity yep which is one of the reasons why we sold our other product well yes so you get again you can't say the exact number but two to three x fifty five thousand dollars a month in terms of ar it sounds like something you know be something between one and two million bucks coming into the company how do you decide where to invest in that for the long term like what does that actually mean sure so the first thing that we're uh wanting to do after the sale is make sure that we still have profitability so we operate on a model that we will always aim for profitability because that's the only thing that we can ensure that keeps the business alive we are 100 bootstrapped self-funded business we have no outside investment and we're all privately owned um and so at that we typically aim for about the 20 profit margin and when we sold off restricted content pro that was basically the loss of that revenue was majority of our profit margin so what we want to do at that point is operate for the next couple of months carefully um but also very strategically to make sure that we can still maintain a monthly profit margin you know we can with enough cash in the bank obviously we can take on losses for a few months no problem uh we can actually take it off for quite a few months but we still want to retain our month-to-month profit margin so the first strategy is just just...