How I Sold My Bible App Company

http://trevormckendrick.com/how-i-sold-my-bible-app-company/

by reuven • 10 years ago

422 107 10 years ago

robbiet480• 10 years ago

This was an excellent read giving a great insider look at an acquisition from the seller side

x5n1• 10 years ago

I don't see how any small time hacker agrees to any indemnification. It's not as if you could even if you wanted to even defend a small lawsuit (I don't know how much they paid him). So what's the point. If you are afraid of being sued, buy yourself insurance. You are a large company, that's something you can do. And it will actually provide you protection rather than a contract which I can not possibly fulfill.

roddux• 10 years ago

I was also rather confused at this. Why would he be liable for anything that happens with the app after it's been sold? Is this standard practise in such deals?

JabavuAdams• 10 years ago

I imagine it's the acquirer protecting themselves against due diligence oversights.

junto• 10 years ago

   The joy of Streak, and the fact that they work remotely, 
   is that I could see them forwarding my email to each other.

   You’ll see in the map below that it was opened in multiple 
   locations, multiple times.

   It’s like sending a text to someone you’re interested in 
   after a date, and knowing that they’re talking to their 
   friends about how to respond. They’re interested.
 
   This doesn’t always work obviously, but it gave me a ton of 
   confidence in the moment.

Interesting... Tracking people opening your app. I assume this tracking using a hidden image in the email?

frgewut2• 10 years ago

"hidden images" don't work with most clients. I guess it was some link with a token they were clicking.

andyjohnson0• 10 years ago

See [1] for a description of how the tracking works - scroll down to "So how does that tracking work?". It appears to use embedded links to message-specific 0-by-0 pixel remote images.

[1] http://www.ghacks.net/2014/02/22/can-streak-really-track-gma...

monsieurbanana• 10 years ago

What about non-hidden images with a token?

flippyhead• 10 years ago

Basically I spent 2 weeks convincing them to let me write this blog post!

And I'm grateful you did. This was very interesting to read. Thank you!

Sealy2• 10 years ago

My wife was out of town so to “celebrate” I treated myself to In-n-Out for lunch!

I love your frugal approach. You deserve everything you got. Nice to see how professionally you both handled the negotiations and it certainly teaches me the virtue of patience!

Sealy2• 10 years ago

Since the app performs so consistently and takes so little of my time (~1 hour per month) it needs to make financial sense to give it up…

Can I ask what you did with the rest of your time?

itaysk• 10 years ago

Very interesting!! thanks for sharing

mattchamb• 10 years ago

For anyone interested, this is the relevant information about the sale in Salem Media's SEC filings:

On September 3, 2015, we acquired the Spanish Bible mobile applications and their related website and Facebook properties for $0.5 million in cash.

raverbashing• 10 years ago

I wonder where did he got the Bible text from though? Was it a public domain translation?

hugi• 10 years ago

There are quite a few versions of the bible in the public domain - http://christianity.stackexchange.com/questions/16377/what-m...

workitout• 10 years ago

You can get it free here: http://www.gutenberg.org/ebooks/10

There is an aspect to be considered about making money on this topic.

lucozade• 10 years ago

Trevor answers a question on this in the blog.

He says that the first one he sold was PD but he also sells others as in-app purchases that are licensed.

yohann305• 10 years ago

What a great story! I want more stories like these. The author Trevor, really gave us so many behind-the-curtain information, at some point I even thought it was so much that he could get in trouble for it if the buyers read the story. (he mentions later in the post that he got it covered)

Thank you!

emptybits4• 10 years ago

I sold my company (Verrus PayByPhone.com ) several years ago and so much of this resonates with me. Thanks to the author for his candid sharing. It was cathartic to read, even.

... over 7 months, hundreds of emails, ... psychologically exhausting and definitely the hardest part of the 3.5 years I ran the business.

This. The hardest part for me and my cofounders was keeping the business operating, and growing, while spending what seemed like full time on the "distraction" of a sale process with several potential buyers.

I always assumed it was dead until the cash was finally in the bank. ... various levels of depression occurred throughout the sales process.

Yet, in the end:

The deal made a ton of sense and I’m glad it got done.

Amen and congrats to you!

robmcm2• 10 years ago

Any idea why paybyphone doesn't give you a list of parking locations near you?

emptybits4• 10 years ago

I can only comment on the "early years" of the company (2000-2011). It was a business decision -- we felt we created more company value by applying limited development budget and effort to winning entirely new strategic customers (large metro centres, each with their own integration, payment, and back-office requirements that most people never see) than to adding more than core features to the user experience.

Naturally, every potential feature, once implemented, has ongoing costs and risks with respect to availability, data quality, maintenance, impacts on customer service, image, impact on our municipal customers, etc. We were a small, lean organization then. It's impossible to know if we struck the optimal balance; you're reasonable to ask!

I am now just another user of the service and I love it ... but in 2016, location-based everything is a reasonable expectation! Cheers. :-)

jastanton2• 10 years ago

Hey, I use PayByPhone all the time in Seattle, I'm really glad you made it, it brightens up my day any time I can use it! Thank you, and congrats on the successful exit!

emptybits4• 10 years ago

Thank you for the kind words. Seattle was a good, early proving ground for us. (We were HQ'd in Vancouver, BC.)

shostack2• 10 years ago

In another recent thread I saw a lot of animosity from people who felt betrayed when a founder sold.

I'm an employee, but just imagining the stress of running a successful business, I honestly can't blame a founder for selling as long as I'm being compensated in a manner I consider fair (ie. fair market rate with minimal/low equity, or meaningful equity with terms that won't screw me).

There's absolutely nothing wrong with cashing out when you think it is the right time. Anyone who did not found the company should understand it is a possibility when they sign on.

bigtunacan• 10 years ago

Trevor,

This is an interesting read and congratulations to you.

If I understand it correctly the app was pulling in $100,000 a year and required only an hour of maintenance per month? I'm curious why you chose to sell for $500,000 rather than continue with a long term revenue stream? Was there concern on your part that you could keep these revenue up in the long run?

nxzero• 10 years ago

Trevor I believe explains in the post, that being often within M&A there's a window of opportunity to engage a party interested in buying a company or its assets. If he declined, it's possible he would have never received an offer as high as the offer he received and would have to hope the app paid out over the next 5+ years, which was 2x the duration the app had been at its current revenue, which had been consistent for 2.5 years.

rpgmaker3• 10 years ago

It seems the app developer was dying for the thrill of selling his first company. Spanish media is growing, particularly in the US, so there's no reason to think his app sales were about to decline, at least not enough to sell his golden goose for a mere 500k. But congratulations to him on selling his first company.

blisterpeanuts• 10 years ago

I had the same question, but I would suppose he just had his own reasons for wanting to sell.

The cool part of the story is that even though it took him seven frustrating months to close the deal, he was earning money every month. Theoretically, with that kind of revenue stream he could have dragged things out for months or years, and the buyer probably understood that.

A great position to be in, and to be so young, too. * envy * :)

fencepost• 10 years ago

I suspect there was also an element of "A big dog in Christian Media wants something like my app. I can sell to them or I can fight the new thing they'll build and cross-market."

By selling he gets a chunk of money in the bank (possibly less than he'd have earned over time and certainly less than Salem thinks they can earn with the app), but he also avoids a marketplace battle and he can go work on other things. Salem avoids having to develop a competing app and gets a significant and likely fast-growing installed base.

My suspicion is that both sides feel like they came out ahead - Trevor got a couple years of good revenue followed by a nice exit; Salem got a market-leading app that likely will prove popular in some global markets where smartphone usage or capabilities are likely to increase over the next decade - what are the forecasts for smartphone usage in Central and South America? Additionally, if Salem isn't already an international player, having a top-rated app may let them expand other operations to cover more international international markets without having to do a lot of risky physical investment or international marketing first to break into those markets.

jscheel• 10 years ago

There's something to say for his place in the market, but I think you are right. Salem has infinitely more capital to create a competitor. By selling, they don't have to deploy that capital, and he doesn't have to fight against competitors eating away his revenue.

CPLX• 10 years ago

Five years is a really really long time in the "monetizing digital content" industry. Five years ago you could make an actual living off a semi-popular niche blog. The iPhone itself is only eight and a half years old. The idea of a "long term" revenue stream has to be evaluated in this context, irregardless of the other obvious fact which is that money today is worth a lot more than money in the future.

markdown3• 10 years ago

irregardless

You've got too extra letters there :)

IkmoIkmo• 10 years ago

He commented a few brief points:

He said he worries 365 days a year that he'll lose out somehow. He specifically mentions the dependence on Apple, e.g. if they change their search algorithm he may be fucked, and there's no independence there. He's small-time and has near zero revenue streams outside of the apple store. (he mentions the Android port being a failure).

About the Android port failure... he's saying Android makes him barely any money at all, but you can imagine he spent $10-20k on that at least last year.

The first year he did things like hire a studio to record an audio book. That may sound cheap, but a bible audio book is 70-75 hours long, and each hour recorded costs $300-600 (you could also do it for $200 or $800, but both aren't very typical). Even for low-quality, shortened books, it's still a significant expense.

He's got costs, the $100k isn't even operating profit, let alone net income.

For example, he mentions he increased his revenue from $75k to $100k from y1 to y2, but also lost money due to new licensing deals that cut deep into his margins, saying that he's not sure it was worth it.

Between a new revenue stream of which he doesn't think it was profitable, and a port to a new app store which he says generates practically non-existent revenue, it doesn't look like he's got the resources to singlehandedly build this out to a ridiculous cash cow. The $100k of course is awesome, but he's had to put in time to make it grow (inc. a brand new app, none of that he refers to when he says he has 1 hour of monthly work to sustain the app), some of these growth projects failed, and he probably invested quite a bit in the first place, more than the $500 he refers to as his initial investment.

After taxes and expenses I'd expect say $50k to be left as net income. I'd take $500k too, for sure. That $50k to say $75k tops he's netting per year, takes at least 8-10 years to beat a $500k lump sum that's reinvested. Now of course he has opportunities to grow the business, but here's the thing... if he grows the business, he's now working part-time or full-time, which carries a significant opportunity cost, too. And it's not without direct costs, either, like developing or licensing content. Further, in those 8-10 years everything can change, particularly the competitive landscape, the OP's purchaser probably would've bought another top 5 app and thrown resources at it.

In short, I think he did quite well with $500k but that's based on a lot of my assumptions and interpretations of his brief comments.

charlesdm• 10 years ago

In short, capital gains. $100k at normal tax rates leaves you with $60k in the bank each year. $500k taxed at capital gains tax rates leaves you with (approx) $400k.

That means it would take you 6.5 years to make the same amount of money. Do you want to run an app for 6 years if you could get the money today + do something else? That $400k can start making 5-10% returns a year.. starting today.

kdamken• 10 years ago

This was actually a really fascinating article. It was cool to read what it's like when you finally hit it big. I have a lot of respect for your negotiating as well. It's hard enough keeping that up during the interview process for a job, I can't image doing it for six months, for that much cash.

Congrats on your success man.

timsayshey4• 10 years ago

There is a ton of opportunity in the christian media industry with huge markets. I hope more christian developers get involved and start making stuff that would help believers, missionaries, churches, etc. There are so many things to disrupt. For those that are interested and want encouragement or help finding ideas. I found a christian startup slack community http://thirdpathinitiative.com/christian-startup-community and there is also a really cool hackathon organization http://codeforthekingdom.org

GFK_of_xmaspast• 10 years ago

On the one hand, Christ was the original " (╯°□°）╯︵ ┻━┻) ", on the other hand, consider what He was disrupting in the first place.

BoppreH• 10 years ago

I hope more christian developers get involved

According to the Business Insider article[1], Trevor McKendrick is atheist:

  Though McKendrick doesn't have to think about money, his
  booming Bible-selling business does have him worrying
  about one thing: his morality.

  See, McKendrick isn't exactly a believer in his product.

  "We don't believe in Christianity," he told Blumberg. "We
  don't believe in the Bible."

  "I would describe myself as an atheist."

[1] http://www.businessinsider.com/atheist-makes-100000-selling-...

timsayshey4• 10 years ago

Thanks for sharing and clearing that up, but this actually validates my overall statement all the more. We need real christian developers and there are so many opportunities to have a huge impact for the kingdom!

misterbwong2• 10 years ago

I'm interested in joining your community but there are a couple things that look like red flags to me about this.

1. It costs $25 to join the slack community. Is this normal?

2. The overview" page mentions all the things in the ThirdPath coaching process but lacks one important thing-how it has anything to do with Christianity. It reads like every other startup coach/bootcamp process.

Makes me think that this bootcamp is just targeting Christians because it's a big niche, not because you believe that there's truly a need for Christian startups

arsalanb2• 10 years ago

No, it's not. Your religion doesn't affect how well your startup does, as you pointed out. This is just an unfortunate case of somebody using religion as a tool to sell you something you may not purchase otherwise.

This is against the Slack Terms of Service.

https://slack.com/terms-of-service Clause #6.7

timsayshey4• 10 years ago

Great feedback, but I don't own it, I just found it on google. Also, charging a one time fee to join is actually really common for Slack communities (ie hashtagstartup.co). It keeps out people that aren't serious or want to spam.

travisty• 10 years ago

There isn't much interest because for the most part, intelligent people don't devote themselves to things that can easily be proven false such as religion.

wtbob• 10 years ago

A few more emails/phone calls laters (this became a theme) they finally made their first offer. It was around 3.5x revenue.

Is this the standard opener now? Also, is that 3.5 annual or monthly revenue? For centuries I believe that 20x annual revenue has been a rule of thumb for properties, companies &c.

vinceguidry• 10 years ago

I think online properties are generally worth less because they take less time to cultivate and build. Also while their earning potential might be solid over the short term, over the long term it's not so easy to gauge.

His Bible app is obviously different than most such properties, which is why he was able to bump up the offer. But still, if the app landscape changes, that can make their purchase worthless overnight. So you have to price that into the offer.

prawn2• 10 years ago

Some online properties are valued at 17-20x monthly revenue. This guy did fine!

seibelj• 10 years ago

1 hour of work per month, $100k per year, each hour of his time was worth nearly $10k. Cool story but I never would have sold. This is the ultimate side business.

rpgmaker3• 10 years ago

It's crazy, he was dying to sell his first company. Vanity makes us do crazy things.

cpwright• 10 years ago

He has 0 risk once his check for $500K clears. Every month he keeps the app there is a risk that something goes wrong; and that 1 hour a month probably doesn't include time that is spent thinking about those things going wrong. Getting the money all at once reduces his ongoing cognitive load.

prawn2• 10 years ago

He return he got was excellent. Definitely the right move to sell.

giarc2• 10 years ago

$100K revenue != $100K profit.

aprdm• 10 years ago

Thanks for writing this! Really good article.

novaleaf• 10 years ago

can anyone give advice on what a reasonable indemnification clause would be? (reasonable for both parties)

OldSchool2• 10 years ago

I'm surprised this isn't more discussed in the comments. It's a major element to consider when you're selling your business. He correctly identified it after all, as a potential deal breaker.

You're selling something, so in an acquisition you will have to represent and warranty what you actually own and you're selling. This sounds simple on its face, but technology isn't nearly so well-defined and legally sorted as, for example real estate.

In software, even if you are 100% certain you can transfer all of the code and there are no potential content copyright issues or latent prior agreements by yourself or other sellers, current/former employees who think they own something, etc, you still have at a minimum, a hard-to-quantify "Sword of Damocles" in the form of thousands of potential patent claims hanging over you, trolls or not, it doesn't matter in a sale. As in business itself, the bigger the money involved, the more visible you become to potential claims.

A publicly-traded buyer is likely to be less flexible on terms, but in any case you as a seller have also to consider that in a sale, you're most likely going to be forced to shift liability from your corporation to yourself personally. If you're prudent, as this seller was, you realize this creates a time period increased personal risk, despite your increased assets. Keeping this period as short as possible and limiting its scope and magnitude is your objective.

A few limitations I can vouch for making it past public company scrutinity are 1. any dispute costing less than $X are not your responsibility. 2. a maximum liability limitation equal to the purchase price in cash / shares (in case share prices drops) 3. a time limit of two years or less. 4. escrow of a portion of the purchase consideration (shares and/or cash) as a warranty cap for the duration of the warranty, perhaps with release/reduction over time. The tax treatment of this arrangement would have to be considered carefully.

Finally, it's worth noting that insurance for an acquisition deal may be available from big name insurers, likely for some low single-digit percentage of the deal value. However, their legal department will undoubtedly be more sophisticated in this area than your counsel, so at its worst insurance gives you little more than a contract with an insurance company over which to sue, likely at great cost.

Overall, as lawyers always say, "it depends." Unless the deal and/or your resources are immense, likely it is a problem with no risk-free solution. If you're young and have nothing to lose, risk is an easier choice. For everyone else, all you can do is optimize based on present knowledge.

shostack2• 10 years ago

So assuming you get a short time limit of <2yrs, would it be smart to stick it in a low risk account somewhere and not touch it until that term is up? Or was that the intent of the escrow?

overcast2• 10 years ago

$100,000 a year doing basically nothing, and you sold it for basically nothing. They made the deal of the year, and you lost out big time. I applaud this guy for creating something popular, and monetizing it well. But that is up there with one of the worst self offs I've ever read. With only $500,000 now you're on the five year crunch to get a new product built or find a new job.

sixQuarks2• 10 years ago

There's no guarantee that app would continue doing $100k a year - competitors pop up, platforms change, economy collapses, you name it.

I think he did alright.

overcast2• 10 years ago

So rather than a chance that something may happen, you've guaranteed nothing will. The app could have just as well doubled its revenue. Selling out such an absolutely minimal work involved app is not worth the chance that the "economy collapses". Spend all that free time setting up apps on all platforms. You don't get anywhere without taking chances.

matheweis• 10 years ago

... a 5x multiple is nothing to laugh at. I wish I could sell my autopilot side project for a 5x multiple.

eric_h• 10 years ago

Sounds like it was actually a 10x multiple of his profits.

trevmckendrick3• 10 years ago

Trevor here, creator of the Spanish Bible app.

IkmoIkmo got this spot on in his/her comment.

Biggest two mistakes people are making in this thread:

1. $100k was revenue, not profit.

2. I get capital gains rates on the sale, versus ordinary income rates.

(If you didn't know about #2 you should probably sign up for my accounting and tax course for freelancers and entrepreneurs: http://trevormckendrick.com/accounting-course-for-entreprene...)

pc86• 10 years ago

Is your web server down?

trevmckendrick3• 10 years ago

Probably. I'm long overdue for changing hosts.

Veratyr• 10 years ago

Sorry if this is incorrect but wouldn't a better term be long term capital gains rates? Short term capital gains are taxed at ordinary income rates but they're still capital gains.

trevmckendrick3• 10 years ago

:) Yes you are correct.

I try to avoid details when higher levels of abstraction are sufficient for my audience.

markdown3• 10 years ago

Have you considered developing an accounting or bookkeeping app, since that's obviously your domain?

elcapitan• 10 years ago

Do you have more information on how that course is going to look like? Are those going to be video tutorials, or some degree of interactivity like on Coursera?

bpicolo• 10 years ago

That full page ad on first load is incredibly annoying

giarc2• 10 years ago

I thought I had clicked on the wrong link.

pklausler• 10 years ago

Another app idea for making money off Christians: the Rapture Alert, which would set off an alarm if a configurable proportion of its users suddenly vanish.

bpg_92• 10 years ago

Congrats!!! I got a small app and some ideas, stories like this make me want to pursue this fultime.

ericjang• 10 years ago

This was a great read. Congratulations!

bambax• 10 years ago

8. If there is any content in the app who wrote it?

Err... God?

pbhjpbhj• 10 years ago

God wrote it with His Spirit in the hearts of the believers and they provided a translation in to [mainly] Hebrew and Greek, those that have translated those translations then created new copyright works (NASB, NIV, NKJV, ESV, Vulgate, etc., etc.). I think it's these later translators the question is concerned with.

For example News International owns Zondervan who own the NIV copyright; I wish that those who got together to write the NIV (one of the most popular English language translations) would have used a CC license.

titomc• 10 years ago

@Trevor, Curious to know how did you get hold of the content for the Bible App. Did you purchase it or compiled it on your own ?

nkrisc2• 10 years ago

The first comment on his blog post actually asks that.

Q: Yen Tan > I’m very curious – isn’t there copyright on the bible/ translated bible? How did you deal with that?

A: Trevor > Great question. The first first I used was in the public domain. I also sold other versions later as in-app purchases, but I licensed those from their respective copyright holders (i.e. Biblica and The American Bible Society)

How I Sold My Bible App Company

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