Today’s issue was inspired by a reader question! If you’ve got something you’d like me to write about here, hit reply and let me know. I read and reply to every response. Now, onto the newsletter…
I often get asked about the value of having technical skills when investing in a Micro-SaaS business. Technical skills exist on a spectrum that covers a wide range, from knowing how to operate a WordPress site all the way to being a developer with many years of experience, and where you fall on that spectrum is an important aspect of your acquisition criteria. For example, I look at mostly WordPress businesses because that’s where most of my experience is development-wise. Naturally, that’s where I have the most industry connections, and many of the products that I look at are products I’ve actually used. That’s not to say that I don’t feel confident that I could potentially run a Shopify app business, acquire a mobile app or a Chrome extension, but all else being equal, I choose to go where my experience lies.
So, exactly how important are technical skills when acquiring a Micro-SaaS business? As with most complex matters, it’s rarely a case of just black and white. In many cases, it’s helpful but not explicitly required. The real utility of these technical skills depends on a few factors:
1. The Size of the Business
There’s a reason Micro-SaaS businesses are usually run by developers. At smaller sizes, the revenue of the business usually isn’t enough to be able to pay a software developer to work on the product, whether part time or full time. As the business scales, the founder might choose to use some of the revenue to hire a freelancer or someone part time to help them out, but that’s usually not the case starting out. If you lack technical or programming skills, it’s likely more efficient to look at a larger business with developers (who aren’t also the founder) working on the product, or where you’ll have revenue to bring the necessary people on board once you acquire the business. If you want to acquire a Micro-SaaS company truly on the “micro” side, you’ll need to bring some technical skills to the table.
2. The Maturity of the Business
In brand new businesses, the software itself is at its most unstable point. There are tons of features to be built, many unknown bugs to be fixed, and multiple pivots to be made. This usually means a developer needs to be heavily involved in the day-to-day of running the business. On the other hand, if a product is more mature and has been around for at least a couple years, there’s a greater possibility that it’s mostly feature-complete and bug fixes rarely need to be made. This type of business lends itself much better to a more non-technical acquirer, who can bring on a developer as needed to make these much more minor tweaks.
3. The Industry of the Business
The industry of the business is a large contributing factor as to whether or not you need technical skills to acquire a Micro-SaaS business. If the business you’re looking at is in a cutting-edge industry, like the cryptocurrency or artificial intelligence industries for example, it’s a pretty good bet that you’ll be at a disadvantage without the technical skills to keep up with the business.
However, if you’re considering something like software that helps accountants build websites, this exists in a much more well-known space and makes the technical side of things easier to hire for and outsource when necessary.
So what if you don't have technical skills?
If a business you’re looking at is going to require technical skills that you don’t have, not all is lost! If you have the business knowledge and the capital but don’t have the technical skills, there are plenty of developers with the necessary skills interested in getting business experience. In fact, there’s a relatively big push right now to pair investors who are looking to acquire business with operators who have the technical skills to help run the ship. Two excellent places to start are Empire Flippers Capital and Chief Operators.
If you don’t want to go through one of the programs listed above, you can also poll your network. Engage in conversation with some of your contacts, tweet to your network, or share a post on LinkedIn. Start conversations with open-ended questions like, “Do you know any Shopify developers?” or “Who would you go to if your WordPress website suddenly stopped working?” This could potentially lead you to someone interested in branching out from their day-to-day development work to take on the technical side of the business you’re looking to acquire.
Just like you don’t have to be a general contractor to invest in real estate (even though it can help you save some money), you don’t need to have technical skills to invest in a Micro-SaaS business. The lower on the valuation spectrum you go, the more you’ll benefit from technical skills. But by getting creative, finding partners willing to share the load, and choosing the right acquisition target for your experience, even a lesser technical acquirer can successfully run a Micro-SaaS business.
If you have any other questions about technical skills or Micro-SaaS businesses, let’s chat! Just hit reply here, or if you’re more comfortable with Twitter, my DMs are always open @kkoppenhaver.
Until next time!