I'm making the assumption there is a dedicated group of users that wishes to see the site continue.
Financing can be done through a bank loan, private lenders, or escrow account. If it wasn't against some sort of investor protection idiocy (in the US), they could probably hold an auction for shares, turn it over to a board voted in by the share holders and then get on with the business of running the business.
Organization of the community I would imagine could work to something like how StackOverflow operates in it's community aspects.
I am very curious if there is more information they'd be willing to release. For example, how many of those $99 customers are happy, how many have garnered business they can confirm came from Sortfolio, etc. It seems like they've started, but not finished, to make one side of the market, but there's not much evidence about the other.
So few paying customers could be giant firms paying on the off chance that they get 1 client down the road. For it to be a compelling business, it would need to be clear that paying clients are finding developers there.
I would also be interested to know their goals when they built it, and why it's being sold.
"if there is more information they'd be willing to release. For example, how many of those $99 customers are happy, how many have garnered business they can confirm came from Sortfolio, etc."
Best way to gather this information is to take the time to contact the customers directly being honest as to the purpose of the inquiry.
I believe this was a concern raised the first time they were trying to sell it, but a big worry for anyone considering purchasing Softfolio is probably what would happen when 37s no longer owns it.
It's sort of like their job board (http://jobs.37signals.com/). People like the job board because of the types of developers it attracts. Both companies and prospective employees value each others' skills and styles. If 37s didn't own that job board and sold it, it suddenly becomes 'just another job board'. Is it the same deal with Sortfolio? Anyway good luck to the potential buyers of Sortfolio. Hopefully they won't have wasted $480,000.
I think it would be useful to know how much traffic / new signups come from other 37s sites vs SEO or links from other sites. That won't give you the exact answer of "how can it fall once it's no longer a 37s product", but it's a start.
The bottom line when evaluating whether to purchase this or not would involve doing due diligence and contacting the paying customers at the very least to determine how satisfied they are with being listed there.
The site is using auto-renewal billing and having someone not cancel is not the same as someone finding value in the service.
Also even though they would like to get $480,000 they should also invite any offers above $X. If nobody bids at $480,000 they will have to try to sell it at a lower price and it will seem like a fire sale.
I'd be worried about the requirement to switch billing. I'm not sure there's a clean way to switch a customer from one billing system to another without requiring user intervention.
In general, recurring billing is a scam by its opt-out nature. If you aren't on top of your accounting, tiny charges slip by. When you spot them, you may be too lazy to immediately cancel it, so you forget.
It isn't enough to know how many users are billed, but how many users are active on the service and willing to jump through the hoops when they have to update their account.
Also, beyond the server requirements, consider the cost of a support infrastructure. It costs much less for 37signals to support one more project in their portfolio than for a new company to spin up a support team from scratch.
I was auditing my finances last week and discovered in the last year I spent over $300 on a tenderapp.com subscription that I had forgotten about. I'm inclined to agree with you there, especially when the target sortfolio customers are businesses, $99/m is easy to forget about until you're asked to renew your details. I wonder if 37 Signals will publish information on how many of their $99/m paying customers (although at $99/m that's only about 200?) actually login and use the site every month, although maybe they'll disclose that to interested parties.
> We’ve put Sortfolio on the clock: We either sell it by July 1, or we close it down.
I'm wondering, If you had $480,000, why not spend 10% of that to build an alternative, and release it on July 1. After all the customers are going to have to signup to a new payment system either way.
So if 37 Signals is more popular than you, what value there in paying $480,000 for a site whose customers may not be interested in it after 37 Signals leaves?
Exactly, so you should expect some customers will leave once there is a sale, perhaps a significant amount. And if there is no sale they will be closing shop on July 1, so 37signals won't compete with your product if you build an alternative.
I really wish I had that kind of money laying around, i'd would easily hand it over in a heartbeat. It would be such a shame for an almost auto-pilot business to be shutdown for no good reason other than its simply not worth it to 37Signals and while thats a perfectly legitimate reason, its so much potential lost for someone like me who would value it immensely.
You get the design, the branding, the code (it's a Rails app), the customers, and the steady cash flow.
You'll lose the branding, unless 37Signals decides that it'll keep linking and promoting it. Potential buyers and clients are coming from 37Signals; and that's why design firms are putting a high monthly fee on the product.
The design and code are by no measure worth $480K. The clients (and steady cash flow) will go with clients. Expect a cash flow crash by losing the branding, and also changing the payment system.
We contacted 37signals when they originally announced their intention to sell Sortfolio. Having bought and sold sites before we asked for some pretty standard information about traffic, revenue, etc. These questions weren't answered and we did not pursue the matter further.
I'm not surprised the site wasn't sold; the "business" of buying and selling sites isn't exactly very "37signal"-y.
With a price now available it's much more transparent for everyone involved; I hope though that this time they are able to accommodate due diligence.
I provided traffic/revenue figures to anyone who asked. If you're a serious buyer, and you have other questions, please contact me directly at jason@37signals...
Do you have (and are willing to share) the credit card information on file for each customer? Or is the new Sortfolio owner expected to contact or otherwise prompt existing customers to re-enter their payment information?
It is possible 37signals doesn't have the information, but the gateway does and would be willing to transfer the credit card numbers. Either way, this is critical detail that needs to be worked out.
I feel like this would be a good listing for latonas.com, Rick Latona has built a huge following of clients willing to spend in this range, http://latonas.com/
I don't believe for a moment he will shut down $200,000 profit with little maintenance.
It's condescending to suggest "I want it to go to a nice home but I'll close it down if I don't get x." If you're willing to entertain such thought then you do not truly value the user.
Sortfolio isn't right for us anymore. Our attention is elsewhere. If we can sell it for a fair price (we consider $480,000 fair), then we'll sell it. If not, we'll close it down and move on. There's nothing condescending about that.
"We just want it to go to a good home". - Then a fixed priced is probably not the way to get there.
What's the ROI look like ? Lets say I absorb the development of the new billing system. How many clients will re submit there billing information ? If I leave it on auto pilot how long till I make my money back? 2.5 years ?
"With over 10,000 free accounts, there’s tons of untapped opportunity here in the existing customer base" Likely part of the buzz around the initial launch.
Pros: The revenue is there. The hosting cost is going to be affordable (low traffic),
Cons: billing switch (huge problem), unless there is value.
"We either sell it by July 1, or we close it down." - Close it down != a good home at all.
What's the operational overhead? support via emails? charge backs? bug fixes?
Let me get this straight. You want to sell a web property that requires no effort to maintain and generates ~$17k/month(!). Wowzers, I'm jealous. Besides that, what happens if you don't sell it now that a "price" is on the market? I'm curious to know how this may affect other "meta" sites like this. I applaud you guys for the guts to do this.
If they aren't focused on it, it is a distraction and can potentially tarnish the brand. Plus, they aren't going to sell for nothing, so they get immediate capital they can invest in areas where they expect a higher rate of return.
Yup, that's more about the brand issue. You have to shut it down eventually, and they've been awfully patient (likely because of the incoming capital).
I'm assuming in their favor that they really believe $480k would be fair deal - which means they've simply lost touch with reality and can no longer discern how much of their revenue stems from the brand and how much from actual product value.
The rational move would be to hire an admin for $100k (remember we're in alternate reality), tell him to keep the site up, go about his life and not call. And collect the remaining $100k until the product fizzles out.
Btw, I'd volunteer to take that admin-role when your sale fails. $100k may not mean much to 37signals anymore. For me it would be a lot of money. I promise to not call you ever, you can just forget that site after you handed it over. I will guarantee 100% uptime (yes 100%, via anycast, at my expense, included with the 100k).
> The rational move would be to hire an admin for $100k (remember we're in alternate reality), tell him to keep the site up, go about his life and not call. And collect the remaining $100k until the product fizzles out.
That's what any prospective buyer could do, and they haven't exactly been coming out of the wood work. Heck, if it's so easy, you could do it.
Focus. Just because something has little to no maintenance doesn't mean you don't think about it. When it doesn't match your existing portfolio of products it makes it harder to incorporate into your overall plans.
> There is no charge to be listed on Sortfolio — every web designer gets a free listing. We also offer a Pro listing for $99/month. The Pro listing includes a larger interactive display ad, up to 6 large images, placement above free ads, and a spot for your logo. You can upgrade, downgrade, or cancel at any time.
The reason why the site is being sold is missing from the sell pitch. "We have no more time to take care of it..." so why are you guys saying it's generating 20k$ a month without you doing anything?
>"We have no more time to take care of it..." so why are you guys saying it's generating 20k$ a month without you doing anything?
You're right, this makes no sense.
37s is just trying for the hard sell. By adding a ticking time-bomb element to the sale (buy it at our price or it's gone forever!) they're hoping to pressure a buyer into coughing up a lot of money for it.
37signals is pricing this deal with the assumption that there will be a significant (>50%) departure of customers upon the deal closing, that cash flow growth thereafter will be meagre (<10%), and/or that the whole thing will collapse within a few (~3-5) years.
If we assume a $480 000 purchase price, annual cash flows of $212 277 (12 times the mean monthly, which is fairly normally distributed save for March 2012) growing at 2% a year, and abandonment after 7 years the investment yields over 10% (IRR) so long as cash flows crash less than 56% from purchase to year 1. In other words, if first year cash flows are at least $93 000 and grow 2% a year from there, the investment will generate a 10% yield after 7 years.
This analysis is stylised, but it remains that even if one takes a 1/4 drop in cash flow from purchase to year 1 and manages to lose 5% of cash flows each year thereafter, the investment will earn a 23% yield assuming abandonment after 7 years.
the investment will generate a 10% yield after 7 years.
Except 7 years ago the most popular social network was called MySpace. The iPhone, Twitter and ycombinator did not exist (amongst other things). Rails 1.0 was released that year.
Why would a niche job board, detached from the brand name that was its only asset, prevail through 7 more years of internet time?
Fair point, 37signals may also expect the whole thing to organically fizzle out within a few years (updated).
Let's constrict the time frame to 3 years from purchase and continue the abandonment assumption. Assuming 2% annual cash flow growth we cannot sustain more than an 11% initial crash before yield falls below 10%. With -5% annual cash flow growth this number drops to 4%. The investment is probably not reasonably viable with a 3 year time-frame.
Note that a more nuanced analysis would ask for a more rigorously thought out required rate of return (in this latter case 10%).
I think a smart businessperson could blow it up much bigger. Open it up to a variety of different industries. Wedding planners, photographers, florists, interior designers, architects, etc. Think big.
To be clear my cursory analysis does not rule on the goodness of this deal for a buyer who believes they can affect the growth variable, it was merely feeling for the edges of plausibility.
Assuming the buyer cannot significantly mitigate any loss of customers resulting from the sale, I looked at the interaction between that crash and expected return. I assumed lower growth rates in my analysis based on the low growth and deviance in the historic cash flow data.
If a buyer got hit with a 1/3 initial crash but believed they could growth cash flows thereafter by at least 10% per year for 5-7 years they could expect an internal return of 21% to 30%, independent of the capital gain on the larger, growing company at the end of the road. The game naturally changes if one ignites such non-linear growth.
Wedding planners, photographers, florists, interior designers and architects have no idea who 37signals is. Consequently they won't be fazed in the slightest by a simplistic job board with relatively poor usability entering their respective markets.
Furthermore, even if they knew who 37signals was - that brand is removed from the product after the sale.
Alternatively, if you seriously believe the success of your job board is due to technical excellence and would map to other markets. Why would someone buy the tech for half a million dollars instead of replicating it within a few months for under 100k dollars?
Using the very same tech staff that he will need anyway to operate it?
I question whether this site it worth $480,000 cash, and here's why:
1. How much of the site is tied into the 37 Signals brand, and is the reason people pay to be listed on the site because of it's affiliation with 37 Signals and the Ruby on Rails community?
2. What's preventing competition from making their own similar service? Is there some barrier to entry or an unfair advantage?
So if this site is sold to someone else, will people still be interested in it now that it's no longer a part of 37 Signals? And what would prevent a competitor from creating a similar site for less than $480,000?
Is there a reason you are not going with a domain marketplace to sell this (eg: Sedo, Flippa)? I feel like posting on such sites would get it the exposure it needs to be sold.
I don't see what is actually of value in this deal for someone to merit a 480K purchase:
1. Site code - Sure you are getting a head start since you don't need to build from scratch but the site doesn't do anything special that can't be duplicated.
2. Brand Name - I think it's more about 37signals being behind this rather than Sortfolio being an awesome product. I don't know how many customers are going to actually use this when 37signals drops it.
3. Customers - See point 2. Why do I need to be a customer of just another portfolio site?
4. Design - Any good designer can reproduce this or create something completely new for you.
5. Steady Cash Flow - I can't even believe they mentioned this as a selling point. Steady cash flow AFTER you integrate your own billing solution.
I would be very interested to see someone estimate out the cost of just cloning this/hosting/advertising. I feel like for less than the purchase price you may get more value and then you just advertise directly to their market.
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[ 3.0 ms ] story [ 168 ms ] threadFinancing can be done through a bank loan, private lenders, or escrow account. If it wasn't against some sort of investor protection idiocy (in the US), they could probably hold an auction for shares, turn it over to a board voted in by the share holders and then get on with the business of running the business.
Organization of the community I would imagine could work to something like how StackOverflow operates in it's community aspects.
I love how open and direct 37signals culture is. Very inspiring.
So few paying customers could be giant firms paying on the off chance that they get 1 client down the road. For it to be a compelling business, it would need to be clear that paying clients are finding developers there.
I would also be interested to know their goals when they built it, and why it's being sold.
Best way to gather this information is to take the time to contact the customers directly being honest as to the purpose of the inquiry.
It's sort of like their job board (http://jobs.37signals.com/). People like the job board because of the types of developers it attracts. Both companies and prospective employees value each others' skills and styles. If 37s didn't own that job board and sold it, it suddenly becomes 'just another job board'. Is it the same deal with Sortfolio? Anyway good luck to the potential buyers of Sortfolio. Hopefully they won't have wasted $480,000.
The site is using auto-renewal billing and having someone not cancel is not the same as someone finding value in the service.
Also even though they would like to get $480,000 they should also invite any offers above $X. If nobody bids at $480,000 they will have to try to sell it at a lower price and it will seem like a fire sale.
It's not being sold for a lower price. It's $480,000 by July 1 or we close it down.
In general, recurring billing is a scam by its opt-out nature. If you aren't on top of your accounting, tiny charges slip by. When you spot them, you may be too lazy to immediately cancel it, so you forget.
It isn't enough to know how many users are billed, but how many users are active on the service and willing to jump through the hoops when they have to update their account.
Also, beyond the server requirements, consider the cost of a support infrastructure. It costs much less for 37signals to support one more project in their portfolio than for a new company to spin up a support team from scratch.
I'm wondering, If you had $480,000, why not spend 10% of that to build an alternative, and release it on July 1. After all the customers are going to have to signup to a new payment system either way.
You'll lose the branding, unless 37Signals decides that it'll keep linking and promoting it. Potential buyers and clients are coming from 37Signals; and that's why design firms are putting a high monthly fee on the product.
The design and code are by no measure worth $480K. The clients (and steady cash flow) will go with clients. Expect a cash flow crash by losing the branding, and also changing the payment system.
I'm not surprised the site wasn't sold; the "business" of buying and selling sites isn't exactly very "37signal"-y.
With a price now available it's much more transparent for everyone involved; I hope though that this time they are able to accommodate due diligence.
It's condescending to suggest "I want it to go to a nice home but I'll close it down if I don't get x." If you're willing to entertain such thought then you do not truly value the user.
Sortfolio isn't right for us anymore. Our attention is elsewhere. If we can sell it for a fair price (we consider $480,000 fair), then we'll sell it. If not, we'll close it down and move on. There's nothing condescending about that.
What's the ROI look like ? Lets say I absorb the development of the new billing system. How many clients will re submit there billing information ? If I leave it on auto pilot how long till I make my money back? 2.5 years ?
"With over 10,000 free accounts, there’s tons of untapped opportunity here in the existing customer base" Likely part of the buzz around the initial launch.
Pros: The revenue is there. The hosting cost is going to be affordable (low traffic), Cons: billing switch (huge problem), unless there is value.
"We either sell it by July 1, or we close it down." - Close it down != a good home at all.
What's the operational overhead? support via emails? charge backs? bug fixes?
I'm assuming in their favor that they really believe $480k would be fair deal - which means they've simply lost touch with reality and can no longer discern how much of their revenue stems from the brand and how much from actual product value.
The rational move would be to hire an admin for $100k (remember we're in alternate reality), tell him to keep the site up, go about his life and not call. And collect the remaining $100k until the product fizzles out.
Btw, I'd volunteer to take that admin-role when your sale fails. $100k may not mean much to 37signals anymore. For me it would be a lot of money. I promise to not call you ever, you can just forget that site after you handed it over. I will guarantee 100% uptime (yes 100%, via anycast, at my expense, included with the 100k).
Lols. Yeah, that's it.
> The rational move would be to hire an admin for $100k (remember we're in alternate reality), tell him to keep the site up, go about his life and not call. And collect the remaining $100k until the product fizzles out.
That's what any prospective buyer could do, and they haven't exactly been coming out of the wood work. Heck, if it's so easy, you could do it.
http://sortfolio.com/about
You're right, this makes no sense.
37s is just trying for the hard sell. By adding a ticking time-bomb element to the sale (buy it at our price or it's gone forever!) they're hoping to pressure a buyer into coughing up a lot of money for it.
If we assume a $480 000 purchase price, annual cash flows of $212 277 (12 times the mean monthly, which is fairly normally distributed save for March 2012) growing at 2% a year, and abandonment after 7 years the investment yields over 10% (IRR) so long as cash flows crash less than 56% from purchase to year 1. In other words, if first year cash flows are at least $93 000 and grow 2% a year from there, the investment will generate a 10% yield after 7 years.
This analysis is stylised, but it remains that even if one takes a 1/4 drop in cash flow from purchase to year 1 and manages to lose 5% of cash flows each year thereafter, the investment will earn a 23% yield assuming abandonment after 7 years.
Except 7 years ago the most popular social network was called MySpace. The iPhone, Twitter and ycombinator did not exist (amongst other things). Rails 1.0 was released that year.
Why would a niche job board, detached from the brand name that was its only asset, prevail through 7 more years of internet time?
Let's constrict the time frame to 3 years from purchase and continue the abandonment assumption. Assuming 2% annual cash flow growth we cannot sustain more than an 11% initial crash before yield falls below 10%. With -5% annual cash flow growth this number drops to 4%. The investment is probably not reasonably viable with a 3 year time-frame.
Note that a more nuanced analysis would ask for a more rigorously thought out required rate of return (in this latter case 10%).
Assuming the buyer cannot significantly mitigate any loss of customers resulting from the sale, I looked at the interaction between that crash and expected return. I assumed lower growth rates in my analysis based on the low growth and deviance in the historic cash flow data.
If a buyer got hit with a 1/3 initial crash but believed they could growth cash flows thereafter by at least 10% per year for 5-7 years they could expect an internal return of 21% to 30%, independent of the capital gain on the larger, growing company at the end of the road. The game naturally changes if one ignites such non-linear growth.
Furthermore, even if they knew who 37signals was - that brand is removed from the product after the sale.
Alternatively, if you seriously believe the success of your job board is due to technical excellence and would map to other markets. Why would someone buy the tech for half a million dollars instead of replicating it within a few months for under 100k dollars? Using the very same tech staff that he will need anyway to operate it?
1. How much of the site is tied into the 37 Signals brand, and is the reason people pay to be listed on the site because of it's affiliation with 37 Signals and the Ruby on Rails community?
2. What's preventing competition from making their own similar service? Is there some barrier to entry or an unfair advantage?
So if this site is sold to someone else, will people still be interested in it now that it's no longer a part of 37 Signals? And what would prevent a competitor from creating a similar site for less than $480,000?
1. Site code - Sure you are getting a head start since you don't need to build from scratch but the site doesn't do anything special that can't be duplicated.
2. Brand Name - I think it's more about 37signals being behind this rather than Sortfolio being an awesome product. I don't know how many customers are going to actually use this when 37signals drops it.
3. Customers - See point 2. Why do I need to be a customer of just another portfolio site?
4. Design - Any good designer can reproduce this or create something completely new for you.
5. Steady Cash Flow - I can't even believe they mentioned this as a selling point. Steady cash flow AFTER you integrate your own billing solution.
I would be very interested to see someone estimate out the cost of just cloning this/hosting/advertising. I feel like for less than the purchase price you may get more value and then you just advertise directly to their market.
"Since Sortfolio is hooked up to our centralized billing system, you’ll need to write your own code to charge customers."