When software developer Norbert Hüthmayr went searching for an offbeat internet business that could scale, his ongoing treasure hunt paid off when he acquired AutoForward SMS for $7,500. Online entrepreneur Hüthmayr sat down with the GetLatka team to share his journey with the Android app. Hüthmayr revealed the one significant change he made to 16X his MRR; his biggest challenge after acquisition and how he fixed it; and his strategies for finding his next acquisition.
After exploring multiple ideas to build from scratch, software developer Norbert Hüthmayr decided in early 2021 that he wanted to find out instead if he could buy a product that already had some traction. He believes that product-market fit is the most challenging part of the journey to success, so if a product has already found a market, you could shortcut the development phase and move straight to scaling.
- $7,500 acquisition at 1X multiple
- 10,000 MRR, 16X revenue
- 1000 customers paying $10 per month
2021 Marketplace Search
Hüthmayr began to scour software app marketplaces in 2021. He spent most of his time at Flippa, the top marketplace to buy and sell online businesses. Hüthmayr’s experience was mixed, as he found that many business owners on the site wouldn’t respond to his messages. “I felt like a lot of people do listings just trying to make a quick buck; they weren’t interested in talking to me as I was doing my due diligence. You ask questions, and they just want to close the deal,” he lamented. Ultimately, he found an interesting Android app that could forward SMS messages in bulk.
$12,000 Listing Price at a 2X Multiple
AutoForward SMS was founded in 2015 by an older Australian woman who controlled many SMS assets. She wanted to sell off parts of her business so she could scale back her work hours. At the time, the app was doing about $7,200 MRR, and she wanted to sell it for $12,000, a 2X multiple. “She was very forthcoming and open,” explained Hüthmayr. “I got quite lucky, to be honest,” he added.
$7,500 Sale Price
The Australian owner found a buyer for AutoForward SMS at $12,000, so Hüthmayr moved on. Hüthmayr was only prepared to pay $7,500 for the app at a 1X multiple. A short time later, the owner reached out to Hüthmayr again, as the deal fell through when the buyer failed to deliver the $12,000 payment. Hüthmayr and the owner quickly agreed to a 1X multiplier deal at $7,500, and the deal was done. Latka added that while the marketplaces boast that developers can sell apps for large sums of money, most deals are completed at a 1-1.5X multiple.
One Challenge After Purchase: Stripe Migration from AUD to USD
As a software developer, Hüthmayr comfortably evaluated the code for the app, sharing that it was well-written. His challenge was that since the Android app was developed and launched in Australia, it was coded for automatic billing with Stripe in Australian dollars, and he was in the US. “I needed to code for credit card transactions in the US. I was worried that it wouldn’t work right and the automatic billing system would break,” he said. Fortunately for Hüthmayr, the migration worked perfectly. “I test migrating like 5 times,” he revealed. Hüthmayr also gave major props to Stripe for their customer support and documentation that helped him through the process.
One Change to Grow MRR 16X from $600 to $10,000
From the beginning, Hüthmayr discovered what he thought was a pricing error in AutoForward SMS. He realized that the original owner had an advantageous feature that she offered to users for free. Her philosophy was that if the feature didn’t cost her anything to add, she shouldn’t charge the user for it. Hüthmayr noticed that existing power users heavily relied on this feature, so he put it behind a paywall. What was the feature? The ability to forward text messages to an API. Hüthmayr created paid tiers based on usage, and his MRR skyrocketed.
1,000 Customers Pay a Monthly Average of $10
Hüthmayr explained that he restructured the pricing to charge customers monthly tiered fees based on usage:
- Up to 500 SMS messages: $1.30
- 500-5,000 SMS messages: $5
- 5,000-100,000 messages: $22
The online entrepreneur noted that users typically text him when they reach their tier limit and want to upgrade.
History from 2015 Continues to Deliver Organic Growth
Aside from the pricing change, Hüthmayr’s only other tweak was to update the website to optimize the already-existing organic growth. Since the app and website had been around since 2015, which is “old” in the app world, Hüthmayr improved the SEO by reworking the website with FAQs and help articles. He shared that he still doesn’t use paid marketing, instead relying on Google searches for terms like text messaging forwarding and SMS message forwarding.
8% Churn, 15% Organic Growth
Hüthmayr admits that AutoForward SMS hit a few bumps with a high churn rate; its churn currently sits at 8% per month, which he admits is high by SaaS standards. However, his organic growth offsets the churn by delivering a 15% increase per month.
$8,600 Monthly Profit Shared with Engineer
Hüthmayr tapped a good friend and traveling partner to help him manage the engineering demands of AutoForward SMS. “We traveled to Ecuador last year. While on the trip, I talked him into helping me in exchange for 20% of the profits each month,” explained Hüthmayr. In a recent month, the company made about $8,600 in profit on $9,300 in revenue. After paying his engineer friend 20% to manage a second version of the app, Hüthmayr takes a small salary and keeps the rest of the profit in the company. “I use it to fund other ideas and keep a cash cushion for other acquisitions,” the bootstrapped entrepreneur explained.
5 Tips for Buying A Low-Cost App
Together, Hüthmayr and Latka summarized five essential tips for an investor looking to buy a scalable app for a few thousand dollars:
- Choose an app that has been around for at least 3 to 4 years
- Find one that is dominating a distribution channel, like the keyword search term
- Identify an app that makes some revenue but has a free feature that could be put behind a paywall
- Look for something that interests you
- Find a seller that’s honest and forthcoming. Not spending time talking to you is a red flag
What’s Next for Hüthmayr?
Entrepreneur Hüthmayr is searching for his next acquisition, but he noted that prices are high, and “it doesn’t help me to buy something overvalued.” He and his engineer continue to evolve and refresh AutoForward SMS, but he doesn’t see expanded functionality as the pathway to growth. Instead, he’s looking to diversify his revenue stream with another business. He would like to find another app where the pricing doesn’t align with the customer’s usage or needs. He reiterated, “Be clever with pricing. Base it on what the customer needs. Charge for the value you provide, not what it costs you.”
Famous Five with Norbert Hüthmayr
Software developer and online entrepreneur Norbert Hüthmayr shared his favorite business book, The Minimalist Entrepreneur: How Great Founders Do More with Less, by Sahil Lavingia. Norbert doesn’t follow any particular CEO but does like to follow Indie Hackers on Twitter. He sleeps between 6 and 8 hours per night, explaining that “when I was younger, I tried to minimize my sleep. Now I just get as much sleep as I need.” His favorite online tool is Stripe, reiterating that he appreciates their product, documentation, and customer support as a techie. Norbert Hüthmayr is 35, married with no children. At 20, he wishes he had known that persistence was the key to success: “If you have an idea, you have to dedicate time to it. Even then, there’s no guarantee. I keep a list of 20 things I tried and failed. But hopefully, one day, you hit gold.”
