There are a lot of reasonable reasons people would list a sub-scale business on a site like those. Some examples:
Take an app that makes $500 net monthly and requires 1-2 hours per week of work. Solid hourly rate, why sell? Except:
- Sudden change in family responsibilities leaves founder without the small amount of time needed.
- The business might net $5k in a sale, and the founder has an urgent need for cash (for ex for home purchase/repairs). The founder resigns to a fire sale because she needs money now.
- Founder realizes the business will remain sub-scale until someone injects another $50k. Founder has a day job but not $50k, and has no interest in raising money.
- Founder's job reviews side project and decides it's too close to "competitive" and asks founder to dispose of it.
- Founder takes a new job that prohibits side gigs.
- Founder gets sick and isn't able to maintain the business.
- Founder gets divorced and is ordered to split the value of the business with ex-spouse. (A sale may be the founder's only option to produce the cash.)
- Founder built the app using tech X 3 years ago. Founder now viscerally hates tech X and would rather have $5k than keep using that tech.
- (Edit: adding this one) Founder was just learning business when they started this business, and now wants to aim bigger. This business could be a good starting point for someone else in their personal development cycle.
Basically, there are a lot of reasons a founder might sell that have nothing to do with the business or its prospects. There are also reasons that have to do with the business not being a fit for the founder at that time. Due diligence is key when buying anything.
I am in that last category myself. I had a really nice and useful budget app that had thousands of daily users and cost all of $20/month to keep going, if that. Was making some money off it too with ads and sales of the ad-free version. Except I built it using Ionic back when it was based on Angular 1. Fast forward to now and that code simply doesn’t compile anymore against modern iOS and Android and I don’t have the time to rebuild it. With some TLC it could have been something but at this point all I’m doing is sending replies to customer emails explaining why the app isn’t available anymore. Lesson learned: JavaScript frameworks ruin lives.
Not just javascript, I built an app in Objective C. It stopped working after IOS 8 (I think) and I no longer had access to a Mac to update it. I too am in the stage of just replying to customers to explain why it isn't available.
Last I checked it was making about $100 every 3 months with the dwindling usage and all. The app took me probably a solid 80 hours of work to put together. I do not know if hiring a developer to work on it would in any way be worth it.
Sure. https://family-fortune.ridgebit.com/ Is the promo page. As I said, this is a bit of a lego project with a bunch of pieces spilled on the floor. Email is in my profile if you are actually interested.
I sold an app with good traction for $20k. Part of the reason was we hated the users. We built a diet community and that community was literally toxic - they'd encourage people to follow crazy diet approaches that would make them pass out and they'd group attack anyone who brought up medical evidence that this was a misinterpretation (including me, our suppliers & our dietitian).
The company that bought it got sick of the users within a few weeks but unfortunately their attempts to pivot and rebrand didn't work.
I'm very sorry you had that experience and I respect your morales. I shy away from community style projects for similar reasons, and a lack of safe-harbour laws makes them extra risky.
Those are good reasons to motivate a seller. But the main problem with small transactions is that the buyer's costs/risks in making an investment can eclipse the "inherent" value of the project.
Consider that theoretical 2h -> $500 / month project:
- Would those 2h for the founder be 2h for the buyer, or much more?
- How much initial training would it take for the buyer to sustain those economics?
- Are those 2h sufficient to protect / grow the business in a changing market, or just an instantaneous rate?
- Are the assets of the business actually secure? (unambiguous ownership / confidentiality, etc.)
Those are all pretty big unknowns, and even if the founder is confident about them the buyer would spend significant effort to verify -- very possibly more than the $5k sale price. It might even be cheaper (incorporating risk) to build a $500 / month business than to verify the purchase of one. Small projects have to sell at a VERY unfavorable discount to counter this.
The exception are buyers who make their own business out of efficient diligence and exploitation for many similar projects (like high-traffic sites for a single community). If you fit into such a category, it is probably better to find a specialized marketplace or a buyer with a reputation than attempt to sell in a broad market.
The questions & considerations you ask are all valid, and are generally included in the buyer's evaluation process. Every point is extremely subjective and not precisely knowable. That's part of the fun of business!
But you are obviously correct that there are no risk-free transactions.
> It might even be cheaper (incorporating risk) to build a $500 / month business than to verify the purchase of one.
Here I want to point out that I know a number of talented people who want to launch a business, but for whatever reason cannot get to the "launched, accepting money" phase of their projects. These people have no problem improving an existing business, but have trouble going from 0 to 1. (I believe this population is as much as 100x the population of people who have successfully launched & gotten revenue in an app.) For these people, it might be entirely worth knowingly overpaying for a working SaaS because it gets them past the launch phase. Putting it bluntly, would they rather spend $10k on an app with revenue that you can grow or another $50k of nights and weekends over the year with no launch to show for it?
Edit: I also forgot that there's the entire category of buyers who just want to keep the app as-is and either integrate it into a bigger suite, use its traffic for lead gen, or otherwise leverage it for some other purpose. If the buyer considers the purchase as part of its marketing budget, $5k is not very much at all. (Plus the bar is low as most marketing spend is wasted, see the adage.)
All valid reasons, but I think my point was moreso if they find themselves posting on MicroAcquire, they will likely end up in my #3, whether they intended to or not, and rightfully so.
Maybe the multiples only seem high to you, and others are anchoring on other market assumptions? (Different market assumptions being a key driver of trading in many things.)
Markets are crazy right now, and #3 could fairly describe transactions in the stock market, housing market, commodities market, etc. occurring now.
Also for sub-scale businesses, it may not be useful to value them based on revenue or profit multiples. For example, if the app is not making much money because there's been no money spent to promote it, how can one know if it's "expensive" or not? I might instead look at it and decide that I would need to spend $25k on development to build the app, so spending $5k to accelerate launch is cheap. Value really is in the eye of the buyer.
Take an app that makes $500 net monthly and requires 1-2 hours per week of work. Solid hourly rate, why sell? Except:
- Sudden change in family responsibilities leaves founder without the small amount of time needed.
- The business might net $5k in a sale, and the founder has an urgent need for cash (for ex for home purchase/repairs). The founder resigns to a fire sale because she needs money now.
- Founder realizes the business will remain sub-scale until someone injects another $50k. Founder has a day job but not $50k, and has no interest in raising money.
- Founder's job reviews side project and decides it's too close to "competitive" and asks founder to dispose of it.
- Founder takes a new job that prohibits side gigs.
- Founder gets sick and isn't able to maintain the business.
- Founder gets divorced and is ordered to split the value of the business with ex-spouse. (A sale may be the founder's only option to produce the cash.)
- Founder built the app using tech X 3 years ago. Founder now viscerally hates tech X and would rather have $5k than keep using that tech.
- (Edit: adding this one) Founder was just learning business when they started this business, and now wants to aim bigger. This business could be a good starting point for someone else in their personal development cycle.
Basically, there are a lot of reasons a founder might sell that have nothing to do with the business or its prospects. There are also reasons that have to do with the business not being a fit for the founder at that time. Due diligence is key when buying anything.