Nathan Sykes

April 10, 2021

Digital Continuity Programs

Happy Saturday! Short post today.

Recurring revenue is rightfully a huge deal when it comes to eventually selling or buying a company. Something like a SaaS company will fetch a larger price tag because of the cash flow it's producing on a monthly basis. That's why there are entire PE firms that solely exist to buy, manage, and eventually sell Software-as-a-Service businesses. It's a great industry that gets you access to lots of monthly cash flow quickly.

But SaaS companies aren't the only things that generate recurring revenue. Digital continuity programs offer access to something for a monthly price. It could be a series of training videos, or a membership community, or a newsletter that arrives every Friday with all of the news in XYZ industry. There's typically a lower upfront investment in validating this kind of product, as you can launch it on a smaller scale to see if there's demand.

The con in this picture (at least for larger funds) is that most of these digital continuity programs aren't operating on a very large scale. You have your outliers, sure, but the vast majority of 'em are small, six-figure businesses at best, side hustles at worst. The deal size just isn't right for a larger private equity fund. But for an acquisition entrepreneur, or a micro private equity firm, looking into acquiring a digital continuity program may prove to bear fruit as an investment. We're really pursuing those kinds of opportunities at Howdy aggressively, and I look forward to keeping y'all updated on our progress.

(P.S. - As a side note... I'm not trying to say that larger funds can't buy ANYTHING that's not a SaaS and has recurring revenue. Folks like Roland Frasier have lots of great tools for businesses of all shapes and sizes to start introducing monthly recurring revenue offers. He has a great worksheet, with examples, that any size company can use to start to turn static cashflow into MRR.)