Eyal Toledano was looking for small Saas businesses to acquire, with the goal of scaling and reselling them within two years.

He had accumulated $500,000 in investment capital after spending a decade in various digital marketing roles and co-founding the Shopify app Batch.

Now, through his business MicroAngel Fund, Toledano planned to leverage his experience in marketing by acquiring profitable, small SaaS businesses. He’d grow them while living off their revenue, and eventually sell them for a profit.

He liked what he saw in Postcode Shipping, another Shopify app. In August 2021, he purchased it for $425,000, plus a 7% cut of its eventual resale.

Toledano viewed his plan as a step toward freedom from the corporate grind.

He laid it all out in a detailed blog post in February 2021. His goal was to turn this initial investment into $1.4 million over two years. He would need to find “good deals for strong cash-on-cash returns that yield about $15,000 in cumulative MRR from the portfolio” as well as “effectively run themselves, with an extremely low support burden.”

Why Postcode Shopping was a strong acquisition target

Enter Postcode Shipping, a highly regarded Shopify app launched in 2014. Postcode Shipping allows sellers to customize shipping rates based on the precise location and the exact goods customers are buying.

“I met the seller on Facebook (of all places) and we quickly hit it off,” Toledano explained in another post about the sale. “They were looking to transact privately with someone who would actually take on the mantle of improving the product and taking it to the next level.” (The founder is not easily identifiable online, and Toledano declined to share who it was.)

The deal also checked most of the boxes Toledano had set for an acquisition.

First, it was a product he truly believed in. “Postcode Shipping represents some of the most fundamental e-commerce machinery required to operate a business on the world’s most popular e-commerce platform, and in doing so earns amazing loyalty from customers that have come to rely on the app to deliver and scale with them,” he wrote.

The financials were equally solid. With a projected annual recurring revenue (ARR) at the time of the sale just shy of $200,000, the deal met Toledano’s cash flow needs. He was happy with the 2.1x projected revenue multiple he paid, and the seller was willing to “stick around as a perpetual advisor and thus being open to a liquidation participation,” meaning the seller gets a cut of the resale price.

Toledano also felt he could use his skills as a marketer to improve the business, potentially enabling him to sell it for a substantial profit down the line.

He passed his two-year resale date goal for Postcard Shipping in 2023 — and  wrote in his year-end 2023 blog post that he was ready to prepare for a sale.